Earlier this week I participated in a spirited webinar on the topic of “real world outcomes”.  I prepared notes going into the discussion (see previous post) and the conversation touched on many of these points.

I promised to share interesting perspectives that arose over the course of the conversation and Q&A.  I’d summarize the major themes as follows:

• There are challenges to achieving the value of “third horizon” data (integrated sets of diverse medical and non-medical data): (1) Linking data sets across institutions, (2) scaling data and analytics infrastructure across organizations, (3) patient, payer, regulator trust in real world data and analytics methods
• Recent trends provide reasons to be encouraged about achieving value of “third horizon” data: (1) Analytics techniques are being refined, (2) Convergence tests give confidence in real world data, (3) Policy proposals encourage open transfer.
• Generating real world outcomes insights is just part of the equation.  The other side of the equation is what does one do with the insights to encourage physicians, patients to take action and modify behavior.

As a strategist and supporter of entrepreneurs in healthcare, it is discussions like these that help illuminate the gaps in current practice, technology, policy and the potential for solutions of tomorrow.

Don Berwick and Andrew Hackbarth have identified the sources of cost-savings in the healthcare system and estimated the magnitude of savings available.  The original manuscript can be found at JAMA here. 

A quick summary of the $400 billion savings opportunities:

• Administrative Complexity: 
  Cause: “Inefficient or misguided” rules implemented by regulatory agencies or payors. 
  Solution: Simplification of rules and regulations, and user-friendly information management tools.
  Savings: Between $107 billion and $389 billion.

• Overtreatment: 
  Cause: Patient preference such as excessive use of antibiotics or surgery, when waiting might be better. 
  Solution:  Identifying procedures, tests, medications and other services that do not benefit patients.
  Savings: $158 billion to $226 billion.

• Fraud and Abuse: 
  Cause:  Fake claims and bills.
  Solution: Early detection, prediction and disincentives.
  Savings: Between $82 billion to $272 billion.
   
• Failures of Care Delivery:
  Cause:  Poor execution of care programs such as patient safety and prevention. 
  Solution: Better training, monitoring and learning models.
  Savings: Between $102 billion and $154 billion.

• Pricing Failures: 
  Cause:  Pricing fluctuations based on geographic location.
  Solution: Pricing transparency and consumer advocacy.
  Savings:  Between $84 billion and $178 billion.
   
• Failures of Care Coordination: 
  Cause: When patients fall through the cracks of fragmented care.
  Solution: Team orientation and information sharing across primary / specialty and in-patient / out-patient care settings when treating patients.
  Savings: $25 billion to $45 billion. 

The solution to the above savings opportunities will require a strong leadership agenda to develop a combination of applying policy levers, reimbursement models, training and management principles.

Today I am participating in a webinar with an esteemed panelist of experts in the field of “real world outcomes”.  The topic dovetails nicely with a basis of innovation in biopharma, which I wrote about in this post.  

In preparation for the discussion, I prepared a few notes on my personal view of the exciting potential reflected by this topic: 

What is “real world outcomes”?

Real world outcomes is a moniker for a broad range of topics related to consumer value of healthcare products and service.  I view real world outcomes as a continuum encompassing three elements: (1) Inputs, (2) Process, and (3) Outputs.  

• As an output, real world outcomes is an analytical measure of the health impact - safety, effectiveness, cost, satisfaction - of interventions outside the realm of controlled clinical trials.  Real world outcomes are an important complement to the body of analysis based on controlled clinical trials sponsored by biopharma and device firms.
• As a process, real world outcomes can be a painstaking labor of aggregating, normalizing and standardizing information that describes consumers’ and service suppliers’ experience in the health system, and then devising analytics methodologies to generate actionable output.
• As an input, real world outcomes is a growing body of information being generated by many stakeholders in healthcare using various “media” to describe the clinical, financial, and behavioral experience of consumers and suppliers of healthcare.  

How is real world outcomes evolving?

The field of measuring value of healthcare interventions has a long history from the beginning of medicine.   One can frame the evolution in three phases: (1) Phase 1 - Claims-based analysis, (2) Phase 2 - “Small-data” outcomes research, (3) “Big data” outcomes research.

• Phase 1: Much of real world outcomes analysis has been generated using medical and pharmacy claims data.  Because claims data is an administrative instrument, use of this information alone yields high-level insights answering the question “what happened?”
• Phase 2: Post-approval registry commitments and local investigator-sponsored studies complemented claims data with controlled clinical trial like medical data about patients experiences.  We are squarely in this phase today and gleaning greater insights answering the question “why things happened?”
• Phase 3: As more data comes online as a result of government incentives, lower costs of information technology, consumer-generated information and relevance of data from outside of healthcare, future insights describing personal experiences of large numbers of patients suddenly become possible.

Why is real world outcomes important?

The short answer is that trends in the environment necessitate stakeholders to consider new models of collaborating to access inputs, develop analytics processes and develop integrated products and services for improved outcomes.  The affordability, access and qualityt of care depends on it.

The long answer involves a recognition that the potential of Phase 3 depends on tackling a long and daunting list potential barriers to the powerful future.For example:

Over the next few days, I’ll summarize the discussion and Q&A.  I expect it to surface interesting perspectives..

This post initiates a series of posts over the course of this year to contextualize opportunities for business innovation from the perspective of various health system stakeholders.  First off, Pharma.  (Next up, Devices & Diagnostics.)

Where is the Pharma industry today?

The industry is in the midst of a multi-year evolution that can be described by three phases:

• Phase 1: The Blockbuster Phase
• Phase 2: The Globalization & Specialization Phase
• Phase 3: Redesign Phase

Pharmaceutical firms grew in size over the two decades from 1970s to the 1990s by discovering, developing and acquiring small molecule products shown to safely and effectively to treat large populations afflicted by chronic disease. Blockbusters, as they came to be known, created high-multiple companies that were darlings of the investment community.  As limitations of chemistry-driven discovery of medicines became more and more difficult to overcome, many in the industry have looked to foreign markets for geographic diversification and also have taken advantage of advances in science to develop biologic-based treatments for more complex (specialty) diseases afflicting smaller populations.  The industry as a whole is currently operating in this phase of the evolution.  Experiments abound to seek improvements in R&D approaches to develop effective medicines for the most complex patients and in distribution of medicines across current and new geographies. 

Few companies are now boldly entering the next phase of the evolution to attempt to refashion the the role of pharma in the healthcare system and directly address important trends ocurring both inside and outside of healthcare:

• Individuals are suffering from chronic illness at higher rates and cost.  (Chronic disease being defined as Cardiovascular, Respiratory, Cancer, Diabetes, Mental Illness.  See this previous post for cost estimates.)
• Decline of return-on-healthcare spending (i.e., poor health outcomes in return for increasingly high healthcare spending)
• Government activism to address unsustainability of the current structure of healthcare financing and delivery by (a) changing incentives through new reimbursement models, (b) encouraging coordination of care through new delivery models, and (c) stimulating modernization of information technology. 
• Employers in the U.S. shifting greater burden of healthcare financing and decision-making to the consumer.
• Mobile and internet-based technology is more ubiquitous than ever

The redesign phase demands biopharma to experiment with better operating models, technologies and economic models, or new ones altogether.

Basis of innovation

The above trends present biopharma firms entering into the third phase two (and not mutually exclusive) options:

1. Continue to march up the technology chain with more advanced systems and process to develop “precision medicines” that require high levels of investment to meet the needs of higher demanding consumers with heretofor unmet clinical need.  Consequences: smaller and smaller consumer bases and higher and higher prices.
2. Do more with less using new approaches to apply information, technology and collaboration that lower cost, barriers to access and create new channels to help consumers curb chronic disease.  Consequences: unknown business models that change economics of an industry.

Those familiar with Clayton Christensen’s model of disruptive innovation will recognize these options as the paradox he coined The Innovator’s Dilemma.  The industry is organized ideally to choose Option 1.  However, Option 2 may be viewed as a threat to the core business and unattractive from an economic point of view, hence de-prioritized.

Tools for innovation*

Regardless of the choice of basis of innovation above, innovators should consider a number of tools for innovation.  The strategies to apply these tools will vary based on corporate context and the extent to which the focus is on option 1 or option 2.  The discussion of strategies can be left to the comments.  Innovators seeking opportunities for innovation might consider utilizing the following tools and approaches to redesign or recreate the pharma value chain:

• Personal diagnostics
• IT-enabled consumer services
• Incentive models for behavior change
• Outcomes based measures of consumer value
• Deeper collaboration with customers and suppliers

Technology advances writ large are enabling the tools and approaches above.  In the past several years, innovations have delivered biopharma products that personalize, localize and de-specialize medicine.  Considering the building blocks for innovations, welcome comments on strategies ot utilize the tools and approaches to redesign biopharma. **

* The discussion above takes the focus on operational efficiencies as a given.  Biopharma and other sectors of healthcare will continue to explore cheaper and more cost-effective methods to perform operational functions such as manufacturing, distribution, sales and customer support.  As a result, I haven’t elaborated on tools for innovations in this area (mostly relying on outsourcing, offshoring or enabling with information technology).

** Full disclosure: I am currently employed by a biopharma.

According to the practice profiled by this WSJ article, primary care practices don’t make a profit from private reimbursements for delivery of care alone.  Without Medicare Advantage plan payments and various pilot projects, primary care practices struggle to make a positive financial return.

A short thread I started on this topic can be found at this Gerson Lehrman site.

Over the course of this year, I will provide my views of the context for innovations (see prior post on areas of interest) from the perspective of these five healthcare stakeholders:

1. Biopharma manufacturers
2. Device & Diagnostics manufacturers
3. Health insurance companies
4. Self-insured employers
5. Health delivery networks

Conversations with investors, entrepreneurs, current and former colleagues have led me to a conclusion (unscientific, granted) that a major reason we don’t benefit from more impactful business innovations in our healthcare system and attracting talented innovators who can address poor return on investment of our health system is because the status quo is complex and not well understood. 

These series of posts, I hope, will play a small part in reducing complexity and attracting more talent and impactful ideas.  I anticipate the posts will offer high-level frameworks which can be expanded upon and explored in the comments or in separate posts where there is interest.