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CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited
Pharma in a digital world
New York Pharma Forum
January 27, 2016
McKinsey & Company
Contents
McKinsey & Company 2
Why does digital matter?
What are the opportunities?
How to capture the value
McKinsey & CompanyMcKinsey & Company 3
5 technology-related trends will lead to major disruptions to the pharma industry by 2025
Competitors and non-traditional entrants
seize control points
Patient engagement capabilities are
core to Commercial model
Expected 2025 disruption
Payors and
providers intervene
beyond the pill and
between HCP visits,
leverage technology
to drive on outcomes
and value
Patients
increasingly using
digital channels to
engage in their
health, savvier about
products as well
as services
New players will act
as intermediaries,
aggregating data and
building platforms
essential to a
pharmaco’s business
Data on product
performance
increasingly
generated outside
pharmaco, often
owned by consumers
Non-traditional
players move into
healthcare tech
Patients are more
engaged in their
health
New tech makes
outcomes-based
care easier
New generation of
tech-enablement
for core biz
processes
More transparency
into product
performance
1 2 3 4 5
Dramatically higher
expectations on
efficiency
and agility
Advanced analytics,
sensors and
automation of
complex decisions
allow step change in
efficiency, speed,
quality and
responsiveness
SOURCE: McKinsey PMP Digital Hub research
McKinsey & CompanyMcKinsey & Company 4
Thought leaders in digital health agree that the fundamental ecosystem of healthcare is changing
SOURCE: McKinsey interviews with leaders in digital health across pharma, data analytics, startups, venture, academics, and medical futurists
Physicians“Wearable devices that today are still in the more recreational-grade state are changing incredibly rapidly into research-grade
and, ultimately, clinical-grade tools. Physicians need a package of solutions to navigate this environment”
Data“Payers will become increasingly like providers in
offering interventions and home care, and increasingly
like pharma in analyzing data and pressure-testing
value”
“Healthcare will be driven much more by consumers than
physicians, with patients increasingly coming to their
doctors with more information, parameters they
measured at home, and an informed opinion about
how they should be treated”Patients
“How doctors spend their time will change dramatically.
They will shift to spending a smaller proportion of it ordering
diagnostics and interpreting results, and much more on the
social elements of healthcare”
McKinsey & CompanyMcKinsey & Company 5
Pharma/healthcare is behind other industries on digital
Source: Expert interviews, McKinsey analysis
Time
Industry revenues rapidly compressing and shifting away from IncumbentsIndustry revenues rapidly compressing and shifting away from incumbents
Margin compression
New trends
emerge
Innovative start-
ups create disruptive
business models
Early adopters start
embracing the new
models
Advanced
incumbents start
adapting to the
new model
Mainstream
customers
adopt
Laggard in-
cumbents die
Advanced in-
cumbents and
established
“startups”
constitute the
new normal
Tipping
point
Traditional
Media
Consumer
Digital Media
Healthcare
Retail banking
McKinsey & Company
Contents
McKinsey & Company 6
Why does digital matter?
What are the opportunities?
How to capture the value
McKinsey & CompanyMcKinsey & Company 7
IoT platform
Big data
Business processes
Sensors and digital services for
tailored care 24/7
Omni-channel conversations across
HCP and patient decision journeys
Advanced analytics to gain real-world
insights and demonstrate value
Automate processes to improve cost,
responsiveness, and agility
Build digital services, apps and
platforms delivering beyond-the-
pill care as part of a suite of
therapy area solutions
Foster the dialogue between
to patients, HCPs, caregivers,
and KOLs to develop
relationships, provide support
and generate insight
Build analytics and data
access capabilities to drive
distinctive insight on unmet
needs, safety & efficacy,
personalized therapy
Bring safe drugs to
market faster, with
improved agility
and efficiency
Opportunities for pharmacos to drive value from digital can be seen across four dimensions Details follow
Digital is
transforming
patient care and
existing business
models
SOURCE: McKinsey PMP Digital Hub research
McKinsey & CompanyMcKinsey & Company 8
Personalized: integration of products and services: 2025 vision
Medications include embedded
sensors for tracking and
diagnostics
Adherence is monitored by such
“smart pills” which helps to
determine specialty drug
reimbursement
Therapeutics include real-time
services and support integrated
with social networks
AI-based treatment planning
achieves balanced treatment goals
and outcomes
Wireless body area networks and
sensors become ubiquitous
Data are combined with “exhaust”
from other products (e.g. smart
refrigerator) to achieve more
precise readout
SOURCE: McKinsey PMP Digital Hub research
McKinsey & CompanyMcKinsey & Company 9
Data-driven advanced analytics used across the business: 2025 vision
Pharma utilize multiple streams
of data, including claims, clinical
data, and patient-reported
measures for real world insights
Contracting based on granular
risk-based pricing (e.g. using
adherence and cure rates) to
determine payments
Sales reps are targeting using
advanced analytics to identify
highest likelihood of lift in
prescriptions and dedicated to that
Physiological simulation and 3D
tissue modeling models toxicity
in-silico, for speed development
Clinical trials and development
use data from multiple
wearables to track physiological
measures, adherence
SOURCE: McKinsey PMP Digital Hub research
McKinsey & CompanyMcKinsey & Company 10
Apple and other non-traditional big data players are gaining traction in healthcare
2015 PartnershipsApple Watch
Healthkit /
ReseachKit
Source: Press
“We believe Apple’s HealthKit will revolutionize how the health industry interact with people”
- CEO Mayo clinic
Ochsner utilizes Apple’s Healthkit and Watch to
track data for patients with heart conditions
(44% drop in readmissions)
John’s Hopkins built an Apple Watch app,
EpiWatch, based on ResearchKit data that helps
diagnose epilepsy
Introduction of IBM Watson Care Manager, a
tool which integrates HealthKit / ResearchKit
with IBM’s patient engagement tools from Phytel
Quintiles improved open source code for
ResearchKit and will use the software to develop
applications in neurodegenerative diseases
McKinsey & CompanyMcKinsey & Company 11
Startups and other non traditional entrants are developing solutions to diagnose and treat patients digitally
Insomnia
Schizophrenia Cardio
Cancer“We hope today is a turning point in
the war on cancer…by enabling the
early detection of cancer in
asymptomatic individuals through a
simple blood screen, we aim to
massively decrease cancer mortality
by detecting the disease at a curable
stage”
- Jeff Flatley
CEO, Illumina
ADHD /
Neuro
▪ App to measure Lead 1 ECG in real
time through the company’s
automated algorithm
▪ Attachable to any smartphone
▪ Received FDA approval for Afib
diagnosis in 2014
▪ Cognitive training for schizophrenia
and related disorders
▪ Underwrote largest clinical trial
assessing the efficacy of
computerized cognitive training (487
participants)
▪ Recruiting for study assessing CT
for mild traumatic brain injury
▪ “Prescription-strength” video game to
improve working memory and
attention of users
▪ Initial findings in late 2015 show
positive impact on attention
▪ Received $10M in funding from Shire
and PureTech and used in a Pfizer
Alzheimer’s trial
▪ Gene sequencing firm Illumnia
announced the launch of a new startup
company, Grail, in early 2016 to develop
a simple blood test for cancer diagnosis
▪ Received $100M in funding from Jeff
Bezos and Bill Gates
▪ Developed platform for CBT, initial
implementation in insomnia
▪ Targeting direct to consumer payment
▪ Conducting 2+ clinical trials testing
efficacy of internet intervention vs.
electronic control module
SOURCE: McKinsey PMP Digital Hub research
McKinsey & CompanyMcKinsey & Company 12
Pharmaceutical companies are also partnering with startup health tech companies
SOURCE: Press searches, company websites, literature search
Collaboration to develop
“smart” version of GSK’s
Ellipta inhaler
Propeller’s proprietary
sensor used on inhalers to
track usage directly onto
mobile app for improved
disease management
Propeller’s sensor has
been used over 35
commercial programs in
the US and demonstrated
over 70% reduction in
rescue inhaler use
Development of a pill-plus
form of Otsuka’s Abilify for
mental illness, a disease
category with pronounced
compliance issues
Proteus ingestible sensor
measures medication-
taking patterns and
physiologic response
FDA has agreed to review
the product as the first
digital drug filing
Formation of a joint
venture called Bayer
LifeScience Center with
CRISPR Therapeutics, a
genome editing startup
Partnership seeks to take
a data driven approach to
drug development in
hemophilia, heart disease
in infants and macular
degeneration
Bayer will invest $300M
over next 5 years in
CRISPR
Dec 2015 Sep 2015 Dec 2015
McKinsey & CompanyMcKinsey & Company 13
Teva and IBM are partnering to drive innovation through the Watson Health Cloud
SOURCE: Teva website, Fiercebiotech, Press, September 2015
▪ IBM’s Watson Health Cloud
developed to house
anonymized personal health
information that can be shared
and combined with clinical,
research and social health data
▪ Teva selected to become the
first global pharmaceutical
company to partner with the
Watson Health Cloud
▪ Initial goal is to use Watson to
create disease models for
therapeutic advances
▪ Broader motivations include the
analysis of real-world data to
identify drug misuse and
development of advanced
analytical solutions to improve
adherence
By building on the
Watson Health Cloud, we
believe Teva will be in a
unique position to put the
best information and
insights in the hands of
physicians, care teams
and patients, to empower
treatment optimization”
- Guy Hadari
SVP/CIO, Teva
McKinsey & Company
Contents
McKinsey & Company 14
Why does digital matter?
What are the opportunities?
How to capture the value
McKinsey & CompanyMcKinsey & Company 16
It is not easy though
Data
Poor quality, heterogeneous,
sparse data
“Walled gardens” hinder data
fluidity
Fragmented talent
& resources
Internal talent scarce; weak
position in external “talent war”
Funding scattered across 100’s of
initiatives
Unaligned incentives
Inflexible legacy IT
Focus on ERP, supply chain
Long application dev’t cycles
Fragmented IT architectures
Little senior support & focus to
scale promising initiatives
No central oversight on portfolio of
partnerships; hard to extract value
Legal, regulatory, policies
Data privacy, cyber security issues
Intellectual ownership and liability
issues
Mindsets
Risk averseness
Strong incumbent mindset
Trust across partners in ecosystem
SOURCE: McKinsey PMP Digital Hub research
Lack of top-down
governance
McKinsey & CompanyMcKinsey & Company 17
It starts with being aspirational
SOURCE: www.space.com
“We choose to go to the
Moon in this decade and do
the other things, not because
they are easy, but because
they are hard; because that
goal will serve to organize
and measure the best of our
energies and skills
– John F. Kenney
September 1962
Text
McKinsey & CompanyMcKinsey & Company 18
Here’s what external thought leaders are saying to pharma
Strategic Shifts What thought leaders are saying
“Users of pharmaco products are comparing them with those of the best
consumer electronic brands”
“Pharmacos are now competing with nimble, small to midsize rivals that have
nothing to lose”
Go beyond the
pack mentality
and embrace
experimentation
and risk
1
Embrace a
collaborative
culture and
challenge barriers
to sharing
“Pharma companies may think they need to keep their data secure but not being
transparent about clinical trials will put them at a perilous disadvantage in
front of patient groups and regulators”
“Pharmacos need to build trust-based personal relationships with consumers”
2
Reinvent
companies by
building
nontraditional
capabilities and
embedding them
in new operating
models
3 “There’s a broader conversation to have with pharma about moving from a
products and pills company to a solutions company”
“The harder question is what are the fundamental organizational changes that
will need to occur? … Technology change is the easy part”
“Pharmacos need to double down on talent that truly understands science and
health data: clinical informaticists who can manipulate EHR data, or data
scientists who aren’t just the IT guys in the basement but are business partners”
SOURCE: Interviews with external thought leaders across VC, startup, analytics frims, pharmacos
McKinsey & CompanyMcKinsey & Company 19SOURCE: McKinsey Digital Taskforce
Change management & digital leadership
How
Digital capabilities
What
Digital transformation driven by the CEO
New
frontiersCore
Foun-
dationsMission
Ground
controlBooster
Scaling the relevant assets into the digital worldProduct portfolio and product development team, existing customer relationships,
global supply chain, company assets, business building approaches
To drive a successful digital transformation, you need to define the "what" and "how"
McKinsey & CompanyMcKinsey & Company 20
Mission
9 steps to take on the "how"
Ground
control
Link budget to realization of intermediary targets (e.g. from
idea to concept to prototype to go-live)5 Budget like a start-up
Install a blended digital challenger board with digital natives
as well as those who know the core business6 Be critical
4 Define rough quantitative targets for each team/initiativeNo measurable targets –no learnings and success
Give cross-functional teams authority to lead the "classical"
teams/ functions7 Allow for dictatorship
and a "license to kill"
Start from the customer and prioritize key customer journeys
in order to digitize touchpoints journey-by-journey 2 Customer first!
Rank all relevant digital initiatives / assets by impact and
feasibility along foundations, core and new frontiers1 Digitize end-to-end
For each prioritized initiative / asset, build a cross-functional
team with clear mandate and digital talent3 Break your functional silos or
they break your digital future
Split up IT: Protect legacy IT which hosts sensitive data and
establish agile capabilities for fast moving B2C systems –
initiate rapid test and learn cycles
8 2-speed IT or you are too slow
Drive implementation to scale along a digital roadmap:
Journey-by-journey, touchpoint-by-touchpointScale it!9
Booster
SOURCE: McKinsey Digital Taskforce
Approach
McKinsey & CompanyMcKinsey & Company 21
Takeaways from today
There is a lot of opportunity and
players are already carving out space
Digital is changing the
pharma/healthcare landscape as we
speak
Be bold – it's a transformation not a
number of initiatives
Talent and mindset shift is key
Implementation success requires being
clear on "what" and "how" (and
courage)
Presentation to NY Pharma
Forum
Cliff [email protected]
Predict • Prioritize • Optimize
27th January, 2016
© AllazoHealth 2016. Confidential
Retrospective/current
Triggers (e.g. late to fill)
Predictive analytics
% of
MCOs
using
83%
7%
40%
Intervention targeting
method
AllazoHealth 30 MCO
Medication Adherence Study
Q1, 2014
0%
Predicts Medication Adherence
100%50%25% 75%
Adherence
improbable
Adherence
probable
(Medication Adherence Predictions)
Statin
Pe
rce
nt o
f P
op
ula
tio
n
Adherence
improbable
Adherence
probable
(Medication Adherence Predictions)
Individualized Intervention
Predictions
Feedback
Learning
Pharmacy and
Medical Claims
Intervention
Data
Demographics
Individualized Adherence
Predictions
Interventions
Delivered
Our Approach
Accurate, Reliable
0
10
20
30
40
50
60
70
80
90
100
0 10 20 30 40 50 60 70 80 90 100
FRACTION ACTUALLY ADHERENT
PREDICTED PROBABILITY OF ADHERENCE
Reliability Diagram
Actual
(Medication Adherence Predictions)
Improve
outcomes;
Minimize
medical
spend
Maximize
Rx volume
Allazo Adherence Solutions
Maximize metrics:
Stars
HEDIS
DSRIP
QRS
$$$
Adherence
prediction
Predicted
intervention
effectiveness
Value of
adherence $3700
+15%
46%
Allazo
Intervention
Priority score
176 176
250
Intervention
Queue
75
Prioritizes patients for intervention
Medical Savings
Intuitive care manager dashboards
Predictions and medications
to prioritize
Visualize
medication supply
“AllazoHealth has been game-changing for our medication adherence
efforts. Now we know which patients we should intervene with and what to
focus on during those calls….
….the targeting and data Allazo provides has made our interactions with
patients many times more productive.”
-Head of Care Management Team at Allazo client
30X higher ROI
Allazo
Priority
Score
Interventio
n Return on
Investment
Each bar shows 10% of patients
eligible to receive intervention
Low priority High
priority
<50 50-76 76-
101
101 -
134
134-
176
176-
235
235-
285
285-
343
343-
454
>454
Confidential Hindsait Information
Hindsait’s AI Platform Enables Improved Quality of Care and Prevention of
Unnecessary Services, Errors and Fraud
Artificial Intelligence + Human Ingenuity
=> Superior Outcomes At Lower Cost
ARTIFICIAL INTELLIGENCE FOR BETTER HEALTHCARE
Unnecessary Services*
$210 Billion
Excessive Administrative Costs*
$190 Billion
Prices That Are Too High
$105 Billion
Fraud*
$75 Billion
Inefficiently Delivered Services
$130 Billion
Missed Prevention Opportunities*
$55 Billion
2015 Estimate is One Trillion $ in Annual U.S. Healthcare Waste
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$765 BILLION WASTE IN U.S. HEALTHCARE (AS OF 2012*)
SOURCE: Health Policy Brief | www.healthaffairs.org|Robert Wood Johnson Foundation, Dec 2012
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HINDSAIT’S PRODUCT PORTFOLIO
Utilization Management Assistant (UMA)
AI and Predictive Analytics Preventing Unnecessary Health Services
Quality Ratings Assistant (QRA)
AI and Predictive Analytics Improving HEDIS and STAR Ratings
Missed Prevention Assistant (MPA)AI and Predictive Analytics Optimizing Missed Prevention Opportunities
Fraud and Anomaly Detection Assistant (FDA)
AI and Predictive Analytics Preventing Fraud and Abuse
A Suite of AI Enabled SaaS Platforms
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HINDSAIT’S ARTIFICIAL INTELLIGENCE SAAS PLATFORM
Predictive Analytics
NLP Natural Language ProcessingVOCABULARIES AND LEXICON
Machine Learning
ETL/Image
Processing/OCR
Pre-Authorization
Request with
Patient Chart via
FAX/EMR
Clinical Guidelines, Business Rules
Predictive Scoring and Intelligent Routing for
Consistent Clinical
Decisions
Alert for Fraud, Anomalies and Missed
Prevention Opportunities
Dashboard with Key Performance Metrics
Input Computing/ Output
Patient’s Medical Record –
‘Free Text’
CLINICAL GUIDELINES AND HISTORICAL OUTCOMES
Performance Audit, Analyzing Human Biases for
Continuous Improvement
Historical Records
Hindsait’s AI platform is hosted in secured, HIPAA complaint Google Cloud Platform
(GCP) -Seamlessly Integrated with Client’s Workflow and IT Systems
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The BEST Utilization Management (UM), Preventing the Most Unnecessary
Services, is High Touch. It Requires Review of a Patient’s Complete Chart
HOW PAYORS MINIMIZE UNNECESSARY SERVICES TODAY: UM
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Approvable cases
to Nurses
Deniable cases
to Physicians
With Hindsait, Patient Chart is First Reviewed by AI
CONSISTENT, AUDITABLE, AND GETS BETTER WITH TIME
HINDSAIT REVOLUTIONIZES UTILIZATION MANAGEMENT
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Faster to Adjudicate More Consistent,
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We worked with Hindsait for more than a
year to fine tune the particular application
of predictive analytics that would enhance
our efficiency without compromising
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Fewer Unnecessary
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= $ Millions in Annual
Savings for Payors
… and counting
And Results Get Better Over Time.
RESULTS ARE DRAMATIC
Confidential Hindsait Information
Rebecca Gordon, MSN, RNChief Health InformaticsFormer Patient Care Director at
NY Presbyterian Hospital
Advisor
Pinaki Dasgupta, MBAFounder and CEO Former Accenture Partner
20+ Global Technology Leadership
Suken Shah, MDMedical InsightPracticing Interventional
Radiologist at Barnabas Health, NJ
Gopal Narayanan, PhDChief TechnologistResearch Associate Professor at
UMASS. Leading AI Expert
Brad Timm, PhDCognitive ComputingData Scientist with expertise in
Quantitative analysis
LEADERSHIP TEAM WITH OUTSTANDING CREDENTIALS
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APPLICATION OF AI IN PHARMA
Personalized medicine
Personalized patient engagement and education
Improving R&D efficiency and drug development
And many more….
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ANALYST SPEAK
“One of the most exciting AI healthcare start-ups” -
“5 Innovative Ideas to Look Out for Before 2016” -
"Right now what you see is that IBM and Watson is at
the center of the [health care AI] ecosystem… However, some artificial intelligence competitors are
emerging, such as New Jersey-based startup
Hindsait…”
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THANK YOU!
Pinaki Dasgupta Ph: 201-491-6930
Email: [email protected]
@Hindsait