Rethinking the Role of Life Sciences Companies in the Healthcare Ecosystem Figure 2: Mergers and Acquisitions Have Rewritten the Life Sciences Landscape


100 120 140 160 180 200


20 40 60 80


0 1999 2000 2001 2002


Number of billion-dollar deals Value of deals


Sources: Capital IQ database, company financial statements, and IBM Institute for Business Value Analysis. Choices for the Future


What lies behind the industry’s inability to address the problems it confronts? One of the main causes is the fact that each company has tried to tackle them separately, rather than working with the other participants in the healthcare ecosystem to optimize the system as a whole. “Systems-thinking shows that there are some issues you can only sort out by collaborating with every stakeholder in the system—and the healthcare ecosystem is no exception,” explains Guy Lefever, Vice President life sciences of IBM Global Business Services.


Seen through the lens of systems-thinking, the healthcare ecosystem is one of the 11 core systems that collectively form a global ‘system of systems’ representing 100 % of the world’s GDP.16


Each system is an


amalgam of public and private organizations spanning multiple industries. The life sciences and healthcare sectors are thus part of a single, interconnected ecosystem that includes all the parties engaged in helping people manage their health. However, that ecosystem is bloated. IBM’s research suggests that it has an economic value of about US$4.27 trillion and that about 42 % of the money it absorbs is used inefficiently. In other words, US$1.79 trillion a year are wasted or lost.16


(When estimating the value of the health ecosystem, we assumed


that the 11 core systems are collectively worth US$54 trillion—the GDP generated worldwide in 2008. We calculated the value of each system by using the OECD input-output tables to measure how much the core industries contribute to each system, and on how much of the production of other industries they rely to produce each dollar of their own output.)


The fundamental issue for individual life sciences organizations, then, is whether they can stop working in silos, embrace systems-thinking and cooperate with the rest of the healthcare ecosystem to eliminate inefficiencies while generating sustainable returns. There are four key questions to consider, described below—each with a range of options.


iHEALTH CONNECTIONS


What Role will Your Organisation Have in the Healthcare Ecosystem?


The first question pertains to the role different life sciences companies want to assume within the healthcare ecosystem, and it entails three specific alternatives:


• • •


whether to focus on patients or people; whether to focus on disease or health; and whether to be a supplier or a partner.


A company that sees the end-users of its products as patients with an illness requiring a prescription only has to provide medicines; someone else is responsible for distributing and administering them. A company that sees its end-users as people has different obligations—and different opportunities; it still has to provide medicines, but it might also choose, either alone or with partners, to provide new offerings that address its end-users’ other needs.


Similarly, a company that focuses on disease seeks to stimulate earlier and broader diagnosis and treatment, whereas a company that focuses on health emphasises prevention and wellness as well as medication. The latter is as interested in encouraging healthier lifestyles as it is in improving compliance and persistence.


Deciding whether to be a supplier or a partner has other ramifications. Suppliers provide products or services, while partners provide solutions, and this shapes the type of relationships and conversations they have. The dialogue between a pharma supplier and its customers typically revolves around formulary access and pricing. The dialogue between partners covers a much wider range of issues, including how to improve outcomes and achieve lower overall costs. The opportunities to create and extract value are therefore far greater. However, any life sciences company that decides to change its role will, first, have to earn the trust


105 2003 2004 2005 2006 2007 2008 2009 2010


10 12 14 16 18


0 2 4 6 8


Value of deals (US$ billion)


Number of billion-dollar deals


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