What Pfizer, GSK and Merck Could Learn from Lou Gerstner's IBM of the 1990s

Let me start out by stating the obvious: Most big-name pharma companies are doing just fine. They manage their patent pipelines, continually invest in research and development and have built strong distribution networks.

Second, addressing the title of this column, while IBM went through an important metamorphosis in the ‘90s, it is not the poster child or financial role model that big pharma seeks or should want.

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My first point is an important enabler, and the second point doesn’t have to stop us from deriving lessons from IBM and considering how they can or should be reapplied. If you really want to know why, consider what happened to the company’s peer group of the ‘80s — you are unlikely to recognize many of those names.

At the risk of oversimplifying the IBM story, the company made a strong push to move from a hardware (product-focused) company* toward integrating software within their solutions. Under Lou Gerstner’s leadership, IBM made an even stronger push to become a service provider, focused on selling integrated enterprise solutions. Sound familiar, healthcare?

We don’t need to stretch the metaphor. The point is, the healthcare industry will continue to become more and more patient-focused and accountable for measurable outcomes, both for disease management and wellness, cure and prevention. Successful patient outcomes will depend on the integration of product (medicines/devices) and service delivery (healthcare providers).

Just like IBM had to move away from maximizing sales of machines (mainframes and PCs), pharma will have to move away from maximizing prescriptions.

There are several important enablers driving this shift:

1. The technology side of the business (Google, Amazon, Microsoft and, yes, IBM, among others) is focusing on the interoperability of healthcare data. Check out this announcement and catch up on HL7 FHIR and the Argonaut project. The potential of electronic health records is closer than ever before to being unlocked.

2. The wearables side of the business is reaching critical mass for the resultant data to go beyond informational value and enter the realm of true healthcare applications.

3. The behavioral side of the business is probably the most underappreciated. While there will be continued efforts to nudge patients to better compliance and persistence, it is more than likely that behavioral science will have far more dramatic effects at the provider level. Consider the impact of reduced antibiotic use through interventions that changed clinician decision making (71 percent reduction in inappropriate prescriptions). A monthly email to doctors comparing them to others influenced behavior change. Or the effects of University of Utah Health’s Value Driven Outcomes (VDO) effort, which developed a pragmatic software framework for understanding and improving healthcare value (costs relative to outcomes). There are other compelling experiments from National Health Service Scotland and Geisinger Health System in Pennsylvania.

4. The data side of the business is both ready and complicated. Ready because the models have been built across categories (you know that every time you reject a Netflix recommendation, you help their algorithm), and the skills that are required to connect and build data sets have become more clearly defined. But the data side of the business involves models that raise complicated and philosophical questions regarding standards of accuracy for diagnosis. The good news is that pharma incumbents have large volumes of data that provide a real and meaningful advantage over any new entrants who may intrude their space.

This is not going to be a snap-the-finger-operation. There are many data connections, ranging from personalized medicine to integrating patient behaviors (IoT tracking of sensors, implants and wearables) to genomics, that must become ‘learning systems’ before the resultant analytics become powerful.

Additionally, there will be forces that want to extend the status quo of running big pharma the way it has been run so far. Others, such as service providers, will likely see big pharma as a “frenemy” and may even slow down integration. But as Lars Sorensen of Novo Nordisk said, the ultimate success of our products is reached when they are no longer required.

Can big pharma pivot to a services model? Some in the industry will choose this strategy, and the proof will be in the resulting success. The future of healthcare and well-being require the integration of pharmacy, clinical, behavioral and data insights to deliver wellness outcomes. Those outcomes are unlikely if each of these disciplines continues to operate without interconnected data systems that track those outcomes longitudinally.

*As an aside, IBM’s services push did not mean that they stopped investing in products and technology. They logged, and continue to log, large numbers on ttechnology patent charts.

Sumeet Kanwar is CEO and founder of Hexagon, a business analytics and customer strategy consultancy. He previously was managing director at Omnicom Media Group and vice president of global digital strategy at Leo Burnett.

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