Philadelphia 2015

Apr 7, 2015 - Apr 8, 2015, Philadelphia

Collaborate to succeed in customer-driven healthcare

The Innovation Blind Spot

Danielle Barron talks to author Ron Adner whose book “The Wide Lens” explains why the failure to focus on the entire ecosystem rather than the immediate environment of a new product is the downfall of pharmaceutical companies attempting to successfully commercialize innovation.

It was Woody Allen who said “If you're not failing every now and again, it's a sign you're not doing anything very innovative.”

The pharmaceutical industry has finally accepted the need to innovate not only new medicines but its entire business model. Unfortunately, with innovation comes the risk of failure. Furthermore, attempting to commercialize innovation is associated with its own inherent risks, even if the product or service is of value.

Tackling unmet needs in healthcare necessitates buy-in from all stakeholders – patients, physicians, governments. Without this, failures can be spectacular. So what are the common pitfalls in commercializing innovation and what can pharma innovators do to manage these critical risks?

Professor Ron Adner is author of “The Wide Lens: What Successful Innovators See That Others Miss”. He believes that a failure to understand and contemplate the co-innovation risks and adoption chain risks in bringing innovation to market is one of the reasons many innovations fail.

“The idea behind The Wide Lens is that more and more, and within an increasing number of contexts, we are finding that successful innovation requires that the innovator do more than 'just' deliver on their promise – they must not only manage their execution but also take into consideration and build into their strategy how to align a greater and greater number of other partners and collaborators.

“The message is that unless you can expand your strategy to consider these other factors, like the co-innovators - the people who need to successfully innovate in order for your innovation to matter - and your adoption chain, which are the partners that would need to buy into your proposition before you can reach your end customer -if you don’t have a process for managing those, you’re putting yourself in much greater danger.”

Managing the ecosystem

Adner explains that he was moved to develop his Wide Lens approach having identified a myriad of factors that impede great innovations.

“I don’t look at how you come up with a great innovation – rather, my interest is in the difference between great innovations that succeed and great innovations that fail. Much of the time that difference is not in the core product that’s being offered but in the ecosystem in which it is deployed and how that ecosystem is managed,” he says.

One of the cases researched by Adner in his book is that of Pfizer’s Exubera – an inhalable insulin that launched amid great fanfare but limped out of the market within a year. Inhalable insulin was thought to be the answer to non-compliance for diabetics who disliked injecting insulin on a regular basis. FDA approval for Pfizer’s Exubera in 2006 meant they had won the race to market with a pulmonary insulin but this approval came with a requirement that all patients undergo a lung function test before the initiation of therapy.

It was the unexpected impact of the lung function test that would transform an eagerly anticipated innovation into an expensive failure - $2.8 billion to be exact. The market potential for an inhalable insulin was real – back in the early 2000s some 370 million people worldwide had Type 2 diabetes and its status as the next pandemic had been cemented – but the changes in practice that this would necessitate had not been foreseen by Pfizer’s R&D team. The apparent gap in the market filled by Exubera would instead create an extra step in the treatment process, one that was neither practical nor feasible when it came to the everyday practice of endocrinologists. The brilliance of the innovation had fallen victim to the innovator’s blind spot and Exubera became “the billion dollar blunder”.

“It is hard to think of a drug whose pre-introduction was met with more mass market enthusiasm than inhalable insulin and Pfizer’s Exubera in particular. It’s a case of a company delivering what it promised to deliver and nominally the market being more than ready to turn it into a blockbuster, and yet it ends up being one of the biggest failures of the modern pharmaceutical industry. Failures in pharma are usually because a drug doesn’t get past Phase 3, but here we have a case where the expectations were for billion dollar sales during the first year but the drug hits the market and within a year the sales were just €12 million. A miss of that magnitude is incredible. All the indicators point to a misunderstanding of how this drug would change interactions in the healthcare delivery chain,” explains Adner.

My research reveals that the blind spot in the rollout was in how the FDA requirement of the lung function test affected the treatment path.

As we see more and more examples of collaborative interactions in pharma, such as interactions between drugs and diagnostics and interaction between different silos within the healthcare field such as endocrinology and respiratory in Exubera, these interactions must be managed as effectively as the core development process.

The missing piece of information from the Exubera launch was how to handle the need for spirometry testing - widely available for general practitioners but completely absent from the practices of diabetologists and endocrinologists, the initial target prescribers of the drug. As well as Pfizer, Novo Nordisk, and what were then Aventis and Eli Lilly were also working on an inhalable insulin. They too ended up scrapping their efforts. Adner believes that this could have been avoided.

“All these great expectations were based on this drug launch. The failure of Exubera was put down to reasons that did not in fact hold water. The delivery device was said to be too bulky, yet when sales expectations were set, both Pfizer as well as industry analysts were well aware of the bulkiness of the initial device.  Indeed, Pfizer was already working on a next generation device at the time of launch. Same too with concerns about insurance reimbursement and adverse effects. My research reveals that the blind spot in the rollout was in how the FDA requirement of the lung function test affected the treatment path.”

Co-innovation and the adoption chain

A successful strategy would have been proactive in managing the need for a new step in the delivery pathway, but this necessity had not been focal to Pfizer’s launch strategy. This kind of mismatch is characteristic of ventures that require new forms of collaboration. It is Adner’s view that instead of focusing on the classical pharma approach of discovery, manufacturing, supply chain etc., those wishing to successfully innovate must ask themselves two critical questions; who needs to co-innovate and who is in the adoption chain.

“The implication of the shift towards personalized medicine is that if you’ve got a drug on the market but the diagnostic isn’t ready then it isn’t going to succeed... likewise you have to think about partners that aren’t necessarily on the critical path. In the case of inhalable insulin, it was whoever was going to run the lung function test, and they were not on the treatment pathway for endocrinologist-managed diabetes patients. Missing one of these adoption partners breaks the chain and ends up losing value creation.”

In his book, Adner states that innovation is a problem for everyone because it is held up as the solution to everything".

Classic issues around execution in terms of satisfying customers and beating competition have been the focus of the pharmaceutical industry to date. Adner makes clear that these remain critical, yet as healthcare becomes more interactive, co-innovation and the adoption chain must become part of this focus. Taking into account these potential pitfalls must become embedded in the pharmaceutical development process.

“You need to come to terms with what you are able to control, what others are in a position to control and things that no one can control. This Wide Lens perspective starts changing choices and investments. There is no problem with taking on risk– the problem is when you don’t understand what kind of risk you are taking. A better understanding of the full set of risks helps you redefine your strategy,” reiterates Adner.

In his book, Adner states that innovation is a problem for everyone because it is held up as the solution to everything.

“Innovation is presented as the way of creating new value but too often, what’s missing from those conversations is the risks that it entails. Glossing over the risks at the beginning doesn’t mean they are going to go away, it just means they are going to be more expensive to deal with further down the road. While managers have rich processes in place to assess and manage their own execution challenges, they do not fully understand their dependence on their partners’ co-innovation challenges,” he explains.

Collaboration is key

IDEA Pharma's Principal, Mike Rea, voted among the PharmaVOICE Top 100 Most Inspiring People in the Life-Sciences Industry, believes that Exubera was a victim of both logistical problems and also patient readiness, or lack thereof, and that Pfizer hubris was to blame for the spectacular failure.

New ways of managing co-innovation and co-commercialization are essential and for the industry, it will be crucial to have an understanding of how pharma can best work with the broader ecosystem to ensure its innovation is accepted and adopted. Collaboration or an expansion of the traditional offering would appear to be one of the best ways to meet this requirement but Rea says that this approach is still thin on the ground within the industry.

“Apart from one or two companies that are offering companion diagnostics to their cancer meds, it is very rare to see anyone offering extra services or a broader, end-to-end patient-centered solution. There is a world of technology out there that has nothing to do with pharmaceuticals but would enhance pharmaceuticals and be of value to patients. All of those considerations need to happen early in the stage of development and not afterwards. At the moment, pharma seems to think that we will launch the product first and then we will think really hard about how to innovate around that but you can’t do that. A product is more than just the ingredients that go into it.”

The new blueprint for success

Large pharmaceutical companies have historically taken the view that the ecosystem will change to accept their innovation but they must learn that “retrofitting” their product within the current landscape will not work; an all-encompassing view must be taken of where they want their product to go – and how they see it proceeding. This makes the process more complex, given it involves a much-enhanced level of interaction and meaningful dialogue with both physicians and patients – the end prescribers and end users.

In the future, Rea sees smaller, specialized tech companies identifying and answering the questions that larger companies haven’t stopped to ask. This new blueprint for success will require successful collaborations between innovators at all steps of the development process. It will also require a fundamental shift in the established wisdom that pharmaceutical companies are at pains to adhere to. A focus on new diagnostic and prognostic testing, as well as new ways of marketing drugs and selling them is necessary.

“It’s like Apple telling you that their first iPhone is the best and refusing to release any upgrades. Most drugs when they launch, that’s as good as they ever get but  the benefit to thinking like this is that you can improve this drug by making sure the right people get it, or that it is delivered in the right way or increasing or decreasing the dose. Pharma doesn’t actually learn that much about its drugs after they launch, when you think that 90 per cent of people with depression can’t enter a clinical trial for an anti-depressant. Most people have got a much more complicated disease and this new interest in collecting data has to lead to more people being treated better and with better medicines. Payers take all the risk by paying for the medicines whether they work or not, this needs to change, to shift the responsibility back onto pharma,” Rea states.

The bigger picture

Pharma needs to be of the mind-set that they can cure whole disease areas and have bigger goals, not just small incremental improvements. Google thinks, how can we make something 10 times better? Not 10 per cent better.”

This reinforces Adner’s point about co-innovation risks and adoption change risks remaining hidden in traditional pharma strategy. The ecosystem is now putting pressure on manufacturers to think differently about other ways of adding value rather the medicine itself and the definition of product will change as these factors are taken into account. Development cycles will become shorter for those with innovative technologies and regulation will also have to adapt to this. But this new approach must be taken at the very earliest stages of the drug development cycle. Simulation rather than forecasting of markets is beginning to filter into the actions of pharmaceutical companies, with Novartis, Janssen and Gilead taking more time to understand the nuances of the market.

“Most medicines are just components of a very big picture,” says Rea. “Some of the markets we think about today may not even be there in the future if we could find proper disease cures; pharma needs to be of the mind-set that they can cure whole disease areas and have bigger goals, not just small incremental improvements. Google thinks, how can we make something 10 times better? Not 10 per cent better.”

Why aren’t pharma doing this already? It all comes back to risk. But a full understanding of the innovation ecosystem, and a willingness to collaborate with the interdependent partner network needed to generate, develop and deliver an innovation, can be the defining factors in its success and can mitigate against the inherent risks involved. This will necessitate a sea change in current thinking within larger pharmaceutical companies wedded to the traditional models of R&D.

But as Adner says, peeking into the innovation blind spot means you can identify all the possible risks and work to manage them, and thus maximize your chances of success.

“It is no longer enough to manage your innovation. Now you must manage your innovation ecosystem.”

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Philadelphia 2015

Apr 7, 2015 - Apr 8, 2015, Philadelphia

Collaborate to succeed in customer-driven healthcare