Saul Kaplan: Biotech Disruption Part Deux

I love conversations about ideas worth scaling.  Many of the comments to my BW column on biotech disruption are from industry stalwarts fighting to defend the industry.  Thinking about how biotechnology can help enable a transformed health care system seems worth talking about.

I am not criticizing either the pharmaceutical or biotech industry or any of its companies and executives that work hard every day trying to bring forward life extending and life saving drugs.  I have the utmost respect for the industry having spent nearly my entire career in and around it.  I am suggesting that the current blockbuster industry model may have served its purpose and can be changed by the disruptive potential of biotechnology.  It is this disruptive potential that will enable us to get under the buzzwords of personalized medicine and begin to understand how a new and better health care system can work.

It is predictable that existing industry players will fight to strengthen their relative position in the industry and to sustain the current industry model.  I don’t criticize them for that.  I expect it.  I can hear Clay Christensen saying that companies and industries don’t disrupt themselves.  He is so right.

Our current health care system is unsustainable and until we experiment and scale new system approaches that take advantage of technology to put the patient and citizen at the center of a well care system our current system will expand out of control.

I have lived and worked in every nook and cranny of the pharmaceutical and biotech industry over a 30 year career and have helped design and build capabilities at the function, company, and industry scale.

One commenter mentions Leigh Thompson from Lilly.  Leigh was a friend of mine from old Lilly days and one of the smartest people I have ever known.  We worked together during the latter stages of clinical and regulatory development as well as on the U.S. launch planning for Prozac.  Leigh was remarkable and is sorely missed.  He was indeed a big proponent of internal systems to fail fast for product and clinical development programs. I know Leigh would be an active participant in today’s conversation about the need to experiment with new business models and industry systems.  He saw the promise of biotechnology and knew the industry would have to change to take advantage of it. He was a world-class innovator.

I had a front-row seat during the early days of the biotech industry.  I remember like it was yesterday touring the very first industry scale production facility for a recombinant DNA derived product, human insulin (Humulin).   As a road warrior consultant over too many years I worked with many project teams building new capabilities for both pharma and emerging biotech companies.  Some even harbored early hopes of leveraging biotechnology to create new platforms for discovery and development for personalized medicine.  I was in many great discussions about the difference between a platform and a product business model.  In every case the siren call of the blockbuster industry model reinforced by a VC exit strategy dependent on either an IPO or Big Pharma acquisition won out.   It was predictable and companies did the right thing to maximize shareholder value.

There is a lot more technology development work needed to enable personalized medicine but biotechnology has advanced enough for us to demonstrate how a system can work in several specific diseases and care path areas.  All key levers and stakeholder roles must be on the table to fully explore available system options.  At the non-profit Business Innovation Factory we are creating actionable lab platforms for exactly this kind of experimentation.

There has been a lot of talk about business models built around outcomes that deliver better care for less money.  The hypothesis has always been that drugs are cheaper than other types of health care and should be used, more not less, to save the health care system money. The theory goes that if you squeeze the toothpaste tube in one place it only pops up in another.  Only looking at the entire tube not just squeezing all over the place will result in an opportunity to design and test possible new systems.

The pharma industry has never done particularly well at selling the “toothpaste tube” story and seems content working the current system for maximum return.  The current blockbuster model is bringing continued consolidation and is not sustainable.

New business model discussions with industry friends that are open to the discussion and not defensive about the history and current position of the industry are always interesting. Discussions with the “lean against” crowd that don’t think the system has to change don’t go very far or last long.   Most of this crowd just point at another silo in the rugby scrum as the source of the inertia.  It is the fault of doctors. No, it’s the insurance companies, the hospitals, the government, the patients etc. Everyone points at everyone else as the source of the problem and nothing changes.

In the current health care system drugs, whether they are from chemical or biological processes, are treated as a cost center or one more silo to manage.  The industry fights every day to make sure the silo is managed in a way that benefits the industry.  Rules form the architecture that the industry operate and compete under including patent law, FDA regulations, and federal/state legislation.  I don’t blame the industry for fighting for rules that are in their best interest.  I am suggesting that we should at least consider that with today’s technology we can do better and should be testing new system designs to see what works and can scale.

The silver tsunami is coming as the first baby boomer turns 65 in 2011.  We had better get on with exploring new system approaches before the current system crashes.  I am proud of the industry I grew up in and want it to be an innovator and leader in shaping a new and better health care system.  The patient is waiting.