Trilogy Tidings
May 2017
in this issue
     Innovation can be described as cleverly solving an important, common problem. Obviously, one such problem is "excessive" cost to the customer. So these two attributes - innovation and cost reduction - are sometimes closely related. However, whether linked or not, each of these attributes can lead to commercial success. Let's explore both in the context of healthcare.

Innovation in Healthcare          
     According to Kurt Schroeder, writing for our local Triangle Business Journal: "Innovation seems to be the business imperative of this decade and beyond. Companies are pouring millions of investment dollars into innovation labs to focus on product and service innovation." However, new-product failure rates in the healthcare industry run at about 35%. (They are even worse for consumer goods at about 49%.)
     So, what to do to improve these batting averages? I think the answer lies in each of the following innovation steps:
  • Identifying an important-enough problem to address that can yield commercial success
  • Applying rigorous, proven ideation, screening and product/service development processes
  • Getting sales and marketing right
Kurt nicely prescribes some details that apply needed rigor to that last step, rigor that is often lacking and which leads to commercialization failure.
     Then there's the matter of pharmaceutical R&D, a particularly glaring productivity shortcoming or - let's be honest - an innovation failure. The Center for Medicine Research International (CMR) reported in its Pharmaceutical R&D Factbook
2014 an average success rate of 4.9 percent from first toxicity dose to market approval. That's abysmal. Certainly, and understandably, the US regulatory state carries some of the blame. But most analysts now agree that pharma's drug discovery and development processes must be modernized. This current innovation discrepancy also directly contributes to high drug prices; more on that later.
Cost Reduction in Healthcare           
     As you contemplate offering new healthcare products and services, I suggest that you engage your laser focus on significantly reducing the costs of medical products and procedures - while at least maintaining the quality of care. Given the current intense focus on those costs, their reduction offers an excellent path to commercial success. View current costs as problems to be solved, then innovate to reduce them.
     Attacking the costs of medical products in particular is a worthwhile activity, but it's not enough. More leverage (and more commercial success) will result from lowering the societal costs of interventional procedures, diagnostic methods, and treatment protocols.
     Then there's the matter of drug costs, a current issue of widespread interest and white-hot rhetoric - an issue closely linked to reported pharma R&D expenditures. Those reported levels of R&D investment are controversial and obviously related to the dismal R&D productivity of drug R&D.
     Depending upon your point of view and your role in the US healthcare system, you are either convinced that (1) current drug pricing is justifiable and contributes little to overall healthcare costs, that (2) pharma R&D is terribly inefficient and must be improved and modernized, or that (3) both statements are true.
     I find that the first (industry) view is well summarized by Luca Dezzani, Global Medical Director at Novartis, in his recent post entitled " Cost of Medicines in Context." The second (more prescriptive) view is laid out by CPhl North America in its recent whitepaper entitled " Pharma Must Lower R&D Costs - Here's How to Do It." They recommend focus on three broad initiatives:
  • Decreasing the risk and failure rates within the drug development process
  • New drug development models
  • Key changes to regulatory constructs 
     Regardless of where you stand on this critical issue, it's difficult to argue against an improvement in the poor productivity of drug R&D. Something's got to give!
So Which Path Leads to Success?           
     Obviously, each can yield success. Sustainable cost reduction often requires innovation. And, innovation may (or may not) yield a reduction of customer costs. Prudence suggests that you keep your eye on both possibilities at all times.
Other Cool Stuff           
     If you're still with me and willing to tolerate a bit more, I recommend a few resources that you may find interesting. The first is a New Yorker article about the future role of AI in diagnostic medicine; I found it fascinating. The second is an interactive tool to assist students in learning advanced statistics. Be aware: It won't work on your mobile device and, truth be told, it's more appropriate for your children or grandchildren; it's too late for you!
Resources from our Archives 
     Check out our Reading Room to view my published articles, presentations and white papers on a variety of topics.
     And, you can examine my Newsletter Archive of prior Trilogy Tidings (since February 2007).
What does Trilogy do? 
     Trilogy Associates facilitates business growth and renewal through commercialization of new products, providing the following services:
  • Opportunity assessment
  • Business planning and enterprise growth strategies
  • New-product conceptualization, commercialization and marketing
  • Market research and competitive assessment
  • Business development and partnering
  • Market and technological due diligence
  • Assessment of the therapeutic and diagnostic potential of novel technologies
  • Design of efficient and effective development strategies for early-stage biomedical products
  • Business and technical writing/publishing

     Inquiries to establish whether and how we might support your business initiatives are always welcome.  Contact us.

Contact Information
ContactInfoJoseph J. Kalinowski, Principal
LinkedIn Profile: www.linkedin.com/in/trilogy