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Trends and Opportunities

MassMEDIC Meeting April 25, 2014 Sharad Rastogi

Healthcare Informatics and MedTech Innovation

PwC

The unsustainable trajectory of the healthcare market requires changes in how information is utilized With increased cost trends and an aging

population, U.S. health spend is expected to double over the next 8 years to $4.6 trillion1

Per capita health expenditures will nearly double

as consumers age2 and in 2020, 17% of the U.S. population is expected to be >65

$2,442

$1,702

$2,503

$5,542

$9,736

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

0

20

40

60

80

100

120

Under 5years

5 - 17years

18 - 44years

45 - 64years

65 yearsand over

U.S

. P

op

ula

tio

n

( m

illi

on

s)

TotalPopulation(in millions)

Per CapitaHealthExpenditure

Sources: 1) CMS Nat’l Health Expenditure Forecast 2010-2020; 2) 2009 Health and Human Services Medical Expenditure Panel Survey; 3) Centers for Disease Control and Prevention. Rising Health Care Costs Are Unsustainable. April 2011 4)Forrester: North American Technographics Customer Experience Online Survey: 4Q2011(US)

State and federal governments spend 1,000 times more

money to treat disease than to prevent it

Healthcare payers continue to focus on improving outcomes and lowering costs…

Non-compliance with prescription medication costs

an estimated $290 billion per year

Chronic disease treatment accounts for over 75% of national health expenditures

Over 30% of healthcare spend is wasted

through inefficiencies, fraud, and other errors

…but are not meeting customer expectations

Health plans rank the lowest industry in

customer satisfaction3

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Health Plans

Retailers

Very poor Excellent Good Okay Poor

US ranks 46th among 48 countries in healthcare efficiency

2

PwC

The consumer revolution has transformed several industries and is starting to transform the health industry

Industry Past (industry centric) Present (consumer centric)

Banking Bank Teller • bankers’ hours • branch only

ATMs, Mobile Banking • available 24/7 • Location-agnostic

Travel

Travel Agency • limited hours • limited locations • annual updates

Online Booking • on demand booking • location agnostic • real time pricing

Retail

Standardized marketing and inventory • national campaigns • Sunday circulars

Customized • website, location-

specific • data-driven targeted

promotions

Health

Physician Office, Hospitals, Pharmacy • set hours & locations • standardized

treatment plans • queue for care • myHealth

Personalization • Personal connected

health • Individualized

services, treatments and drug protocols

Consumer centricity requires a better understanding of customers (Patients, Payers, & Providers) and their behaviors. This changes the dynamics of the relationship and often empowers consumers to take greater ownership of decisions

1980’s-2010’s

Future Shift

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April 2014

PwC

50% of mobile phone and tablet users will

have downloaded mHealth apps within five years - Mobile Health Trends and Figures 2013-2017

$43 Billion potential annual consumer

market for remote/mobile monitoring devices –

HRI Healthcare Unwired

Diet Physical Activity Stress Medication Adherence

New sources of health and wellness data that can be collected and monitored continuously in ‘real-life’ settings

Personal sensing devices and apps

Consumer adoption

Sleep Glucose

New data are being generated and made available to enable more holistic understanding of consumer health and behavior

This new data provides valuable insights about consumers outside of clinical settings and can be integrated to enable

P4 Medicine (Predictive, Preventive, Personalized, Participatory)

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April 2014

PwC

Winning with Informatics requires a shift from reporting to prediction – Life Sciences lags other industries

Co

mp

lex

ity

High Prediction & Optimization

What might happen?

Monitoring What’s

happening now?

Analysis Why did it happen?

Reporting What

happened?

Business value

High

Industrial Products

Consumer Products

Insurance

Asset Mgmt

H.C. Provider

H.C. Payer

Internet

Retail

Banking

Utilities

Life Sciences

Entertain- ment

Media

Telecom

Leadership

Low

Life Sciences Industry Analytics Maturity

Typical Questions Answered by Life Sciences Today…

• Are we optimizing investments effectively across channels?

• What are my sales trends and trend influencers?

• What expenses can be reduced while maintaining revenue?

• How do I better manage wholesaler inventory?

• What programs / offers are being used by HCPs and patients?

Leaders from Other Industries are using Analytics

Sample Questions Answered Today…

• What is the optimized marketing spend that maximize customer engagement?

• What is my predicted aggregate performance six months out?

• What trends in the data indicate suspect activities and risks based on fraud or regulatory scrutiny?

Most LS companies conduct historical reporting and analysis focused on cost containment and operational efficiency and

rely on vendors to generate advanced analytics insights

• A top consumer electronics retailer can predict in-store sales with 95% accuracy six-months in advance

• A global CPG company can predict and monitor sales at the individual store level of their retailers worldwide

• A top casino operator runs frequent simulations on its gaming floor to maximize slot and table game revenue

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April 2014

PwC

The value of a device is no longer solely in the product itself, it is in the information it produces and services it enables

Integrated services & business models that address clinician & consumer needs are becoming increasingly important

Medtech companies have a wealth of untapped data and will play a major role in customer centric strategies

New entrants are staking their claim (e.g., Google, Verizon, etc.) and MedTech must adapt its approach to compete

Medtech companies are looking to open innovation as a key approach to drive future growth

Medtech lags behind other industries for customer centric strategies and social, mobile, analytic, and cloud technologies

2

3

4

5

6

1

The market is demanding a different focus and approach to MedTech innovation

New Innovation

Focus

New Approaches

to Innovation

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April 2014

PwC

To address these trends, Medtech executives anticipate a broader and more balanced mix of innovation

Source: PwC Medtech Innovation Survey 2013

Traditionally MedTech has been focused on incremental innovation of products and technology; there is a shift to new types of innovation and a recognition that there is a need for more radical and breakthrough innovation initiatives

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April 2014

PwC

We are seeing a growth of data sets that expand beyond payer data to more provider and consumer focused data

“Big Data” in healthcare includes enabling connectivity between ever-increasing data sources. Many stakeholders are focusing on integrating provider and payer data and exploring the potential of consumer data to improve health care decision making.

Physicians

EMRs, Practice Management

Systems, ePrescribing

Hospitals

EMRs, Revenue Cycle Systems,

Ancillary Systems

Laboratories

Lab results

Health Information Exchanges

Electronic Health Records

Provider

Financial

Medical claims, Pharmacy claims,

Premiums

Medical Mgmt

Utilization Mgmt, Case Mgmt, Disease

Mgmt, Drug Adherence

Performance Measures

Hospital, Provider, Plan, Pharma

Benchmarks

National, Regional, Industry

Payer

Relationships

Provider-Patient, Family, Friends, Thought Leaders

Self Reported

Social Media, Web, Mobile, Health Risk

Assessments

Behaviors

Demographics, market segments, socio-economic

Experience

Customer Satisfaction,

Symptom relief

Consumer

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April 2014

PwC

Informatics-enabled business value can be realized across the life sciences enterprise

R&D

Clinical Trial Recruitment and Cycle Time Reduction

Comparative Effectiveness Research

Real World Evidence Personalized Medicine

Sales & Marketing

Promotional Effectiveness

Outcome-based Reimbursement Models

Pricing Optimization Customer / Product

Profitability

Supply Chain

Supply Chain Accountability & Product Security

Inventory Planning and Control

Production Optimization Forecasting

Effectiveness

Finance

Working Capital Improvements

SG&A Reporting

Margin Improvements

Cash Visibility

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April 2014

PwC

Leading healthcare companies are already employing Informatics in a range of applications

Kaiser Permanente1 Blue Shield of California2

• Implemented a new integrated computer system called HealthConnect

• System’s goal is to drive data exchange across all medical facilities and promote the use of EHRs

• Results

- Improved outcomes in cardiovascular disease

- Achieved an estimated $1 B in savings from reduced office visits and lab tests

• Partnered with NantHealth to develop a new integrated technology system

• System’s goal is to help doctors, hospitals, and health plans to deliver evidence-based care that is more coordinated and personalized

• Their goals: improve healthcare delivery and patient outcomes, especially regarding prevention and care coordination

AstraZeneca3

• Partnered with WellPoint’s data and analytics subsidiary, HealthCore

• Goal is to conduct real-world studies to determine the most effective and economical treatments for some chronic illnesses and common diseases

• AstraZeneca will use HealthCore data, together with its own clinical-trial data, to guide R&D investment decisions

Medtronic4

• Partnered with Aetna on Heart Failure and Diabetes

• Goal is to understand how device data and implantables could be used to assess how chronically ill patients’ fluid retention could predict worsening heart failure

• Partnership is also looking to use claim data to identify good candidates for insulin pumps

Payer Provider Pharma MedTech

Sources: 1) Kaiser Permanente: HealthConnect® Electronic Health Record; 2) BCBS CA: NantHealth and Blue Shield of CA form Proactive Healthcare Collaborative to Coordinate Personated Care; 3) AstraZeneca: AstraZeneca and HealthCore Announce Real-World Evidence Data Collaboration in the US; 4) MDDI Online: Medtronic Teams up With Aetna On HF and Diabetes. Good Idea or Bad?

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April 2014

PwC

MedTech companies should better leverage their information assets to establish competitive advantage and address unmet needs The traditional healthcare business model has been influenced by new trends …

… that leading to innovation taking shape around digitizing and embedding technology in medical devices.

Better usage of product IDs and supply chain data to improve operations and enhance services

Wireless devices and mobile health technology

SMART devices that collect patient and device usage data

Growing Expectations for “Big Data” There’s a new culture of creating and sharing data to prove efficacy, identify clusters, standardize practice, streamline work flow, and increase efficiency along entire HC delivery process

Medical and Pharma Error Reduction Push is for technology that informs decisions, catches adverse events before they occur, monitors that patient gets appropriate treatment, and reduces human and infrastructure errors

Disease Management and Health Outcomes Emphasis being placed on improving health outcomes by helping patients manage their disease and adhere to treatment regimens, personalizing their care, and diagnosing earlier

Healthcare Cost Containment To control costs, tech that will move care from HC facilities to homes, prevent hospitalizations, improve hospital efficiency, reduce LOS, and help with early diagnosis will be valued

Data collection, storage, mining, and analysis tools for operational and clinical data

SMART devices that can communicate with other HIT

Early, rapid, and personalized diagnostic tools

Tools, programs, and devices that encourage and support medication adherence and treatment regimen compliance

Patients Demanding Transparency and Empowerment Push toward information democracy and direct-to-consumer marketing is spreading into care and driving consumer-led action

dd

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April 2014

PwC

MedTech companies will need a new organizational mindset to embrace change and enhance informatics capabilities

Companies will need to invest in the technology and people to make informatics a success

• Data storage, infrastructure, Analytics, and improved information sharing

• Training and hiring Data Scientists who know and understand your business

Companies will need willingness to take on risk and try new business models that extend beyond the product

• Taking on more risk in the value chain to own a disease (Diagnostics, treatment, and outcomes)

• Owning the delivery of drug or device diagnostics and analytics from shipment to dosing

Companies should create an environment that encourages curiosity, fast failure, and innovation

• Enable a culture of calculated risk taking to develop products faster

• Learn and adapt to define and tests products internally and in the marketplace

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April 2014

PwC

PwC: Mining Healthcare Data Video

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April 2014

Thank You

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PricewaterhouseCoopers LLP 125 High St Boston, MA 02110; USA T: +1 617.530.4726 sharad.rastogi@us.pwc.com

Sharad Rastogi Principal Advisory