Medco Innovation 2011.11
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Medco Innovation 2011.11

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I led a team, in my Management of Innovation & Technology class, to describe one of the more public innovations at Medco.

I led a team, in my Management of Innovation & Technology class, to describe one of the more public innovations at Medco.

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Medco Innovation 2011.11 Presentation Transcript

  • 1. Innovation Capabilities ReportA G C T T G C T GC G G G C A G A A T C A T C 01 0 011 1 1 0 0 1 01 001011 0 1 00 01 01 110 0 1 0 10 0 1 0 0 0 00 1 1 1 T C G C T 1 1 1 0 0 0 0 0 1 1 0 0 1 0 Personalized Medicine 0 A A G T1 0 A C T G C G A A C T C G A T C G G A C C G T T C A A Adrian Carrión Gena Fazzari Chappella Mayweather
  • 2. Today’s Agenda Ø  What is Personalized Medicine? Ø  Who is Medco? Ø  Sources of Innovation Ø  Types of Innovation Ø  Patterns of Innovation Ø  Industry Standards Ø  SWOT/ Five Forces Ø  Medco’s Strategy Ø  Video on the Medco/Mayo Clinic Warfarin Study (Youtube) G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C
  • 3. What is Personalized Medicine or Pharmacogenomics? Ryan Phelan, CEO DNA Direct “Using genetic insights into treatment decisions, into early prevention, and into early diagnostics.”www.medco.com G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 3
  • 4. Who is Medco (MHS) Products & Services Health INS Patient pays premiums > Benefit design and management > Pharmacy network management > The Medco Pharmacy Rx INS > Specialty pharmacy solutions Patient pays premiums > Diabetes management, home healthcare products and Medicare specialists Mail-Order Rx > Clinical management Patient pays Co-Pays > Precision Health SolutionsTM Medco –  Genetic Testing > Client services > Retiree solutions > RationalMed® Patient pays Co-Pays > Optimal Health® Retail-Rx Pharmaceuticals G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C
  • 5. Sources of Innovation n  Sources of innovation Firms   emerge from a complex network of innovators (similar to the figure on the left) – And Individuals   Universi+es   personalized medicine is no different n  Personalized medicine is a result of technology spillover in that, it is an off-shoot of Private   Gov’t   pharmacogenomics Non-­‐Profits   Funded   G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 5
  • 6. Sources of Innovation Continued Research   Linkages  With   Linkage  With           • Private  firms  –   Customers   Non-­‐Profit   acquisi+on  of  DNA   • Customers  include   Organiza:ons   Direct  to  leverage   both  doctors  and   • Hospitals  and   R&D   pa+ents   academic  ins+tu+ons   • Applied  research   • Industry  evolving   par+cipate  in  clinical   • Demand-­‐pull   toward  customer-­‐ trials   approach   rela+onship   • Obtain  regulatory   management  versus   approval  from  FDA   scale   G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 6
  • 7. Types of Innovation Product vs. Process Product vs. Process Innovation • It  is  improving  the  efficiency  and  effec+veness   • Pa+ents  will  no  longer  have  to  endure  trial  and   error  approaches  to  finding  the  best  treatment   • Pharmaceu+cal  firms  can  produce  even  beMer   treatments  –  increasing  the  number  of  marketable   compounds   • No  longer  “one-­‐size-­‐fits-­‐all  approach”  –  will  be   targeted  with  pre-­‐selected  focus  groups  versus   large  random  samples   • More  efficient  approval  process   G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 7
  • 8. Types of Innovation Radical vs. Incremental Radical  vs.  Incremental  Innova+on   • Personalized  medicine  encompasses  both  radical   and  incremental  innova+on   • The  product  innova+on  is  incremental  with   poten+al  for  radical  –  compounds  will  be  varia+ons   of  exis+ng  compounds  with  infinite  possibili+es   • The  process  innova+on  is  radical  –  large  degree  of   “newness”  and  “differentness”  –  unlike  prior   experiences  for  most  observers  –  how  many   people  in  the  room  have  experienced  personalized   medicine?     G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 8
  • 9. Types of Innovation Competence-Enhancing vs. Competence-Destroying Competence-­‐Enhancing  vs.   Competence  Destroying  Innova+on   • Building  on  exis+ng  knowledge  base   • Pharmaceu+cal  firms  can  produce  beMer   treatments  –  increasing  the  number  of  marketable   compounds   • Compounds  that  do  not  sa+sfy  a  large  popula+on   will  no  longer  have  to  be  shelved  –  rather  they  can   be  matched  to  gene+cally  compa+ble  pa+ents     G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 9
  • 10. Types of Innovation Architectural vs. Component Architectural  vs.  Component  Innova+on   • Personalized  medicine  changes  the  overall  design   of  how  treatment  is  determined   • The  impact  is  far-­‐reaching  –  it  will  become  more   about  customer-­‐rela+onship  management  instead   of  scale  –  the  days  of  dropping  off  samples  to   thousands  of  doctor’s  offices  are  gone   • It  is  believed  that  the  pharmaceu+cal  industry  will   evolve  into  a  niche  market  –  a  radical  change  from   the   G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 10
  • 11. Patterns of Innovation Technology S-Curve • Conventional methods of treatment are reaching a plateau • Personalized medicine is: §  a discontinuous technology §  in early stages of discovery §  poised to transform healthcare industry within decades Limit of Technology Conventional Treatment Performance U.S. Personalized Medicine Market is Roughly $232 billion! Personalized Medicine Effort G C T G© 2010 Medco Health Solutions, Inc. All rights reserved. C A G A T 11 C C
  • 12. Patterns of Innovation Slow Technology Diffusion of Personalized Medicine Physicians Pharmaceutical FDA/Government •  Limited knowledge of Companies •  Publicly supports technology •  Priority is to market a technology drug to as broad a •  Compensated for population as possible procedures NOT •  Slow to modify polices treatment process to encourage use of •  Personalized medicine technology undermines business •  Typically slow to strategy support new methods of care Key Stakeholders in Healthcare Industry are Unfamiliar with Technology G C T G© 2010 Medco Health Solutions, Inc. All rights reserved. C A G A T 12 C C
  • 13. Industry Standards Technology Cycle Era of Ferment • Personalized medicine in Era of Ferment • Companies still Technological “Dominant Design” experimenting with Discontinuity Emerges technology • Learning curve still Incremental significant Innovation • Dominant Design has not been identified G C T G C A G A T 13© 2010 Medco Health Solutions, Inc. All rights reserved. C C
  • 14. Industry Standards Network Externalities Complementary Goods “…this is when the value of a good “Additional goods or services that to a user increases with the enable or enhance the value of number of other users of the another good.” same or similar good.” •  Positive consumption Lab/Genetic externalities will materialize Testing once technology reaches a critical mass “Complementary Goods” •  Emergence of Dominant Design will increase installed-base Personalized Medicine G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 14
  • 15. Industry Standards Government Regulation Genomics and Personalized Medicine Act of 2006 “To improve access to and appropriate utilization of valid, reliable and accurate molecular genetic tests by all populations thus helping to secure the promise of personalized medicine for all Americans.” Bill calls for: • Genomics and Personalized Medicine Interagency Working Group • Expansion and Acceleration of Genetic and Genomics Research • Genetics Workforce and Training Bill proposed to Congress; however, is not yet a law. G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 15
  • 16. Industry Standards Expected Dimensions of Value More Powerful, Safer Drugs & Vaccines Improvement of Drug Discovery & VALUE Approval Decrease in Overall Healthcare Cost G C T G© 2010 Medco Health Solutions, Inc. All rights reserved. C A G A T 16 C C
  • 17. SWOT Analysis •  Leading  market  posi+on  boos+ng  brand   image  and  bargaining  power   •  Strong  growth  in  revenue  and  profits   •  Reliance  on  low-­‐profit  clients  could   building  investor  confidence   affect  company’s  profitability   •  Mail  service  contract  increasing  the   customer  base   Strengths   Weaknesses   •  Acquisi+on  of  DNA  Direct  and   online  OTC  and  healthcare  products   Opportuni+es       Threats   •  Intense  compe++on  could  put   market  posi+on  under  duress   sites  to  augment  customer  base   •  Changes  in  government  regula+ons   •  Collabora+ve  agreements  would     could  lead  to  a  decrease  in  the   provide  revenue  growth  opportuni+es   demand  for  services   •  Posi+ve  outlook  for  the  U.S.  Generics   •  Changes  in  industry  pricing   market   benchmark  could  impact  the   •  Aging  U.S.  popula+on  would  lead  to  an   financial  performance       increased  demand  for  health  care  services  Data Monitor G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 17
  • 18. Porter’s Five Forces Model Pharmacogenomics Threat of New Entrants Supplier Buyer Power Power Threat of Substitutes G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 18
  • 19. Strategy It’s leveraging the power of advanced pharmacy to redefine the standards of clinical excellence as we drive down overall healthcare costs n  Growth Strategies - Acquisitions >  Horizontal Integration –  Accredo’s Specialty Pharmacy –  BioSources’ Medical Equipment Testing >  Vertical Integration –  DNA Directs’ Genomic Test Analyses n  Information Technology Management Strategies >  Agile Infrastructure (modular) & Patent applications n  Collaboration Strategies >  Outsourcing –  Contract Manufacturing (IT) >  Equity Joint Venture –  Mayo Clinic and Medco Research Institute G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 19
  • 20. Warfarin (anticoagulant drug) Study Conducted by The Mayo Clinic & The Medco Research Institute G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 20
  • 21. What competitors are saying about Personalized Medicine... G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 21
  • 22. Medco’s First Mover-Early Entrant Strategy Decision Support Tools Precision Health Solutions: ‘The Trusted Advisor’ n  Web-based genetic testing n  Coverage management to help related information and them determine reimbursement education modules for patients policies and appropriate and providers. coverage criteria, while ensuring that the tests are properly used. n  web-based tools that will connect patients and physicians n  Policy and benefit consultation to live counselors who can to advise plans on how to best provide “reliable information structure their genetic test around these kinds of tests by benefit and help plans choose walking them through available tests, including lab indications of a test and helping work. them to understand the results http://www.aishealth.com/Bnow/hbd060710.html G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 22
  • 23. Recommendations n  Take advantage of the opportunities as an early mover n  Be prepared to respond to changes in legislation n  Strike up more joint ventures or strategic alliances with lab infrastructure (Qwest Diagnostics, LabCorp, etc) n  Look into other vertical/horizontal integration opportunities involved with genetic testing n  Protect innovation through patents n  Get the word out about Medco’s role in positively affecting drug therapy directly to the consumer n  Conduct more studies through the Medco Research Institute (Warfarin) G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 23
  • 24. Questions? http://www.aishealth.com/Bnow/hbd060710.html G C T G C A G A T© 2010 Medco Health Solutions, Inc. All rights reserved. C C 24