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The global healthcare market is going through a time of tremendous volatility and change. Reimbursement mechanisms are getting revamped, reduced, or eliminated as overnments look to reduce or stop the growth in healthcare spending. Markets are changing dramatically as patients are presented with newer and less expensive means of receiving their healthcare products and services.  Furthermore, governments, organizations, and companies are looking to the future to create innovative ways of leveraging new technology, models, and information to improve patient outcomes while reducing the cost of care.

  • In January 2013, the UK Office of Health Economics (OHE) estimated the cost for new drugs at $1.5 billion, up from $800 million in 2000, while other sources estimate the median cost for a new drug up to $5.3 billion (Matthew Herper, Forbes, Nov 2013).
  • Total spending on healthcare is projected to rise from 16 % of US gross domestic product (GDP) in 2007 to 25 % in 2025, 37 % in 2050, and 49 % in 2082.
  • Federal spending on Medicare (net of beneficiaries’ premiums) and Medicaid should rise from 4 % of GDP in 2007 to 7 % in 2025, 12 %  in 2050, and 19 % in 2082.
  • A shift from a ‘pay-for-services’ to a ‘pay-for-performance’ model that will base reimbursement rates on patient outcomes is predicted.

Ironically, the increasing cost of healthcare is occurring at a time of tremendous innovation in information technology (IT) and personal devices across the health science value chain.  There are a variety of new technologies that are poised to create tremendous innovations, including the following.

  • The growth and use of smartphones continues; current estimates indicate that there are more cell phones than people in the world today.
  • ‘In-memory’ information processing is replacing disk with solid state memory and is leveraging the power of the next generation of hardware that uses multi-core architecture with massive parallel scaling across many blade servers to dramatically increase processing power at a low cost of entry.
  • Next-generation devices are providing a significantly more compelling interaction through the use of high-definition video or interactive applications between a healthcare practitioner and nurses or patients, in either ‘connected’ or ‘disconnected’ mode.   Organizations are increasing leveraging new & emerging technologies to improve therapeutic outcomes.

Despite all the advances in technology and information, health science organizations still have tremendous challenges to face improving organizational decision-making that optimizes decisions and results in a positive patient and/or business outcome:

  • An Economist survey determined that only 20 % of business people surveyed had the right information to make a decision, while 80 % said they had either too little or too much. Furthermore, 75 % stated that they made the wrong decision because they did not have sufficient information.
  • Large pharmaceutical companies are challenged by patent expiries as the US alone will lose $133 billion in revenue of branded drugs from 2012 to 2016, and a constrained capacity for bringing new, innovative blockbuster drugs to the marketplace while confronting cannibalization by overseas generic competitors.
  • The traditional sales and marketing models for life science companies are outdated and increasingly less effective in today’s market. New legislation such as the 2010 US Sunshine Act to ensure transparency in the manufacturer, physician, and patient relationship will have a significant impact on these models and processes going forward.
  • Healthcare reform like the US Affordable Care Act have increased costs and reduced margins for the life science manufacturer while simultaneously adding tens of millions of new patients into the system through a national healthcare program who were previously unable to afford healthcare services.

Clearly, these are just some of the numerous challenges that are changing the health science market and demand more innovative approaches to solving the variety of illnesses. Physicians need better access to data,  patients need high-efficacy and cost-effective treatments, manufacturers  need to get products to market faster with
greater understanding of the  impact of the therapy on a patient group, and, ultimately, the healthcare  industry requires timely, accurate, and actionable insights to make better decisions, at a lower cost and a superior therapeutic outcome.

To learn more about we can help you with your business challenges please have a look at SAP’s Solution Explorer for the Life Sciences Industry.

What do you think about the issues discussed here? Continue the conversation in the comments below and on Twitter @SAPlifesciences

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