Managing Director, Global Life Sciences and Health Care, Deloitte Touche Tohmatsu, USA
Many factors are driving and influencing convergence in today’s life sciences industry. Recent scientific advances and improvements in enabling technologies have opened new avenues for convergence among drugs, diagnostics, and devices. Aging populations and rising consumerism are increasing demand for healthcare products that offer greater effectiveness and convenience. Shifting industry and market conditions are also creating pressures and new opportunities.
Each of the life sciences sectors—pharma, biotech, devices, and diagnostics—faces somewhat different industry and market circumstances, but convergence is presenting a new avenue for business growth for all of them. For instance, by acquiring and partnering with firms in other life science sectors, pharmaceutical firms are filling product pipelines, extending product lifecycles, and expanding product portfolios, while device companies are achieving product differentiation and expanding product applications by developing platforms that have multiple uses. Convergence is reflected specifically in the development of combination products, but also generally in the convergence between industry sectors, particularly between pharmaceutical and biotech sectors, which are often now combined in a single reference to “drugs” in spite of their fundamental scientific differences.
There is a general shift in patient needs as a result of the overall demographic shift toward older populations and larger populations of patients with one or more chronic ailments that require regular monitoring, prolonged treatment, and pain management (cardiovascular conditions and diabetes, for instance). This shift is putting upward pressure on health care costs and increasing the demands on existing healthcare resources. Combination products (ones that offer remote and continuous monitoring, provide controlled drug therapy, are less invasive and painful, are simple to use, and require minimal intervention by healthcare providers) have the potential to respond to the increase in patient needs in a way that may be more affordable, easier to use, less expensive, or more effective than current solutions. Also, by bringing more self-administered healthcare solutions to the market and enabling remote patient monitoring by physicians, convergence may reduce the number of care visits that are needed, resulting in services that are more cost-effective.
Developing a combination product requires more than the integration of disparate technologies. Although partnerships are common in the life sciences industry, partnering to create a combination product is quite challenging given the fundamental differences between pharmaceutical, biotech, device, and diagnostic companies. Firms in the different sectors, for example, have different product development timelines, operational approaches, regulatory requirements, and distribution channels. Synchronizing the goals, knowledge, capabilities, and expectations of partners can be critical to the success of such innovations, and may be complex because of the inherent differences in operating platforms, processes, and protocols. Companies that view convergence as an opportunity for mutual transformation may achieve greater success than those that see convergence only as a transaction involving the exchange of ideas, resources, and capabilities.
The regulation of combination products is one of the biggest hurdles for both companies and regulators. This is largely because drugs and devices are subject to different regulatory requirements—when they are combined, regulators must determine which set or sets of regulations apply. To provide guidance and ensure that combination products are tested and validated sufficiently, regulators need to develop a strong understanding of the technologies that are involved and how exactly they are integrated. Companies may be able to facilitate the validation and approval process and avoid delays by working in close collaboration with regulators during the R&D phase. Variation in regulatory requirements across different regions of the world also remains an issue. Greater harmonisation of product testing requirements, quality standards, acceptance norms, technology protocols, and certifications could lead to faster market introduction of combination products. Yet another issue may be the potential increase in battles over the ownership of intellectual property as convergence leads to the formation of partnerships and alliances. Companies will need to evolve new models of licensing and profit sharing with alliance partners.
Drug eluting stents (DES) are, indeed, one of the most prominent examples of convergence. However, there are many other combination products thriving in the marketplace today. Examples include spinal cage fusion solutions and implantable drug delivery devices that provide controlled and timely release of chemotherapy agents for the treatment of certain cancers.
Another category includes combinations that integrate diagnostics with drugs. Consider the example of positron emission tomography (PET) scanners that are used in combination with pharmaceutical contrast agents and radiopharmaceutical tracers to be able to diagnose cancers at earlier stages and less invasively than through surgery. Similar is the case of Herceptin (a genetically engineered humanized monoclonal antibody) which is used only for breast cancer patients for whom a diagnostic test has detected the presence of a specific protein - human epidermal growth factor receptor-2 (HER2).
Examples for device-drug-diagnostic combinations are also plentiful. Blood glucose monitors, for example, when combined with implanted insulin pumps, offer round-the-clock monitoring with timely, controlled release of insulin, and provides diabetes patients with a less invasive and more effective treatment alternative.
While it may be true that device manufacturers have achieved strong brand recognition in the case of drug eluting stents, firms in all the life sciences sectors are actively pursuing and benefiting from convergence. Through convergence with devices, pharmaceutical and biotech firms are creating opportunities to distribute their products through new channels, extend product life, and expand product portfolios. Interestingly, the traditional boundaries between the device, pharmaceutical, and biotech sectors are beginning to blur as companies seek to expand their capabilities beyond their core competencies to develop convergent solutions through cross-sector partnerships and acquisitions.
Many of the early and most prominent examples of convergence have emerged from the device sector rather than the pharmaceutical sector, perhaps because of generally shorter development timelines, greater opportunities for incremental improvements, and ability for devices to serve as platforms for multiple uses. In addition, many initial models of convergence in both sectors have involved integration at the packaging or manufacturing stages. However, convergence is now increasingly occurring at earlier stages of research and development, and companies in all sectors are forming alliances and co-creating technologies and products from the earliest phases of R&D through clinical validation, manufacturing, and product commercialization. With the growing need for new drug and biologic molecules as well as possible exploration of devices as delivery vehicles, many of the pharmaceutical and biotech companies are venturing into convergence. Pharmaceutical and biotech firms are likely to become more prominent with respect to convergence as they partner at earlier stages of development and the industry shifts towards the development of more targeted therapies that involve the combination of diagnostics and drugs.
Knowledge sharing occurs naturally happening during the convergence process. Given that companies are not easily able to create and commercialize a convergent product alone, alliances and joint ventures have become key paths to product creation. And, since the majority of alliances require end-to-end participation from collaborating partners, the degree of knowledge sharing may be quite high. Alliance partners may not only be expected to be involved jointly in R&D, but also to take part in the clinical validation and approval processes together. This may help each gain technology-product insights and speed up clinical approvals. Similarly, alliances in manufacturing may help companies understand the nuances of manufacturing individual products vs. converged solutions.
Clearly, the convergence between the telecom and IT sectors is highly mature today. However, the initial phase of bringing existing technologies, processes, and applications onto single technology platforms required re-work of technology-product quality, process harmonization, and protocol standards. That was followed by a period of convergence involving the emergence of new technologies with newer protocols and applications, which required more intensive efforts in research and development when compared to the initial phase. Convergence in the life sciences industry appears to be following a similar path. As companies shift from combining existing technologies to investing in research and development to create entirely new convergent solutions, they may encounter even greater uncertainty and risk, but perhaps also greater reward.
There are two things that are vital for the success of convergence in life sciences. First, convergence is a cross-sector and inter-disciplinary activity. Therefore, success will depend on the level and intensity of participation from all the sectors of the life sciences industry. Second, convergence will impact all the stakeholders of the healthcare industry – providers, regulators, governments, payers and patients. They will all have to work together, along with the innovators, to facilitate the development, introduction, and adoption of innovative combination products.
For more information on convergence, please read our new Deloitte Research report, Managing Pathways to Convergence in the Life Sciences Industry. The report is available at: