On Innovation Stagnation in Healthcare

Recent techno-enthusiasm aside (e.g., #HIMSS19), we're living in a time of innovation stagnation.

If you step back and take a broad view, nothing much is really "transforming" healthcare’s systemic performance declines. We're distracted by the theater of the latest "useful" feature, but digital + drug discovery = status quo.

Pilotitis dominates and provides cover.

We're funneling our creativity into areas that produce niche impacts. So a tech start-up has a greater prospect of riches if it creates a new social networking app than if it launches a new model for, say, mass transit.

Peter Thiel, co-founder of PayPal, believes the greatest threat to growth in America is a culture that embraces conformity. He says: “I worry that the conformity problem is worse today than it was in the ‘50s. Our culture does not want change; it does not want progress.”

Writing in Health Affairs this month, Alfred B. Engelberg attributes the cause of high drug prices to a shortfall in innovation at a system level. The path forward is a new market where competition is based on outcomes. He says:

“The price of a drug should reflect its value. If a new drug lacks a meaningful clinical advantage it is not entitled to a higher price than the existing medicine. If it does offer a clinical advantage, the value of that advantage can be quantified. Value-based pricing is the core principle employed by other developed countries in negotiating drug prices and is the reason why their per capita drug spending is so much lower.”

Innovation begets disruption, and disruption requires pivoting to a new set of norms and institutional frameworks.

For the pharmaceutical industry -- and the entire subsystem of vendors, services, agencies and advisors who are paid to guide and operationalize its plans -- this means developing a new market positioned on health system value, not technical merits of "drug" in isolation from its environment.