CHAPTER 11

Health Care

Introduction

In terms of the world’s metaproblems, one of the greatest is the continuing rising costs of health care provision. The factors influencing this cost spiral include (i) ongoing advances in medical technology, (ii) rising levels of obesity, and (iii) population aging. This latter factor is critical because older people face expensive illnesses, such as cancer; heart conditions; and mental problems, such as dementia. In those cases where a government funds a major proportion of health care provision, the financial burden is approaching the point where ongoing affordability has become an unmanageable burden for the welfare state. Similarly, where health care is funded through medical insurance, premiums have become a massive burden for employers or individuals. As a consequence, governments and employers recognize that change must occur, which results in making health care provision more cost-effective and patient-orientated. The potentially most effective strategy for affecting a change probably lies within greater exploitation of entrepreneurship. McCleary et al. (2006) opined, on the basis of current and emerging trends in health care, that entrepreneurial opportunities exist across the continuum of care.

Specialist Knowledge

In the health care sector, new solutions often require an in-depth knowledge of the situation confronting the medical professional. As a consequence, equipment manufacturers are often not in a position to initiate radical innovation, but instead become involved in commercialization after a medical professional has validated the technological viability of a new proposition. To gain further understanding of radical innovation in the health care sector, Lett et al. (2006) undertook a study to generate knowledge in relation to the four different projects. In all four cases, initial users were the originators of the radical innovation. Their common problem was the most effective procedures could not be undertaken using standard neurosurgical instruments. This is reflective of the fact that major medical problems are a key source for creative activities (Collins and Amabile 1999). In addition to problem-induced motivation, all surgeons were professionals in their field, and thus, had in-depth knowledge within their domain of surgery. Furthermore, they had knowledge about the respective needs to improve the surgical process. This knowledge was gained by extensive learning, experience, and experimentation, which is difficult and costly to transfer to third parties (Von Hippel 1998). During the idea-creation and concept-generation processes of the innovation, surgeons followed a common pattern of searching for appropriate technologies outside of the medical domain. They applied analogical reasoning in involvement in searching out new ideas and concepts. This situation caused Lett et al. to propose that it is often the case that, in the health care sector, it is users rather than manufacturing firms who are more likely to develop radically new concepts.

Biotechnology

Although surgery has remained an important aspect of medical treatments, other key advances such as the development of inoculations and vaccines to provide resistance to diseases, drugs such as sulfonamides, and antibiotics such as penicillin have provided new forms of medical care. Since the 1920s, drug-based solutions have provided the basis for the evolution of a global pharmaceutical industry. The problem is the high price of drugs, and the monopoly position allowed through the granting of patents, means this area of treatment has become one of the largest costs facing the health care industry (Müller, Fujiwara, and Herstatt 2004).

Pharmaceutical firms face strong pressures to develop medicines for a global market and exploit economies of scale. Fleming and Sorenson (2004) noted that the growing interdependence of previously discrete technologies creates difficulties for any single firm wishing to stand alone in the industry Thus, R&D alliances play a critical role in this industry, in which alliance-based teams race toward the creation and commercialization of similar end-products and a winner-takes-all situation may often exist.

Biotechnology has enabled pharmaceutical firms to move from a random approach to conducting a rational design approach, in which compounds are developed from scientific theories regarding the origins and evolution of diseases. The latter approach means that pharmaceutical firms must rely on science more than ever before (Cockburn, Henderson, and Stern 2000).

This new technology represents an important area of medical innovation as an alternative to reliance upon drugs developed by the major pharmaceutical firms. The science involves the use of living systems and organisms to develop or make products. Application fields of biotechnology are as diverse as health care, chemistry, material science, agriculture, and environmental protection. In the United States alone, there now exists a huge number of biotech companies, most of which are extremely small and are perceived as an important path through which to challenge the semimonopoly position of the major pharmaceutical companies.

In recent years, advances in biotechnology have led to new and diverse sciences such as genomics, recombinant gene techniques, applied immunology, and development of pharmaceutical therapies and diagnostic tests. The technology is based on biological or biotechnology concepts to harness cellular and biomolecular processes to develop technologies and products that deliver new forms of medical treatment. Over the past three decades, biotechnology has emerged as a vital global industry associated with a sustained flow of innovations dramatically improving human health (Gans and Stern 2004).

Until the early 1980s, the prevailing belief was that no new company could compete with the pharmaceutical industry giants because of the enormous costs of developing the necessary R&D infrastructure. However, biotech firms have not only challenged the traditional pharmaceutical companies as the discoverers and developers of new products, but also have built credibility in novel areas such as cell biology, molecular genetics, and drug delivery. Biotechnology companies operate amid uncertainty and rapid change. Fuchs and Krauss (2003) posited that biotech firms are unique. First, they are strongly science-based, more nimble, and less risk-averse than pharmaceutical companies with innovation within these firms often far more radical. Second, biotech companies represent a source of tacit knowledge with the exploitation of knowledge requiring intense science-based interactions. Alliances with other biotech firms, university research centers, and pharmaceutical companies are the norm in the industry, providing biotech with faster access to capital and knowledge, enabling companies to react more quickly and flexibly to new developments and offering better protection for intellectual property rights. However, the timeline between establishing the company and product launch is usually very long. On average, the entire biotech process, from scientific discovery to commercialization, can take up to 15 years. This reality exposes entrepreneurs to a plethora of critical and time-sensitive decisions. As a consequence, failure rates among biotech firms are relatively high.

Genomics

In genetics and genomics, the sequencing of the human genome has resulted in the development of new biological drugs to treat cancer and other serious diseases. So-called “targeted therapeutics” is the first step in creating drugs that attack a disease without affecting healthy cells and tissues. Leading firms and research institutes are switching their focus from genetics to genomics. A genomics program focuses attention away from individual mutations, individual genes, and individual patients to next-generation sequencing of genomes and storing genomic profiles of thousands of mutations across tens of thousands of patients in a biobank. These data provide knowledge to undertake research spanning the disease spectrum (Reinke 2015). The perceived potential of genomics was a catalyst for numerous new entrepreneurial start-ups in the 1990s. Many of these firms struggled to survive, and hence, this has necessitated the development of new business models to generate adequate revenue flows to support ongoing research.

Genome sequencing is very efficient and increasingly cost-effective, permitting innovations in disease prediction, detection, and treatment. As a consequence, genomics companies have sought to leverage their position by “adding value” to their proprietary assets. For example, a database can be annotated, a microchip can be engineered to measure a wider range of parameters more sensitively or with greater accuracy, and some types of assets can be customized to meet the needs of particular clients or partners within a research alliance. Rothman and Kraft (2006) noted that to increase revenue streams, young, genomics start-ups have turned to utilizing alliances to achieve long-term survival.

While target identification provided a vital initial market for genomics companies, this had short-lived commercial viability. Rothman and Kraft concluded there were two main reasons for this outcome. First, the increased availability of DNA sequencing technologies and sequence databases had, by the late 1990s, reduced their use to that of a “commodity technology.” Second, target generation and screening technologies, especially combinatorial chemistry (CC) and high-throughput screening (HTS) systems, have been developed to automate and accelerate the speed with which the genome could be searched and targets identified. These advances were immediately adopted by the big existing pharmaceutical companies either through investment in the technology or by company acquisition.

In their review of the declining revenue, Rothman and Kraft noted that genomics companies have developed a number of means through which they are able to differentiate their products, add value to the supply chain, and thus, leverage their position in commercial negotiations. One solution has been move downstream. This has been achieved by establishing internal drug development programs (IDDPs), permitting these firms to leverage their biological expertise and discovery capabilities. Some of these companies also have established IDDPs by using in-licensed compounds from pharmaceutical or biotechnology companies. Others have combined in-licensing with the use of internally generated compounds to achieve greater control within a drug development program. These changes are necessary to cope with the problem that the regulatory and structural framework of the drug innovation cycle is often very lengthy. However, where these firms have such a have drug candidate that has passed through preclinical trials, then this commands a much higher commercial value. In moving downstream, the genomics companies are adding shareholder value because they now own drugs that are nearer to being marketed to the health care sector.

Digital Technology

The Internet and related communications technologies are seen as the most likely source of entrepreneurial solutions, whereby a reduction in the costs of health care services might be achieved. This is because the Internet can provide the following benefits (Riva 2000):

1. Establishing close, supportive relationships with patients

2. Becoming the preferred source of health information and service provision

3. Increasing patient convenience

4. Creating more effective ways to share knowledge and information

5. Creating new ways to deliver care

6. Reducing operating expenses by applying IT-based automation

The Internet and related communications technology have massive potential for supporting the provision of health care through activities such as transmitting data from a remote location for response by a health care professional based at a central location and by health care professionals offering treatment guidance to medical staff located elsewhere within a country. However, developing countries often depend heavily on private profit-orientated entities for provision of health care services. This situation has attracted some medical entrepreneurs driven by a desire to serve disadvantaged sections of the society by attempting to provide accessible and affordable services to the masses by innovatively designing economically sustainable business models. In both developed and developing nations, IT is one of the prime resources leveraged to enhance service delivery. Srivastava and Shainesh (2015) posited that, in addition to ICT, which is the key interactional resource in most health care value-creation systems, there is a need to continually search for and orchestrate contextually available knowledge and institutional resources to deliver the desired value.

Medical Data

A major component of the health care provision is the acquisition, storage, and analysis of data. At the level of the individual patient, this activity occurs when a medical professional engages in a review of symptoms, examines past medical history, or assesses the prognosis of ongoing treatment. Exploitation of available data also occurs at the macrolevel, such as a hospital, utilizing patient records to evaluate alternative treatment regimes or at a national or international level when determining the effectiveness of an illness prevention program, such as vaccinating children. Entrepreneurial utilization of the Internet, by providing new forms of communication and information, can offer major cost savings in relation to the management of patient data because health care professionals can access dispersed databases and exchange data on medical treatments undertaken at different locations (Binshan and Umon 2002).

Lanterman (2015) predicted the ongoing revolution in information technology in health care will to lead to advances in detection, monitoring, and treatment of a multitude of health conditions. New modes of data collection and access are changing the way that health care professionals and their patients communicate with one another. New patient-side consumer devices are revising the method and frequency of what kinds of data can be collected and transmitted. Many health care devices, both in-clinic and patient-side, can be described as belonging to the “Internet of Things.”

Within the health care sector, there has been a huge push toward interoperability and interconnectedness. The latest health-related devices are being supplied with full Internet connectivity, allowing them to be remotely administered via wireless data transmission. Consumers are also keen to purchase an ever-increasing array of apps and devices that allow them to track their health habits and vitals. These new devices, including blood pressure monitors, scales, breathalyzers, toothbrushes, and their associated apps, can now track an individual’s daily habits and patterns (Boos et al. 2013).

Lanterman noted that the appeal for wearable devices is demonstrated by the growing market demand for products such Apple Watch (www.apple.com), FitBit (www.fitbit.com), and Microsoft Band (www.microsoft.com/microsoft-band). These new devices allow individuals to not only track their own habits, conditions, and exercise, but also share this information with third parties. For example, the Apple Watch’s ResearchKit (www.apple.com/researchkit/technology) allows third-party app developers to tap into Apple’s hardware sensors, specifically those that track a user’s medical condition.

Medical researchers have developed apps to study patients with asthma, diabetes, and Parkinson’s disease, thereby giving these researchers and physicians in these areas more data than was previously available. In relation to primary care, doctors are no longer reliant upon an occasional visit to the patient’s home or by the patient coming to their practice. Health care providers can now have access to a person’s medical condition more frequently and over extended periods of time. Another technological advance is telemedicine, which allows patients from the comfort of their own homes to telecommute to their doctor’s office (Gilman and Stensland 2103).

In the past, health care providers and governments have been very enamored by the claims of the huge savings that could be made by creating national electronic records systems. Unfortunately, to-date, most of the attempts to build such systems have led to massive cost overruns and created systems not fit for purpose. This has led to a shift toward the development of electronic personal health record (PHR) systems. This alternative approach is designed to permit individuals to access, manage, and share their health information in a confidential environment (Steele et al. 2012).

The number of health care providers, who consider PHRs as a main source of information in the delivery of care, remains relatively low. This possibly reflects unfortunate experiences when using pre-Internet systems where there were problems over data reliability and adverse cost and benefit outcomes. The latter obstacle can be expected to be removed as individuals and organizations move toward storing information in the cloud. Another catalyst for change is the move toward smartcard-based PHRs and ability to access records using mobile devices.