The Business of Healthcare Innovation

The Business of Healthcare Innovation is a wide-ranging analysis of business trends in the manufacturing segment of the healthcare industry. It provides a thorough overview and introduction to the innovative sectors fueling improvements in healthcare: pharmaceuticals, biotechnology, platform technology, medical devices, and information technology. For each sector, the book examines the basis and trends in scientific innovation, the business and revenue models pursued to commercialize that innovation, the regulatory constraints within which each sector must operate, and the growing issues posed by more activist payers and consumers. Specific topics include market structure and competition, the economics and rationale of product development, pricing, sales and marketing, contract negotiations with buyers, alliances versus mergers, business strategies, and prospects for growth. Written by professors of the Wharton School and industry executives, the book shows why healthcare sectors are such an important source of growth in any nation’s economy.

“Since the first edition of The Business of Healthcare Innovation, the workings of the industry have become even more complex, intertwined, and tricky to navigate. The industry’s evolution is effectively captured in this successor edition which includes important updates relevant to traditional and newer, ‘maverick’ innovators who will find the insights and frameworks described to be invaluable.”

Peter A. Tollman, Ph.D., Senior Partner and Managing Director, The Boston Consulting Group

“Burns has produced an exceptional successor to The Business of Healthcare Innovation with this new edition. The original made an important contribution to those of us who work and invest in the life sciences. The updated and expanded chapters on challenges and possibilities for the pharmaceutical and biotechnology industries, the new insights into the potential of digital health, and the overall theme of convergence of technologies into an innovative model of modern medicine, make it a timely and valuable volume.”

G. Steven Burrill, CEO of Burrill & Company

“For an industry that serves the needs of patients with innovative medicines, there are few scholarly books that analyze the underlying business of the life sciences. The Business of Healthcare Innovation addresses this important need with a thoughtful and engaging analysis of the pharmaceutical and biotechnology sectors. I particularly enjoyed the discussion on biotech, including discussions on the range of business models and on the symbiotic relationship of biotech companies with pharma. If you’re interested in the ‘business of science,’ this is really worth a read!”

John Maraganore, CEO, Alnylam

“This book is the authoritative text on the medical device industry. The authors combine extensive research with intimate insights to distill a complex topic to its essential ingredients.”

Dan Starks, Chairman & CEO, St. Jude Medical

“After decades of anxiety, concerns with healthcare quality, costs and safety have become alarm. Several significant efforts by government and the private sector are underway to transform health care. These efforts center on diverse performance-based reimbursement mechanisms that bind those who provide care with those who purchase care.

As Burns astutely notes these efforts appear to view those organizations that provide products and services to the industry as incidental to the transformation of care. This view is a mistake.

Companies that deliver innovative advances in the lifesciences, medical devices and health information technology can be and are significant contributors to our collective efforts to improve care. Vaccines, medical imaging, pacemakers, and electronic health records are examples of these contributions.

The Business of Healthcare Innovation does an exceptional job of describing the nature, challenges and contributions of the companies that produce these products and services. This understanding is essential – effective care transformation requires the efforts of all stakeholders and that each stakeholder understand the nature of the others and how best to form and manage partnerships. Without this understanding care transformation will deliver less than we deserve.”

John Glaser, Ph.D., CEO, Siemens Health Services

“It has never been more important to study and understand the medical device sector of the healthcare market. As our U.S. and global healthcare systems transform themselves for the 21st century, the vital medtech industry approaches an important crossroads. Strong forces are arrayed to reshape the way it interacts with patients, clinicians, regulators, payers, and hospitals – in fact, to reshape fundamentally the medical device business model.

This book does an excellent job of breaking down this complicated subject into its unique elements and analyzing each in a clear, direct style that illuminates the key issues facing this rapidly changing industry. The discussion of the sources of, and impediments to, device innovation are particularly welcome. I recommend this astute analysis to healthcare executives, policy-makers, investors, innovators, and anyone else who wants to understand the critical importance and future direction of the medical device industry and medical device innovation.”

Michael A. Mussallem, Chairman and CEO, Edwards Lifesciences Corporation

“Innovation is the answer to the cost and quality challenges in health care today. Despite its importance, few scholars have offered a comprehensive assessment of innovation in medicine – what it is, how it arises in specific sectors, and what are the barriers to achieving transformation of health care. This ambitious work makes a substantial contribution to our understanding of this key concept in health care.”

Kevin A. Schulman, MD, MBA, Professor of Medicine and Gregory Mario and Jeremy Mario Professor of Business Administration, Duke University

“Health care looms as the central issue for the swarm of baby boomers seeking the goal of wellness in this decade. This primer by Burns and his colleagues nicely summarizes the challenges of developing new technologies that will be relevant and affordable. How will healthcare reform influence the healthcare industry to innovate and invest in new technologies? What will new regulatory approaches do to early stage investment in new therapies? How will the United States remain a net exporter of medical devices and pharmaceuticals that is the envy of the rest of the world? Can uncommon profitability in the device sector be perpetuated? How are the processes of research and development, collaboration, mergers, and acquisitions different in the pharmaceutical, biotechnology, and medical device industries? The answers can be found in this articulate and well-referenced text.”

Stephen Oesterle, MD, Senior Vice-President, Medtronic

“Burns provides an excellent overview of the competitive dynamics of the medical technology sector which has had increasingly significant effects on health service costs and outcomes. Understanding the dynamics of this sector is important for all future healthcare leaders and this comprehensive and accessible book provides first-rate coverage of the subject.”

Regina Herzlinger, Ph.D., Professor, Harvard Business School

“Every entrepreneur, no matter whether they be inexperienced or experienced, biotech or device, scientist or business person needs to read The Business of Health-care Innovation. It is not enough today to have a great idea; successful startups require knowledge of the past, present, and future of the our industry if they want a real shot at making a difference.”

Mark Levin, Partner and co-founder, Third Rock Ventures

Lawton Robert Burns, Ph.D., MBA is the James Joo-Jin Kim Professor, Professor of Health Care Management and Chair of the Health Care Management Department, and Director of the Center for Health Management and Economics at the Wharton School, University of Pennsylvania.

Second edition

Lawton Robert Burns

CAMBRIDGE UNIVERSITY PRESS
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Cambridge University Press
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© Cambridge University Press 2012

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First published 2005
Second edition 2012

Printed in the United Kingdom at the University Press, Cambridge

A catalogue record for this publication is available from the British Library

Library of Congress Cataloguing in Publication data

ISBN 978-1-107-02497-7 Hardback
ISBN 978-1-107-60777-4 Paperback

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To Alex and Brendan

Contents

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