03 Dec 2001  Research & Ideas

Healthcare Conference Looks At Ailing Industry

What's plaguing healthcare? Experts including HBS professor Clayton Christensen make the diagnosis on future trends for biology and medicine—and the business opportunities within—at the 2nd HBS Alumni Healthcare Conference.

 

Cancer research, it has been said, is not unlike a group of blind men studying an elephant. One man feels the elephant's tail and says it is a rope. Another blind man handles its tusk and calls it a spear, and yet another declares its trunk is a hose. All report earnest but similarly off-the-mark observations.

Although healthcare as a whole still suffers from the elephant problem, it's suffering less all the time—at least where science is concerned—thanks to remarkable and ever-faster scientific advances. Chief among the advances is genomic research that offers a global picture of genes and proteins at work in the business of life. "The book of life" that made dramatic headlines last year—and was really a first draft of the human genome sequence—is destined to change and challenge medicine, ethics, and business far into the future.

The great embarrassment of 20th-century medicine is that most therapeutics were directed at symptoms, not causes.
—Eric S. Lander

With that in mind, about 200 HBS alumni working in the healthcare field converged in mid-November at the Charles Hotel in Cambridge to learn from experts and compare notes. The second annual Alumni Healthcare Conference, led by the HBS Health Industry Alumni Association, presented two days of provocative lectures, panel discussions, and case studies surrounding questions like: What's next for healthcare? And how should smart businesses proceed, given the rapidly expanding landscape of scientific progress?

Integration, not intellectual property

The "great embarrassment" of twentieth-century medicine, despite its many strides, is that most therapeutics were directed at symptoms, not causes, said Eric S. Lander, a leader of the Human Genome Project and director of the Whitehead Institute Center for Genomic Research. Even the impetus for common diseases such as diabetes and hypertension continues to elude scientists, he said.

photo of Eric S. Lander
Eric S. Lander

But that will change. The major achievement that underlies biology and medicine today is that biology and medicine have become information-based sciences in a way that they never were. Twenty years ago, said Lander, information was a trivial component of biomedical research. Most of what a scientist did was based on work taking place in his or her own lab or in a few other labs. Now, of course, scientists depend to a great extent on information that was developed elsewhere, such as a digital form of DNA.

The goal now is to redefine disease based on the underlying biological mechanisms, Lander said. By that token, diseases are going to surprise us. Reclassifying them means that some diseases will get split in half and other diseases will get lumped together because they have the same mechanism, although they may look different to us, he said.

What this portends commercially is up to smart companies to figure out, he said. Companies will need the ability to integrate scale and informatics; they'll need what he called a "fleetness" with technologies—not just one favored technology, but many kinds. They shouldn't worry too much about hoarding intellectual property rights nor depend on one technology platform. It is more important to understand the big picture in the first place in order to choose the right target, Lander said.

Mixing risk and reward

The basic model that the biotechnology industry has followed for over twenty years is also changing, and for the better, according to panelists at a session titled "Will Equal Biotechnology-Pharma Partnerships Become the Model of the Future?" Until recently, said Jeffrey Wiesen, an attorney specializing in biotechnology, the standard routine was "more a work-for-hire model than a collaboration model, although we always called it collaboration."

In a nutshell, it worked like this, Wiesen said. "A biotech company would carry a project to a specified stage of development. It would throw the ball over the fence [to a major pharmaceutical firm] and it would sit around and wait. Sooner or later, if the product was successful, it would collect some royalties."

Now, a growing number of biotech firms are teaming up with major pharmaceutical companies to share both risk and reward on specific projects. But how do they define borders in the essentially borderless world of science?

photo of Anna Protopapas
Anna Protopapas

Part of the trick is to agree to boundaries wherever possible in the initial agreement and continue to discuss them along the way, said Thomas Honohan, of the pharmaceutical firm Aventis, which is collaborating with the smaller Millennium Pharmaceuticals, Inc., of Cambridge, MA. Aventis and Millennium are at different stages in their business cycles; they have different needs, and different projects appear attractive, said Anna Protopapas of Millennium.

photo of Thomas Honohan
Thomas Honohan

"When it comes to choosing a compound to take into development, for example, we have scientific and technical criteria which we approved ahead of time which we use to make that decision," Honohan explained. According to their agreement, when a compound comes up for development, both companies develop the data they need to make a decision. Then each company separately decides if they want to work on it as a joint compound or not at all. "If we both say yes, it becomes a joint project," he said. If one says yes but not the other, there's a small payment to the company that decides to go ahead. Such an arrangement, he said, "doesn't work perfectly, but it's consistent with our internal prioritization of what projects we will be working on."

Sea change, please

How about the future of healthcare for the general populace? According to HBS professor Clayton M. Christensen, the three industries most plagued by high cost, inconvenience, and inconsistent quality are healthcare, higher education, and legal services. A problem with all three, said Christensen, author of the provocative business hit, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, may be that they haven't yet been disrupted.

As Christensen explained, the debate on mass healthcare reform usually pivots around the same three questions. "Maybe we've just got to get Americans to buck up and consume less healthcare, because we certainly are profligate consumers of it," he said. "Maybe we just need to figure out how to get the high-end, expensive hospitals and doctors to somehow get good at providing inexpensive care. Or maybe we just need to subsidize it with taxes."

According to Christensen, disruptive innovations typically allow a larger population of less skilled or less wealthy people to do things in more convenient, lower cost settings that traditionally could only be done by specialists in less convenient, centralized settings. In healthcare, one good disruption has been angioplasty. Before the early 1980s, he said, patients had to be "almost dead" before they could be treated for coronary artery disease with open-heart bypass surgery. The surgery was only available at select academic medical centers at great cost and inconvenience, he said.

However, as companies developed catheterization and balloon angioplasty techniques, cardiologists could learn to treat patients who formerly had to be referred to more specialized physicians, namely cardiac surgeons. "More importantly," Christensen said, "it enabled a much larger population of people to begin to be treated. Other than cardiac surgeons, the rest of us are so much better off because that little piece of the healthcare industry got disrupted."

Disruptive technology is the cure for healthcare, he said, if it means that, within limits of safety, more people with less training are given the technology to do more and more sophisticated procedures. A greater number of patients could then benefit from better, lower cost, more convenient healthcare, he said, "than if we expect the leading institutions to somehow transform themselves and come down market."

Photos by Martha Lagace

Clayton M. Christensen is a professor of business administration at the Harvard Business School, with a joint appointment in Technology & Operations Management and General Management. His research and writing interests center on the management of technological innovation, developing organizational capabilities, and finding new markets for new technologies.