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The New Health Economy

I. Overview

In the last few years, the Life Sciences industry in the US industry has been facing unique challenges, as costs rise, government regulations change, and operational barriers mount. A new paradigm has been created called the New Health Economy, which also includes consolidating hospitals for efficiency, changing expectations of patients, and increasing calls for price reforms. To combat these challenges, the industry has grown more consumer-facing and collaborative. [1]

A significant result of this shift is that life sciences organizations—particularly pharmaceutical groups—have begun to tailor the healthcare experience towards patients directly. Data-driven product development has led to more personalized treatments, although the lack of big data talent in bioinformatics has been hampering growth. In the next few years, companies will move towards a more flexible and interactive approach by directly interfacing with patients, delivering better experiences for patients and gathering valuable data for drugmakers. [2]

Life sciences groups have formed geographic clusters, particularly in Boston and in the Bay Area [3]. However, this means that rising rents and an increasingly competitive recruitment pool can lead to increased costs.

Finally, many potential external factors must be prepared for, as they could reshape the industry. Changes in insurance policies and the politics behind them can wildly affect pricing and customers’ level of willingness to pay for certain services. Diseases and pandemics can occur without prior notice and could change the drug development focus, as seen with the Ebola crisis. Particular inventions or discoveries (such as new antibiotics and genetic treatments) can also change research directions.

II. Industry Sectors


Boston is a major hub for biotech and pharmaceutical startups, including many of our former clients. The gamut of organizations is vast, with capabilities ranging from using virtual reality to cure lazy eye to incentivizing proper health practices with a mobile app. They often focus on individualized medicine made possible through data analytics.

Looking forward, the Massachusetts Biotechnology Council expects the following four trends to impact biotechnology: a strategic hunt for revenue growth, an influx of new sources of capital, real estate solutions driven by tight markets, and talent acquisition. A changing tax regime may also have a significant impact. [4]


Pharmaceutical organizations generally expect to see returns on investment only after at least 8- 10 years. Thus, drug development is an expensive and time intensive process that requires a long-term commitment towards R&D before monetization. This also means that the pricing of the drugs is usually very expensive and relatively inelastic. A series of lawsuits, nevertheless, has been highlighting predatory pricing in this field, which could bring some relief to customers. Often smaller companies that develop direct market competitors to other pharmaceutical companies will sell themselves to the competitor to gain more resources.

Pharmaceutical organizations are focusing on using enterprise analytics and data sciences to influence their business decisions, leveraging big data analytics. As medical records move to the cloud, imaging becomes progressively higher quality, and genome information becomes widely available, these companies take in the large data sets to help with drug development. This means that cloud-services, privacy, and security become primary concerns for the organizations.

III. References





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