Beyond the Pill: Teva’s Use of Digitization to Add Value Back into Generic Drugs
Connected drug delivery devices are among the many digital supply chain innovations Teva has acquired to drive sales and control operational costs
Since losing patent exclusivity of its blockbuster Multiple Sclerosis drug, Copaxone, in 2015, Teva Pharmaceuticals has lost over $50B in market cap. 1,2 Recent news rival generics manufacturer, Mylan, will receive earlier than anticipated FDA approval for its generic 40mg three times weekly formulation will further challenge Teva’s top line.3 Over the same period, consolidation in the PBM space and increased generic competition is diminishing already thin margins for small molecule drugs.3 These events captured the attention of activist investors, and in response, Teva leadership committed to divest non-core assets to fund business operations and to focus on operational efficiencies to manage the bottom line. 4,5,6,7,8
Teva pursued multiple strategies to mitigate the impact from Copaxone generic entrants upon loss of exclusivity. These strategies, outlined at Teva’s 2012 investor meeting, included (1) expanding its pipeline of higher margin branded therapies, (2) focusing on its biosimilar therapy pipeline, and (3) improving global supply chain efficiency. 6,7 Common across of these initiatives is the increasing use of “digitization” to drive efficiency and value for the organization. Early examples of Teva’s use of digitization across its supply chain included:
- Teva established specialty pharmacy distribution networks through its Shared Solutions program to reduce friction across the therapy decision making process and to support Copaxone compliance.9 The program provides patient and provider support resources through Teva’s online portal, nurse hotline and specialty pharmacy providers.9
- In 2010, Teva acquired a generics manufacturer Ratiopharm which used social collaboration tools from Microsoft and Moxie to enhance communication between supply chain stakeholders, reducing system delays and costs.10,11,12
More recently in 2015, Teva made several investments and established multiple partnerships in digital health, and should expect to realize the benefits of these solutions over the next few years.
One of the first partnerships established was with IBM’s Watson Health. Specifically, IBM-Teva hopes to use machine learning in the Watson Health Cloud to analyze chronic disease models that facilitate drug innovation, reduce drug misuse, and to increase medication adherence using real-world evidence. 13,14
In addition to the digitization of therapeutic development, Teva is also innovating its biosimilar supply chain through a partnership with cold chain logistics leader, Controlant.15,16 Teva and Controlant have been recognized across the industry for their use of wireless temperature monitoring systems to track biologics distribution end-to-end; in the future, this partnership could serve as a strategic differentiator for Teva to compete against manufacturers of branded biologics and biosimilars.15,16,17
Other areas of investment include drug delivery technologies that can collect real-world patient data and differentiate generic drugs. In the near-term, Teva is expected to commercialize its Gecko Health CareTRx “smart” inhaler and mobile-app to track compliance across its respiratory therapies.18 Teva also invested in Microchips Biotech, a unique implantable drug delivery device that can be wirelessly programmed to deliver desired amounts of medication.19 Additionally, Teva partnered with Intel to use their Trusted Analytics Platform to wirelessly collect Huntington’s Disease patient data as a part of its Phase 2 study to monitor declines in motor control over time.20
Finally, Teva’s investment in American Well, a telehealth company that plans to add mail order medications could expand the number of patients with access to care while also providing Teva with a more direct channel to the patient.21 In the near to mid-term, this solution could increase access to care while replacing traditional doctor’s office visits and retail pharmacies.
Teva partnered with Phillips and formed Sanara Ventures, a joint venture to invest in strategic health technologies.22 Sanara’s investments in several focus areas should further enable Teva to use digitization to increase demand for its products and to maintain market share and competitive pricing in the mid-term. Focus areas for the venture group include:
- Continuum of Care and Disease Management: Support early diagnosis and therapy compliance23
- Digital Health, Healthcare IT and Mobile Apps: Track utilization and effectiveness of therapies23
- Patient Diagnosis, Sensing and Monitoring: Improve remote monitoring and track effectiveness of therapies23
- Drug Delivery and Device Combinations: “Approaches and technologies for transportation of medicines in the body, to achieve better therapeutic effect.”23
In the long-term, Teva has the opportunity to move up in the supply chain, closing the gap between drug manufacturer and patient. Teva should look for new ways to leverage data from connected drug delivery devices and sensors to develop predictive analytics that could prompt clinicians/patients to titrate or change medications, preventing disease worsening and costly acute care. Additionally, Teva should use these devices in clinical studies as way to economically collect additional clinical patient data. Finally, Teva should increasingly use this patient data in contract negotiations with pharmacies and insurers to demonstrate the value of its therapies.
With a strong pipeline of digital health solutions, how else might Teva use these technologies to close the gap between Teva and the ultimate consumer, the patient?
How could Teva use connected drug delivery devices to better forecast their product demand?
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- Yahoo Finance. “Teva Pharmaceutical Industries Limited (TEVA).” https://finance.yahoo.com/quote/TEVA/, accessed November 2017.
- Teva Pharmaceutical Industries October 29, 2015 Form 6-Q. http://ir.tevapharm.com/phoenix.zhtml?c=73925&p=irol-reportsAnnual, accessed November 2017.
- Rory Jones, “Teva Cuts Outlook Again in Perfect Storm of Problems,” Wall Street Journal, November 2, 2017, via Factiva, accessed November 2017.
- The Times of Israel, “Teva Should Ditch Generics, Focus on Branded Drugs, Activist Investor Says,” September 19, 2017, via Factiva, accessed November 2017.
- Seeking Alpha, “Teva: A Complete Overview,” August 30, 2017. https://seekingalpha.com/article/4103038-teva-complete-overview, accessed November 2017.
- Bill Berkrot, “Teva CEO Promises to Reshape, Refocus Company,” Reuters, December 11, 2012. http://uk.reuters.com/article/us-teva-outlook/teva-ceo-promises-to-reshape-refocus-company-idUKBRE8BA1AR20121211, accessed November 2017.
- Michael Hayden, “Teva Investor Day,” December 11, 2012, accessed November 2017.
- Nick Paul Taylor, “Manufacturing at the Heart of Teva’s $2B Cost-Cutting Drive,” FiercePharma, December 12, 2012. http://www.fiercepharma.com/partnering/manufacturing-at-heart-of-teva-s-2b-cost-cutting-drive, accessed November 2017.
- Teva. “Copaxone Shared Solutions.” https://www.copaxone.com/shared-solutions, accessed November 2017.
- FiercePharma, “Teva Supply Chain Gets a Boost from Social Media,” July 26, 2011. http://www.fiercepharma.com/manufacturing/teva-supply-chain-gets-a-boost-from-social-media, accessed November 2017.
- Sharon Gaudin, “Drug Maker Goes Social to End Supply Chain Crisis,” Computerworld, July 25, 2011. https://www.computerworld.com/article/2509386/social-business/drug-maker-goes-social-to-end-supply-chain-crisis.html, accessed November 2017.
- Moxie. “nGenera (Moxie Software) Unveils Human-Centered Enterprise Collaboration Solution.” press release, June 15, 2010. Moxie website, https://www.gomoxie.com/press/moxie-unveils-human-centered-enterprise-collaboration-solution, accessed November 2017.
- Guy Hadari, “Beyond the Pill, IT Leads the Technology Revolution at Teva Pharmaceuticals,” Pharma Tech Outlook, January 2016. https://www.pharmatechoutlook.com/magazines/December/January2016/, accessed November 2017.
- September 10, 2015, Teva “Teva Pharmaceuticals and IBM Partner to Build Global e-Health Solutions on the IBM Watson Health Cloud” http://www-03.ibm.com/press/us/en/pressrelease/47632.wss#release
- Gisli Herjolfsson, “Controlant: Bringing IoT and Cloud Access to the Entire Pharma Supply Chain.” PowerPoint presentation, April 10, 2016. https://conference.advania.com/lisalib/getfile.aspx?itemid=104edd69-8a16-11e6-9407-005056bc2afe, accessed November 2017.
- Controlant, “Pharmaceutical,” http://www.controlant.com/pharmaceutical, accessed November 2017.
- LogiPharma. “LogiPharma Launches Pharma Supply Chain Awards,” press release, May 17, 2017, on PR Newswire website, https://www.prnewswire.com/news-releases/logipharma-launches-pharma-supply-chain-awards-622714044.html, accessed November 2017.
- Jof Enriquez, “Teva Pharmaceuticals to Buy Gecko Health Innovation,” Med Device Online, September 28, 2915. https://www.meddeviceonline.com/doc/teva-pharmaceuticals-to-buy-gecko-health-innovations-0001, accessed November 2017.
- Jof Enriquez, “Teva, Microchips Biotech Tea on Drug Delivery Microchip,” Med Device Online, June 22, 2015 https://www.meddeviceonline.com/doc/teva-microchips-biotech-team-on-drug-delivery-microchip-0001
- Steve Rogerson, “Intel Partners Teva to Tackle Huntington Disease,” Connected Health News, September 27, 2016. http://www.iotm2mcouncil.org/intteva, accessed November 2017.
- Jonah Comstock, “Report: Teva Pharmaceuticals Invested Tens of Millions in American Well,” Mobihealthnews, June 4, 2015. http://www.mobihealthnews.com/44094/report-teva-pharmaceuticals-invested-tens-of-millions-in-american-well, accessed November 2017.
- Sanara Ventures, “About Us,” http://sanaraventures.com/, accessed November 2017.
- Sanara Ventures, “Our Focus,” http://sanaraventures.com/, accessed November 2017.
- Photo Credit: Jonah Comstock, “Teva Pharmaceuticals buys smart inhaler company Gecko Health Innovations,” Mobihealthnews, September, 27 2015. http://www.mobihealthnews.com/47039/teva-pharmaceuticals-buys-smart-inhaler-company-gecko-health-innovations, accessed November 2017.
- Pharmacy Benefit Manager (PBM)
Student comments on Beyond the Pill: Teva’s Use of Digitization to Add Value Back into Generic Drugs
I’m quite impressed by the number of ways Teva has already begun to incorporate digitization into its operations – both at the therapeutic development level and through to drug delivery and compliance. That said, I think Keely’s point about developing predictive analytics is a critical one. I myself am left wondering what Teva is currently doing with all the data it is collecting, particularly through initiatives like the Intel partnership to collect motor control data for Huntington’s patients or other remote monitoring systems; in the absence of a direct tie to automated drug delivery or interpreted meaning for prescribers and care providers, having tons of data feels superfluous. Is Teva using the information it gathers to inform (proactively or otherwise) its supply? I would urge Teva to consider its use of digitization as a means to meaningfully change its supply chain decisions, logistics, and responsiveness to demand, otherwise it could risk what Dr. Daniel Kraft, MD, calls in his 2011 TED Talk, the challenge of the “data explosion.”
Teva is in a really tough place. While I agree with many of your suggestions, I wonder if these digitization initiatives, and specifically the launch of Sanara Ventures, are examples of Teva grasping at straws in trying to dig itself out of its current hole. While I think the company should be monitoring and investing in these kinds of things to some extent, I think its best bet in terms of digitization is on filling its pipeline for the long-term. That’s my R&D bias speaking, of course, but in the long run, I think if it wants to get out of this black hole of PBM and generic pressure, it’s going to need some drugs that address currently unmet needs in areas where they can get a reasonable margin. I like the work with Watson health, but these are early days in the digital discovery era, and it will be interesting to see if they can develop their branded therapy portfolio, as you mentioned.
Another thing, given Teva’s current financial situation (https://finance.yahoo.com/news/why-teva-pharmaceutical-industries-snap-213000687.html), I wonder if a lot of these investments are as high of a priority as the company is making them out to be and whether they should be using their capital more responsibly.
I’ve thrown out a lot of negativity, but here’s a more optimistic view as a counterargument: https://www.fool.com/investing/2017/10/02/6-reasons-ive-been-aggressively-buying-teva-pharma.aspx
Thanks Keely for sharing your insights on Teva. The shift by companies like Teva up the supply chain has been interesting to follow, especially with respect to medical devices. In 2016, Medtronic released the first FDA-approved insulin pump that automatically sensed glucose levels and administered insulin (https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm522974.htm). These closed-loop systems have drawn attention partly because they place a greater legal burden on the manufacturer in the event of a mishap. Fortunately, some data suggests the safety profile of closed-loop systems is comparable to other devices (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5260117/), though the primary studies were done over only 3 months and were funded by Medtronic (https://jamanetwork.com/journals/jama/fullarticle/2552454). This is an exciting space for Teva to pursue, but not without the very real challenge of needing to balance patient safety with the desire for innovation, especially in an age where IT systems seem so easily hacked. Also, I would be curious to hear more about the partnership with IBM Watson, in light of IBM’s failed partnership with MD Anderson (https://www.technologyreview.com/s/607965/a-reality-check-for-ibms-ai-ambitions/). It’s possible that this type of technology is better suited for drug development, as you mention, than for diagnostic purposes.
Pharmaceutical companies investing in consumer facing digital tools also need to consider the digital tools that other players in the value chain are deploying. Given the value of data in the healthcare space, this dynamic could present a risk for Teva in maximizing the value of these investments in digital tools. For example, CVS Caremark released a diabetes care management tool that incorporates a digitally enabled glucometer (https://cvshealth.com/newsroom/press-releases/cvs-health-introduces-new-transform-diabetes-care-program-improve-health). While this doesn’t directly compete with any of the cosnumer-facing digital tools that Teva has implemented, it shows that other players are positioned to enter this space and other players, like payors, may be better positioned to connect with patients.
I do see specific benefits of digital investments for B2B efforts. For example, Teva could work with PBMs to use data to inform value-based pricing contracts that demonstrate the efficacy of their products.
Keely has hit on some wonderful aspects of the changing nature of the pharmaceutical industry in America–which is both the envy and the scourge of the world in many ways. The question going forward will be whether the model that we’ve come to know and accept can be fundamentally changed by digitization and the recommendations that Keely mentions–specifically predictive analytics and big data–or whether the result will be a more efficient version of the model we know now. At the same time, Keely’s work reveals just how precarious the industry is for nice producers. The loss of a patent and an expedited approval of a rival drug have put Teva on the ropes, to the point that they’re divesting assets to keep their firm solvent and to fund the pipeline. The ability to capture and use data as leverage for an improved operating strategy and operating could be the point of differentiation that breaks Teva out of the boom and bust cycle of pharma product development and moves them toward a sustainable future.
Thanks Keely for an insightful article. I am in the camp of supporting Teva’s shift to embrace digitization, as it is setting them up to capture growth in the market that will inevitably utilize technology to predict demand for drugs in the coming future. As you pointed out, consolidation in the PBM space and increased generic competition is pushing Teva into a corner in their traditional business. By offering these potential high value “add on” services such as partnering with IBM Watson Cloud as well as providing apps, Teva can reduce friction in the demand funnel at various stages in the product cycle. Teva isn’t diverging from their core business but creating innovative opportunities to drive their margins back up in what is becoming a challenging environment for the traditional players in the market.
While not knowing much about pharma, this article posed a number of questions for me, that I’m grateful to you for raising. One was around the role of big data, specifically when it relates to patient information. How do drug companies leverage data through companies like IBM, via Watson, when you’d think that HIPPA would prevent easy information flow? And if there is an opt-in, could you see an information bias? I agree that there is a huge opportunity in healthcare for being smart about using data to inform new products, changes, and innovation, but I wonder if this is actually a competitive advantage to companies like Teva if the information is easily accessible, and if it’s not, to what extent reporting bias colors the extrapolations?