Rethinking Life Sciences - October 2016 kpmg.es - KPMG International
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Rethinking
Life Sciences
kpmg.com/socialmedia kpmg.com/app
October 2016
kpmg.es
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© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
9 8
Value-based pricing
Payers need big savings. R&D is costly. Time to
shift from price-per-pill to charging for outcomes?
12
Patient capital
Why user focus is a defining trend for the sector.
17
Data & analytics
Our roadmap for big data beyond the hype –
and how firms can build new capabilities.
Video interview
Clare Cutler talks oncology at AbbVie.
20 22
BEPS update
The four key steps global life sciences firms Nutraceutical nation
must take as the OECD’s Base Erosion and An emerging category finds its feet.
Profit Sharing action plan comes into force. So what’s next for nutraceuticals?
Picture: Getty images
Rethinking Life Sciences 2
© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Table of
contents
Welcome from Chris Stirling 4
Espresso shot
Life sciences in a minute 6
The catalyst
Video: AbbVie’s Clare Cutler opens up oncology 8
The wake-up
A value-based pricing revolution is coming 9
The playbook
KPMG’s Exceptional Women in Life Sciences set the agenda 12
Option to grow
Analytics is today’s essential investment 17
On the ground
Re-examine corporate structures for BEPS 20
On trend
Nutraceuticals shapes up the food sector 22
Contacts 24
Rethinking Life Sciences 3
© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Welcome
Welcome to Rethinking Life Sciences.
The highlight of this issue is our video interview with
Clare Cutler, Vice President Oncology, Global Marketing
at AbbVie. Clare shares her views on the challenges of
combination treatments and the implications for therapy
pricing.
We also uncover the key trends in pharmaceuticals
with some of the leading lights in KPMG’s Exceptional
Women in Life Sciences programme. It’s well known
that pharma has struggled with a diversity deficit. Our
campaign aims to highlight the work we’re doing to
support and encourage women in leadership roles –
work we’re also seeing our clients undertake.
Other articles in this issue include an updated
breakdown of the implications of the OECD’s Base
Erosion and Profit Sharing (BEPS) action plan; and a
look at the benefits of implementing a value-based
pricing model in pharma.
As payers and providers all over the world struggle
with the cost and complexity of the life sciences
supply chain, there’s a real opportunity to reshape the
fundamental assumptions underpinning our industry.
That means looking at pricing, contracts and “customer
journeys” in new ways – and reshaping business
models and market positioning around the value of
lives, not the cost of pills.
No wonder patient-centric healthcare planning is a
strong theme running through this issue.
KPMG takes a long view of these challenges and
opportunities – and the topics in this edition of
Rethinking Life Sciences are a useful reminder that,
during periods of rapid change, sometimes a steady
hand and a clear vision are the best routes to success.
We hope you enjoy this issue of Rethinking Life Sciences
– and, as always, we welcome any feedback.
Chris Stirling
Partner and Global Head of Life
Sciences at KPMG
christopher.stirling@kpmg.co.uk
Rethinking Life Sciences 4
© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The espresso shot
A quick, concentrated look at the trends, topics and
data that are shaping the life sciences sector.
Anticipate tomorrow…
Cancer in Focus: late-phase
Longer patient journeys R&D pipeline (US drug tests)
In 1900, the top three
causes of mortality were all
acute. By 2013, they were
all chronic (heart disease, 25
Women in life sciences:
cancer, COPD). About 141
missing half the brains?
million people in the US
There remains a striking
had one or more chronic 51 gender gap in terms of average
conditions in 2010; by 2030,
remuneration and career
it will be 171 million. 15 progression in life sciences.
Real-time patient data
5 For example, women earned
The world’s 100 million 4 39% of biomedical engineering
wearable devices are
degrees in the US in 2011. But
generating 15 million
Only 8% of board members at
gigabytes of monthly traffic. • Oncology • Neurology the top-ten biotech start-ups
Forecast for 2019? 500 • Dermatology • Vaccines in 2014 were female. And only
million wearables. • All others 20 of 112 senior management
roles in the top-ten biomed
...deliver today More than 225 medicines will companies in the US were held
be introduced by 2020, with by women. See page 14
Invest in the platform. Life one-third focused on treating
sciences firms need to be cancer. See page 8
able to manage processes Source: The Scientist Life Sciences
and interrogate data at huge Source: IMS Health Salary Survey
scale to manage internal
and external change.
Legacy systems and siloed Examining notions of value: health costs
databases will soon create
potentially fatal choke Health spending as percentage of GDP
points. See page 19
1973 1983 1993 2003 2013
Cost pressure OECD 5.0% 6.4% 7.1% 8.0% 9.0%
NHS trusts in England US 6.5% 9.3% 12.5% 14.5% 16.4%
overspent by £2.5bn Germany 6.8% 8.2% 9.0% 10.3% 11.0%
in 2015; in the US, it is UK 4.0% 5.3% 6.0% 7.1% 8.5%
estimated that $8.2bn a year
is wasted due to duplicative
testing in hospitals. Can the Healthcare spending has risen rapidly as a share of national
life sciences industry offer income over the past 40 years – by 80% across the OECD, but
fast solutions? See page 11 112% in the UK and a massive 152% in the US. Since 1973, the
share of health spending on pharmaceuticals has grown from
14.9% (OECD average) to 17%.
Sources: Nature; RAND Health;
BBC News; Issues in Science and Source: OECD
Technology
Rethinking Life Sciences 6
© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
“As well as
working with
patient groups
and institutions
treating patients,
we need to
collaborate
with other
industry players”
Clare Cutler CV
2003–2006 Business Unit
Oncology
Manager (Oncology &
Haematology), Roche
2006–2010: Director
of Oncology (UK),
GlaxoSmithKline
2010–2011: Director & Head
in concert
of Solid Tumour Commercial
Development, GlaxoSmithKline
Oncology Centre of Excellence
2011–2013: Global
Commercial Lead (Oncology),
GlaxoSmithKline
2013–2015: VP & Medicine
Modern oncology is all about treatments Commercialisation Leader
in combination – and working closely (Oncology), GlaxoSmithKline
with patients. For AbbVie’s Clare Cutler, March 2015 August 2015: Vice
that means finding ways to collaborate President, Global Oncology,
Novartis/GSK Integration Lead
with health providers and rival pharma & Site Head, Novartis
companies in pursuit of better patient Sept 2015–present: Vice
outcomes. President, Oncology, Global
Marketing, AbbVie
AbbVie emerged from Abbott
Laboratories in 2013 as a global
biopharmaceutical company
with focus and capabilities to
address some of the world’s
greatest health challenges –
including hepatitis C, cancer,
Hilary Thomas immunology, neurological
Partner and Chief Medical Adviser, conditions, renal disease and
Life Sciences, KPMG endometriosis.
hilary.thomas@kpmg.co.uk
Rethinking Life Sciences 7
© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Out of the box
External challenges are forcing pharmaceutical companies
to change business models from ‘sales push’ to a more
value-based approach. Drug-makers need to prove efficacy
to payers and regulators – but also that the price versus
established products is justified by improved outcomes.
We know that constant innovation for Medicaid and Medicare (CMS)
from pharma companies leads to in the US, which reports hospital
a flow of new (often expensive) 30-day risk-standardised mortality,
products – such as Glybera, one complication and readmission
of the first gene therapy drugs measures for acute myocardial
released in Europe. But fiscally infarction and heart failure.
constrained Western economies Combined with cost information for
have limited room to grow the pathway, this data can provide
healthcare spending. insight on the value provided for
acute cardiovascular care.
“Populations are ageing and medical
advances offer more options for “By opening up the entire clinical
treating chronic diseases that a supply chain, from R&D to patient
generation ago would have been sign-off, it’s possible to create value
hopeless cases,” says Hilary opportunities that life sciences
Thomas, KPMG Partner and its businesses could use to fund
Chief Medical Adviser in the UK. innovation – and provide enhanced
This led to public and political services in silos currently being
pressure on pharma companies and neglected, such as post-operative
new consideration of alternative care,” says Hilary Thomas.
payment models such as value-
based pricing. Based on our on- Value-based pricing
the-ground experience with payers, considerations
healthcare providers and pharma A value-based pricing strategy
companies in many countries, we is complex to design, however.
believe that value-based pricing Factors include product- and
models can be an adequate market-specific factors such
response to stakeholder concerns. as commoditisation and
current revenue size; external
What do we mean by value? circumstances such as the policy
Value-based healthcare is defined environment and reimbursement
as the health gains (outcomes) pressures; and the implementability
created for patients per unit cost of value-based pricing.
by healthcare interventions. Various And not all products are suitable
outcome measures have been for value-based pricing. There
developed around the world, and needs to be measurable outcomes
outcomes data is collected and of application of the product
shared with clinicians and the public. (otherwise it’s impossible to
A good example is the Centers measure the value to the patient);
Rethinking Life Sciences 8
© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
and no generic versions of the and accuracy of data and agreement Making value-based pricing
product are already, or will soon on validity of outcomes by clinicians. schemes a reality needs
be, available in the market – other Ideally, the infrastructure to measure cooperation between
products can compete on costs or and collect data will already be pharmaceutical companies,
brand value rather than outcomes. largely in place. hospitals and insurance
4. The pricing scheme has to be companies. We have four
That means we need to evaluate elaborated with the contractor, recommendations:
products for value-based pricing taking into account timing and
depending on position in market, legal possibilities. 1. Be selective in using value-
external challenges and feasibility. based pricing. Not all products are
Consider the following aspects: Benefits to stakeholders suitable for this approach.
Patient 2. Close cooperation between
–– Is there a need to differentiate –– Better access to treatments hospitals, doctors and payers is
from competitor products? If that otherwise would not be essential – design the value-based
yes, value-based pricing could reimbursed pricing schemes on a product-by-
be ideal. –– Better outcomes of treatment product basis.
–– Value-based pricing is resource- –– More subgroup specified or 3. Use pilot schemes involving
intensive – so does the product personalised treatments smaller cohorts of patients to test
have a cost or level of sales big value-based pricing; broaden the
enough to justify the cost? Medical doctor / hospital policy if it works.
–– A squeeze on the payer’s ability –– Potential for treatment of 4. Include the necessary
to pay for the drug may be patients at lower cost precautions in the contract, such
an indicator that it would be –– Guarantees on the outcomes of as strict inclusion and exclusion
amenable to alternative pricing treatment criteria of the patient subgroups
strategies. –– Improving evidence-based for value-based pricing.
–– Value-based pricing msy medicine by collecting real-
represent a politically more world data There are bound to be political
palatable solution for payers as complications, too. “As
it concentrates on improved Society compelling as it might sound to
outcomes for patients. –– More and better health care for offer a service or an outcome
–– Are there any insurmountable less costs rather than sell a pill-in-a-box, it is
barriers to the decision – usually –– Access to a wide range of those considerations that might
the availability and quality of the treatments, including expensive define success or failure of value-
required outcomes data. treatments based approaches,” says Hilary
Thomas. “In the UK, in particular,
If yes, then how? Pharmaceutical company the NHS is considered by many
Our framework for value-based –– Approval for reimbursement and to be tainted when it uses private
pricing comprises four main areas, access to the market sector contracts that see front-
each of which requires high-level –– Larger volumes of sales (e.g. line health provision outsourced to
and front-line decisions to be taken: by improving adherence, commercial enterprises.
incentivising clinicians to
1. The pricing strategy depends prescribe the drug) “But we need to establish
on the competitive market and on –– Improved position in the market sustainable models that improve
the chosen contract relationship. and enlarging market share patient outcomes, generate
You might have a 100 percent –– Real-world data collection that savings and create the financial
value-based approach (outcomes prove efficacy of products and operational headroom for life
fully drive payment) or a mixture sciences businesses to invest in
between traditional market-based Payer innovative ways to improve KPIs
pricing and value-based, such as –– More health care for less costs across the board,” she concludes.
a bonus (or penalty) based on –– More certainty on cost- “That should build a compelling case
outcomes. effectiveness of treatment for value-based pricing in healthcare
2. Outcome measures that –– Guarantees on the outcomes of – and offer some solutions to the
underpin the pricing scheme need treatment coming healthcare crisis.”
to optimise the capture of value. –– A possible reduction of the
Longer-term outcome measures costs of follow- up treatment Based on the KPMG paper,
are less useful when payments due to better initial treatment Pharma shifts towards value,
are made quarterly or annually. by Dr David Ikkersheim,
3. Enforcement of the pricing Translate value-based pricing Dr Annemarije Oosterwaal
scheme depends on the availability schemes into practice and Dr Thishi Surendranathan.
Rethinking Life Sciences 9
© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Value-based pricing in action
In 2012, ZINL, the HTA body in the Even earlier, in 2009, Merck contracted
Netherlands, agreed to reimburse with insurer Cigna in the US to discount
Novartis for Xolair, a treatment diabetes products Januvia and Janumet
for severe asthma on a “pay-for- if a key intermediate outcome – blood
performance” basis. sugar control – was achieved for
members with Type 2 diabetes, in
During evaluation of Xolair for return for a more favourable position
reimbursement, ZINL had concerns for Januvia and Janumet on the Cigna
on the cost-effectiveness of Xolair formulary (meaning lower co-payments
for severe persisting allergic asthma. for members, driving higher volumes
Approximately 30% of patients for Merck’s products).
were unresponsive. Cost per patient
was €16,000. Ruling out Xolair for Cigna concentrated on improved
reimbursement was not an option treatment adherence in all diabetes
because clinicians saw response in patients to achieve these outcomes
a good proportion of patients. So a improving volumes for all diabetes
“no cure, no pay” arrangement was drug manufacturers. It reported an
implemented. If there was no response improvement in blood sugar control
in six months, the cost of treatment was of more than 5 percent on average,
reclaimed by the hospital from Novartis. and improved medical adherence across
The success of this arrangement would all diabetes drugs – peaking
depend in large part on the appropriate at 87 percent for those taking Januvia
use of the drug by clinicians. It is in and Janumet.
the patients’, clinician’s, payer’s and
manufacturer’s interests to ensure as
many people who would benefit from
the drug are prescribed it.
Rethinking Life Sciences 10
© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Patient
capital
KPMG’s Exceptional Women in
Life Sciences explain why focus Hilary Thomas
on patients, not interventions, is Chief Medical Adviser and Partner
at KPMG in the UK
key – and investments in R&D and The industry is starting to
M&A must be geared to better see the real value it brings
to patients. We strive to help
end-user outcomes if they’re to companies understand how they
deliver sustainable returns. can maximise that, whether
it’s by changing their business
model; the way they engage
with patients and with healthcare
We’ve asked some of the firm’s global leaders from the systems; or exploring the total
Exceptional Women in Life Sciences programme about value chain for a drug. It’s about
the key trends in life sciences. The consensus is clear: how we make sure that patients
it’s all about the patients. Delivering clear beneficial are engaged in their healthcare
outcomes over a well-defined patient journey looks set to and how taking their health
be the defining model for primary health providers, drug seriously adds value.
and medtech companies, as driven by three factors.
The digital age is driving another
First, commissioning agencies – insurers in the US or transformation. To keep one step
state health services such as the NHS in Europe – are ahead of the likes of Google and
unrelenting in their drive for cost efficiency. There are Apple, this sector will need to be
limits to margin squeezes and volume discounts. Value- really innovative.
based models are sure to come to the fore.
“The life sciences industry will
Second, regulatory pressures in both business practices need to think about the breadth of
and treatment approvals. Compliance for each part of the the services it can offer and how it
patient supply chain in isolation is going to become very can be an important stakeholder
costly. Meanwhile regulations – from IP rights to drug in the healthcare ecosystem, and
approvals – are becoming globalised. not just sitting on the sidelines”
Third, data. Diagnostics of all kinds are improving and
getting cheaper, and that’s reshaping the landscape
for preventative health and early intervention. But the
data collected by primary care providers, life sciences
businesses and, above all, patients themselves is
changing the way we look at end-user interactions. From
wearable tech and the internet of things, to sophisticated
analytics and open data, bits and bytes look set to
continue their sector-defining role.
Rethinking Life Sciences 11© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Jennifer Lospinoso
Anna-Marie Detert
39%
Women earned
39 percent
Director in Life Sciences
Compliance at KPMG in the US
Scrutiny on drug pricing is sharper than ever.
Payers and providers are looking for new types
Director in People and Change at of biomedical of – and steeper – discounts. It’s leading life
KPMG in the UK engineering science companies into increasingly complex
I’m really excited about the sales degrees in the contracting arrangements. Now we’re starting to
and commercial models in life US in 2011... see contracts based on patient outcomes – and
sciences. For example, technology data has an impact, because that’s where the
like wearables and virtual reality proof is on key metrics like quality of life. But we
means we can influence people to still have reference pricing in some countries in
take medicines in a more proactive “You Europe; in the US, we have different government
way. Companies that can design have to be programs with statutory pricing. Companies
an experience around the patient really need to start looking at things from a
to help them self-diagnose, take passionate global perspective, instead of having these
preventative action and self-treat will about fragmented business approaches.
do well. We need payers, patients what life
and the industry to work together
to help people take more ownership sciences can
of their care. KPMG works across do for the
the patient pathway to help deliver world. But
this vision. Even in acute care, we’re Allison Little
going to see more specialisation and internally,
a better dynamic between the public it’s about Life Science Advisory Leader
sector and private hospitals without tenacity. You for KPMG in the US
having to go through so many stages
to deliver patient outcomes. have to have Companies are really trying to figure out how
a vision” they’re going to create value in the future.
Specialise in a particular therapeutic area and
differentiate on the science? Or diversify to
capitalise on market reach with a larger portfolio?
It’s a tremendous opportunity for transformation.
Even the specialists are focused on the patient
journey, trying to provide supporting services or
devices that make it more manageable.
Kelly Dane There will also be breakthroughs in science that
will make some conditions that people struggle
Director, KPMG Global Life Sciences with curable, or at least more manageable.
We’re applying the right talent to the People will live a longer, healthier, happier life.
biggest challenges for our clients. But there will still be care needed and end of life
We’re one of the few firms bringing management. We have an opportunity to see
together our Healthcare and Life quality of life improve significantly.
Sciences practices: we know their
challenges have to be overcome
through partnership. And we want to
encourage more women to extend
themselves in the industry. Its issues
will only become more challenging
unless we bring in the best talent
from every background and apply
diversity of thought to its problems.
Rethinking Life Sciences 12© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Lynn Buhl
8%
...but only 8
percent of board
Director in Life Sciences members at the
Advisory top-10 fund-
at KPMG in the US raising biotech
Compliance does drive better business practices. start-ups in 2014
were female...
You need better data, better systems, better
processes on the compliance side. But we can
also recommend new systems or data analytics
that benefit the business as a whole. When
clients are facing potential lawsuits, the big risk is
that practices are not well documented. Robust
and complete documentation doesn’t just help Jennifer Shimek
prove they were trying to do the right thing. It’s
valuable across the board. Partner and principal in Forensic
Advisory Services at KPMG in the US
“We Enforcement actions and due
need to be diligence on third-party intermediaries
has become a big part of the M&A
Patricia Wylie
aware of the and divestiture activity – knowing
emerging what you’re buying and making sure
Forensic Manager in risks as we that you have a perspective on any
enforcement and compliance for [operational or regulatory] risk. Pharma
KPMG in the US
open up to companies not domiciled in the US
More companies are looking to M&A and big data and but with a large presence here are
joint ventures to grow their capabilities and analytics forced to live under these rules.
extend their global reach. However, they’re also Data analytics is critical. Using data
opening themselves up to some increased risks, – and new well helps us identify what people
particularly in regulatory and compliance. We’re transparency are doing wrong or how well a drug
seeing a lot of emerging markets replicate many in how we’re is working for the patient population
of the regulations in the US, too. And there’s an or make sure we’re reporting any
increased regulatory focus on how we’re meeting interacting adverse events. Government is
patients’ needs and bringing them services in a with really focused on going after this
more efficient way – providing a holistic solution. patients” data, too.
Kelli Brooks
Partner in Forensic Technology
Services at KPMG in the
US and Global Leader for
eDiscovery
Carol Streicher
As companies are acquired or merge, there’s
a proliferation of data. Dealing with legacy Partner, Deal Advisory, at KPMG US
systems and maybe cultural issues gives clients Slow FDA approvals and limited
pause to understand what to do with their data. pipeline are causing a lot of concern
Also how they deal with regulatory obligations in the industry. These challenges are
in different countries – and what that means creating significant M&A activity. The
around data privacy. Embracing technology can lines between big pharma, generics
really help you to get at your information much and specialty are getting blurred. A
more quickly, more efficiently, and certainly perfect example is Pfizer acquiring
more cost-effectively. Hospira last year.
Rethinking Life Sciences 13© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
“Every time
there’s a
Christine Kachinsky
discussion
Partner at KPMG in the US and about an
Global Head of Sustainability opportunity,
Tax
We have tax accountants and attorneys on
I make sure
our team, but also scientists and engineers we bring the
who can speak the language of our clients. right team to
That’s vital if we’re to get the information
that we need to comply with the tax law and
my client and
optimise tax benefits – and to increase the do the right
level of sustainability of these tax benefits upon thing for
examination. We also use our technology to Vicky Phelan
streamline information gathering through to
them”
reporting – which also increases efficiency. Leads on Life Sciences for the
Shared Services and Outsourcing
As companies talk to each other to streamline
Advisory group at KPMG in the US
patient care, I’m hoping that technology helps
them both comply with privacy laws as well as
We’re going to see more convergence
become quicker and more efficient.
– of payers, providers, pharma,
medical devices. At the same time,
people will take more accountability
for their own health, the way they
monitor their bodies and make sure
that they’re doing preventative
things as opposed to being treated
by medicines. It’s important that we
have the medicines. But if you can
avoid using those drugs [simply to
treat acute symptoms rather than as
part of a patient journey], all society
benefits.
“Acquiring
companies
Regina Cavaliere need to
Principal in Advisory, Regulatory Enforcement & make sure
Compliance at KPMG in the US they’re doing
Consolidation right now means we’ll see some a really deep
very large organisations, and then a lot of smaller
ones, focused on clinical innovation. They can be assessment
more nimble – but they still have to work within on their
the compliance and regulatory framework. compliance
Clients are looking for a holistic, innovative programme –
approach that connects them to the patient, but and once the
also takes into account the legal and regulatory deal closes,
framework. For example, the European Court of
Justice struck down the Safe Harbor provision make sure
that allowed for data sharing between the that extends
European Union and the US. But how we use to integration
data is central to creating more coherent patient
journeys, so it must be tackled. efforts”
Rethinking Life Sciences 14© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Diversity deficit under
attack
17.8%
... and only 20
What can the life sciences industry do to
address its diversity issues? According to
Catalyst, a New York-based research and
advocacy group, women earned 39% of
Jaime Marks Corvino of 112 senior biomedical engineering degrees and 38%
management
roles in the of doctorates in the US in 2011. Yet in the 10
Associate Director of Account top 10 biomed highest-value biomed companies there, only
Management, KPMG in the US companies in 20 of 112 senior management roles were held
Companies are really focused on the US were by women. Only 8% of board members at the
how they’re going to invest to bring held by women top-10 fund-raising biotech startups in 2014
the most value to customers. The were female, according to science journal
science to individualise therapies Nature.
and treatments is here now, for
example. But the policies and KPMG’s Exceptional Women in Life Sciences
payment approaches haven’t caught project is just one way the firm is attempting
up. Many life sciences companies to address that diversity deficit. “For example,
are waiting to get that figured out to the KPMG Network of Women (KNOW) is a
see if the investment is worth it. global programme to give women coming
Companies are having to look first up through the firm the chance to network,
at their talent pool. There are a lot see role models and understand how people
of opportunities to create roles made it work for them,” says UK Chief Medical
to answer these really difficult Adviser Hilary Thomas.
questions. New partnerships, too
– looking outside the industry and Hilary, like many of her peers in the global life
getting creative about what they sciences community, is also a member of the
can do, whether it’s technology “We have Healthcare Businesswomen’s Association (HBA).
or patient advocacy. Twenty years a passion “It’s a really powerful opportunity for women to
from now, we’re going to see a very come together,” she says of an organisation with
different set of companies doing for the more than 40,000 members in the US alone.
lots of different things for patients. patients and “There isn’t a global big pharma company yet
We’ll be surprised at where we a passion to that has a female CEO. That has to be the next
were today. crack in the glass ceiling.”
see those
organisations Anna-Marie Detert, director in People and
[working Change in London, thinks for firms like KPMG,
diversity is an out-and-out commercial issue.
for better “Our female clients in life sciences are starting
outcomes] to really take on some senior roles,” she says.
become “KPMG is moving at pace with them – we’re
bolstering our capability and our diversity
successful” as our clients are doing the same thing. It’s
Dana McFerran creating new relationships.”
Partner in the Forensic practice for There’s still a long way to go. But as the
KPMG in the US balance in young women studying science,
Many companies focus on improving technology, engineering and maths (STEM)
outcomes. At the same time, there’s subjects shifts, companies and firms with
increased government scrutiny. Robust an open and inclusive approach will be
compliance is key, but we need to significant beneficiaries in terms of people,
ensure we’re not overburdening talent and creativity.
businesses. We can identify the roles
and risks that they need to deal with
from a regulatory perspective.
Rethinking Life Sciences 15
Thought leadership title 15© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Big data, Three big
challenges for
big data
big insights
To realise its true value, big data
needs to be integrated into
organisational design and a wider
ecosystem supportive of good
data management, analytics,
as well as new business and
investment models. Other
sectors such as retail and
From deep research to driving changes in patient financial services offer examples
behaviour, the opportunities for smart use of data of how this might be achieved.
science and analytics in the life sciences industry 1 Understand the risks and
are almost limitless. regulations around data sharing.
Data protection laws, such as
Today opportunities for innovation data; transforming it into more the Health Insurance Portability
frequently lie in the analysis of data easily usable formats; analysing and Accountability Act in the
beyond the primary use for which it it; generating knowledge; and US or the Data Protection Act in
was generated. New technologies applying the knowledge to produce the UK, are stringent on patient
and policies are beginning to valuable insight. But each step information. Researchers may
improve access to, and analysis of, requires a different investment have to anchor data to a baseline
this data while ensuring protection in skills, technology, tools and date and use de-identification
of individual privacy. techniques that broadly reflects measures. Attempts to de-
the complexity of the data and of identify data can restrict moving
Big data has potential applications the question at stake. or sharing data.
across the whole value chain,
from drug discovery to provision Key client issues 2 Recognise obstacles such as
of front-line healthcare. With so Life sciences companies typically data silos.
many opportunities – and issues understand what interventions Administrative – claims,
– the challenge is to know where work for which patients at what reimbursement, cost information.
to begin. Not only do opportunities cost. Internal and externally Clinical – such as patient history,
differ in intrinsic value across generated data must now support vital signs, progress notes, and
individual organisations and the more complex applications. diagnostic test results, usually
pharmaceutical industry as a stored in Electronic Health
whole, but practical realisation of There are a number of challenges Record (EHR) systems.
big data opportunities relies on a that make it difficult to fuse vast Patient reported – often
wider data ecosystem of assets heterogeneous data sets together overlooked because it does not
and services. to improve patient outcomes. neatly fit traditional data systems.
Healthcare data typically resides
It is a common mistake to assume in silos (see box). By making 3 Overcome the challenge of
that value of big data lies in the use of all of these disparate and unstructured data. Roughly
data itself – its volume, accuracy, siloed datasets, the Life Sciences 80 to 90 percent of business
accessibility, linkability and so on. industry can greatly improve information is unstructured data.
In reality the ‘bigger’ the data, the patient outcomes analysis. In healthcare, that can be clinician
less this holds true. Even with notes, scanned documents,
high-quality data, it is not possible Another challenge is using data patient diaries, images and even
to leap straight to business value. for secondary and tertiary analysis. test results. A UCLA study has
For instance, administrative data posited the use of social media
In theory, the chain is simple: data is collated primarily to account to track HIV incidence and drug-
generates insight that creates for services rendered and collect related behaviours to detect and
value. This means capturing the payment; Electronic Health Record perhaps prevent outbreaks.
Rethinking Life Sciences 16© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
(EHR) data helps track patient Increase awareness Make a sustainable
progress, treatment and clinical Accelerating awareness and data ecosystem
status. When these data are used understanding of big data is The multitude of new information
to measure quality, outcomes, critical to increase public and sources remains an underutilised
and for real-world evidence private investment in the short- asset. We need accessible and
(comparative effectiveness, cost term. The pharmaceutical industry interoperable data to generate
reimbursements, behavioural has a wealth of experience and economic value and realise
analysis and so on) the original insight that will be key to realising applications such as personalised
use of the data must be its potential. Initiatives to grow medicine. A collective of NHS
acknowledged as a potential awareness across the ecosystem data and service providers, and a
limitation and may compromise will help different organisations wider data service market, is fast
the reliability and validity of any find ways to engage around big emerging in the UK to address
resulting parallel conclusions. data for mutual benefit. these challenges – all within a
robust governance framework
This secondary and tertiary analysis Build capability and capacity to protect patient privacy. There
is often performed in a data We need new capabilities to is an opportunity for the industry
warehouse where all contextual exploit big data analytics and to become a more strategically
analysis is removed. Thus the results manage the diverse data available engaged customer of NHS data
are degraded and correlations across the pharmaceutical services and to help build a stronger
are highly suspect. Unstructured industry, academia and healthcare collaborative culture – one that
content is neither stored nor services. The complex analyses involves stakeholders aligning
searchable against the structured inherent in big data applications around the common aim of
information, creating an inability to demand technical skills – but delivering better value for patients.
link and correlate information. these skills alone are not enough.
A new generation of informatics/
But the most significant challenge business analysts is needed
in aggregating and analysing to translate that analysis into
healthcare data is that much of real value – data scientists who Moulshri Pande
it is unstructured poorly stored, are able to extract and analyse Director of Life Sciences DIS at
retrieved, queried and viewed. information from large data sets KPMG UK
The content is spread across and then present value-added moulshri.pande@kpmg.co.uk
multiple data models, systems knowledge and insight to non-
and data marts. technical experts.
Big data What does it look like?
Control Cost
Treatment & Rx Claims
Payment Data Public & Private Payers
Clinical Outcomes Data
s
Leading Practices Data tc ome
y ou
Program Effectiveness Data
Q ualit Drug Safety and Efficacy Data
Population/ Disease Data
Patients Medical Device Efficacy
Prescription Data Clinical Trial Data
nce Rx and Promotional Sales and
Lab Data
al evide
Radiological Data C linic Marketing Data
Product Utilization Data Market Research Data
Treatment Protocol Data
Genomic Data Providers Suppliers
Optimize Revenue
Admissions Data Supply Chain Data
Physician Profile Data Industry Intelligence Data
Epidemiological Data / Patient Profile Data
Benchmarking Data Benchmarking Data
Market Research Data / Genomics Data
EBM Data Market Research Data
Clinical Trial Data / Other basic research
Clinical Research Data
Rethinking Life Sciences 17© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The roadmap to big data
Life sciences focus Health economy focus
Manufacturing Health Health
Discovery & Commissioners Patient
supply & technology outcomes
development & payers usage
distribution assessment
–– Genetic –– Computerised –– Selective use –– Population –– Use of –– Clinical
testing prescribing of EHRs for segmentation aggregate model
Common –– Disease benefit-risk –– Ad-hoc real world and
Today landscapes analysis real world data pathway
–– Trial evidence by to track reviews
design and brand uptake
recruitment –– ––
–– Genomic –– Sales force –– Retrospective –– Retrospective –– Telemedicine –– Social
analysis performance comparative real-world –– Self-tracking media
–– Automated assessment effectiveness evidence of –– Linking monitoring
research based on real analysis medicine medicine use –– Post-launch
Possible meta-analysis world data –– Potential value usage to outcomes stratification
–– ‘Real world modelling –– Uptake –– Adherence
Today data’ studies modelling management
e.g. for new based on technologies
disease local data
taxonomies –– Identifying
conduct risks
in marketing
and sales
–– Enhanced –– Efficient –– Predictive –– ‘What if’ –– Point of care –– ‘Real world’
therapeutic inventory burden modelling diagnostics real-time
target control and impact of stratified –– Pharmaco- analysis and
Emerging identification systems modelling service and genomics pharmaco
–– Automated –– Personalised pathway –– Personalised vigilance
stratification product redesign treatments –– Realised
–– Virtual drug delivery –– Reduction in value
design –– Enhanced prescribing modelling
counterfeit errors and waste
prevention
Common base of real world data
Rethinking Life Sciences 18© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Your BEPS check-up
The OECD’s 15 point action plan on Base Erosion and Profit
Shifting (BEPS) will fundamentally change how and where life
science companies are taxed – and have a material impact on their
competitiveness and market valuation.
The Organisation for Economic Businesses that appropriately adapt they might merely achieve a
Co-operation and Development their business model in line with the concentration of ‘substance’ in
(OECD) Action Plan on Base OECD’s recommendations should jurisdictions offering the most
Erosion and Profit Shifting be able to minimise the impact of competitive effective corporate
(BEPS) is designed to prevent inevitable inefficiencies in the system income tax regime.
multinational businesses from caused by a lack of certainty. In the
achieving non-taxation on profits medium term, this should give them We recommend multinational
or artificially shifting profits the best chance to maximise R&D life sciences companies review
across borders to exploit lower funds to gain innovation leadership. their organisational, legal and
corporate income tax rates. funding structures and perform
The potential impact of BEPS scenario planning to assess
There is a 27.5% difference BEPS will impact life sciences the likely impacts of the BEPS
between the lowest and highest companies in various ways, affecting work-streams. Consider, too,
corporate income tax rates across the tax deductions available and the how existing structures would
OECD countries. It is estimated risks of double taxation. For example: be viewed should information
that there is a 24% spread in the – Groups that rely heavily on interest regarding the supply chain and
tax rates paid across the top 20 deductions to manage their current taxes paid in-country be made
companies in the life sciences year tax charge may suffer a material available to the public.
sector. BEPS will therefore impact, as will those who have
potentially increase the tax burden financing arrangements which rely Corporate income tax
of many companies currently on hybrid mismatches post-BEPS
structured to take advantage of – BEPS Actions 8 to 10 stress ‘value If companies want more visibility
lower-tax jurisdictions. creation’ and ‘key decision making’ in over future tax liabilities and
determining where profit should be to maintain a flow of funds for
The final BEPS reports were taxed. Yet there is no consensus on essential R&D, they need to
issued in October 2015 and set what these terms mean in practice. reconsider their organisational,
out the recommended actions Does a decision to fund or undertake legal and funding structures;
for individual countries. If a clinical trial drive value? Or is it the and to quantify the value
implemented as outlined, some local management of the trial? Life of intellectual property and
of the proposals are likely to sciences companies will need to intangible expenditure such as
significantly impact the post- provide tax authorities with a clear R&D and marketing.
tax profitability of life sciences and consistent message on what
companies, which may alter drives value across their portfolio. In order to reduce uncertainty
funds available to invest in over transfer prices, companies
essential R&D. The proposals, then, might can make better use of advanced
significantly impact the bottom line pricing agreements, which
We are starting to understand by increasing the overall effective establish an agreed pricing
how individual countries will corporate income tax rate. Or formula for a set period of time
adopt the recommendations – and minimise the prospect
especially jurisdictions that seek
to lead the pack such as the
UK, Australia and certain other
European states.
Rethinking Life Sciences 20© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Businesses should The four actions
start to model the life sciences
effect of BEPS on their companies
forecasts and future tax
profile to quantify the should consider
impact; and prioritise taking
areas for review and 1. Understand precisely how the
restructuring group is funded and what
flexibility there is to refinance to
minimise the impact and cost of
BEPS compliance.
of costly legal challenges. Life transparency demands.
sciences companies should also The three major impacts on life 2. Review the use of
embrace the move to greater sciences companies: representative offices within
transparency, as this creates better 1. Reduced availability of interest global business operations,
relationships with tax authorities deductions. BEPS Action 4 is quantify the impact that a change
and enables more dialogue on tax likely to restrict the ability to take in the definition of a permanent
planning. interest deductions even on third establishment may have and
party debt. consider restructuring to reduce
Financing in a post-BEPS the potential impact on post-tax
world is expected to undergo Advice: assess existing financing revenues.
comprehensive changes, flows to minimise the impact of
especially in those countries that these new restrictions. 3. Assess the relationship
need to make radical changes between the owners of all
to their interest deductibility 2. More subjective transfer intangibles across the business
regime to align to the OECD’s pricing rules increase likelihood of and the related business
recommendations. Groups that disputes over where profit should activities, ensuring that activities
have significant debt funding and/ be taxed. ‘Value creation’ and ‘key are commensurate to the
or use financing structures that decision making’ will determine revenues generated in the place
benefit from hybrid mismatches taxable location. of ownership.
are likely to need to undertake
substantial restructuring in order to Advice: provide tax authorities 4. Develop a system which is able
minimise the impact (and cost) of with a clear and consistent to measure the value of data
BEPS compliance. message on what drives value that is collected through business
across the portfolio of products. activities, enabling you to predict
All multinationals, regardless of the potential of a data asset to
sector, should be acting now to: 3. Increased risk of creating a become taxable and the amount
– Identify the BEPS Actions and taxable presence. Life sciences of taxable profit that would be
key countries of most relevance to companies that rely on the use generated.
the group and operating model. of representative offices or
– Understand the detail of the third parties as their in-country
proposals and how they are to be presence may be at increased
implemented on a local level. risk of creating a permanent
– Quantify the impact of BEPS on establishment in the location of
the group.
They should also be establishing
the representative office.
Advice: Review organisational
27.5%
a robust transfer pricing and structures and supply chains to
documentation system to minimise evaluate optimum approach for
their exposure to tax audit and tax purposes.
Spread in corporate
income tax rates across
OECD states
Rethinking Life Sciences 21© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Nutraceutical
update
What are the key consumer trends driving the nutritionals and
supplements industry forward in 2016? Katrina Lytton has the answers.
2015 saw consumers taking Ingredients, advice and claims: What is the future for
control of their own health what’s next? personalised nutrition?
and weight management and Naturally functional foods will Personalised nutrition is at the
recognising that health is continue to dominate, particularly heart of trends in health and
intrinsically linked to individual those that claim benefits for wellbeing. The recognition that
food and lifestyle choices. I sports performance and weight each individual has their own
see the increasing demand management – such as complex nutritional profile and responds to
for a personalised approach to carbohydrates, particularly seeds and ingredients in a different way is
wellness driving innovation in grains, and ‘healthy fats’. The use of transforming the role technology
the fields of sports nutrition, protein products, such as whey, will can play in this sector.
weight management and become more mainstream.
healthy snacking. There is a strong appetite
The trend in ‘free-from’ ingredients for consolidation amongst
The trend for 2016 continues to looks set to stay. Products that claim pharmaceutical, food and
be very much around naturally to promote digestive benefits – such technology companies, as
functional products, healthy as ‘alternative’ flours, dairy free technology plays an increasingly
snacks, ‘clean’, plant-based milks and ancient grains, as well as crucial role in the management of
products and an emphasis on prebiotic and probiotic supplements – individuals’ behaviour. The trend
healthy fats and proteins. are likely to proliferate. in digital health and prevalence
of apps and wearable devices to
‘Free from’ (particularly gluten- Sugar replaced fat and salt to track movement and diet give
free) is likely to remain a key become one of the most vilified individuals a perceived sense of
factor in product development. ingredients in 2015 – and will control over their own wellbeing by
It has contributed to the contribute to further growth of the providing them with measurable
recognition of the role of gut ‘free-from’ market and the demand facts and statistics. This in turn
health in weight management. for unrefined, natural ingredients. provides companies with the ability
There will be greater demand Products made with plant-based to analyse consumer behaviour
for ‘gut friendly’ products such superfoods and containing powerful more effectively and use this data
as fermented foods, unrefined antioxidants, such as raw cacao and to tailor products to individuals and
carbohydrates as well as matcha, will further boost claims of market them in such a way that is
prebiotic and probiotic products the medicinal properties of natural motivating and empowering.
and supplements. ingredients.
The trend for 2016
continues to be very
much around naturally
Katrina Lytton functional products
UK Nutrition Lead, KPMG
katrina.lytton@kpmg.co.uk
Rethinking Life Sciences 22© 2016 KPMG, S.A., a Spanish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Sports nutrition has gone What about opportunities among How do ‘clean label’ and ‘free-
mainstream. What does it the senior population? from’ trends drive innovation
mean for nutraceuticals? The number of adults over the age in supplements?
Sports nutrition is no longer of 60 is expected to double by 2050. Consumers increasingly want
the domain of athletes; it As incidence of chronic disease to know the provenance of
continues to move to the – notably obesity, diabetes and their food; clean labelling is
mainstream, largely driven cancer – continues to increase, a fast becoming the norm. The
by the focus on protein for shift towards prevention rather than demand for products containing
both sports performance and treatment is needed to match quality only a few, more recognisable,
weight management. Protein of health to the rise in longevity. ingredients – and without
supplements, such as whey, are additives or preservatives –
increasingly in demand. They are The current trends in personalised is likely to contribute to an
often used in combination with nutrition and technology are going increase in products that are
fruit and vegetables as part of some way to ensuring individuals natural and unprocessed.
a balanced diet and go hand in take a more proactive part in
hand with an active lifestyle. addressing their own health needs. The requirement for information
But a number of today’s chronic about both the contents
The past year has seen an conditions are lifestyle diseases. and origins of products will
increase in the appeal of protein So further changes in behaviour are necessitate greater transparency
supplements for women critical to ensuring a healthier ageing within the wellness industry on
thanks to the prevalence of the population. supplement development and
‘strong not skinny’ trend and formulation. The normalisation
growing popularity of women’s Consumers have access to increasing of dietary supplements should to
resistance training. The use of amounts of data, enabling them to lead to an increase in innovation,
supplements as part of daily make rational choices. However, as with a particular emphasis on
nutrition is likely to generate an non-rational beings, there needs to vitamins, minerals and amino
increase in innovation around be a greater understanding of how to acids found in plant compounds,
proteins that contain a wide incentivise people to make decisions reflecting the overarching trend
range of amino acids and that that will benefit them in the long for natural, clean ingredients.
target specific goals such as term. Some progress is being made.
weight loss, energy, satiety and For example, health devices can track
muscle repair. activity, make recommendations and
reward good behaviours. Published
advice emphasises the importance
of making small, sustainable lifestyle
changes that have a lasting impact.
Rethinking Life Sciences 23You can also read
