For life sciences startups, UPMC's model shows that an integrated payer-provider views expensive therapies not just as a line-item cost but as a potential long-term saving. They calculate value based on reducing other system costs like hospital stays, supplemental drugs, or future procedures.
Related Insights
Rather than waiting for late-stage development, biotech startups should integrate commercial planning into early trials. This means building in data collection for payers, pricing, and patient access from the start. This "think with the end in mind" approach ensures the company has the right data for pivotal trials and market access.
While fee-for-service models incentivize in-clinic treatments, value-based care shifts the focus to outcomes and overall cost. Under these new models, home dialysis—which offers better patient outcomes and lower societal costs—becomes more profitable for providers, creating a powerful financial incentive to drive adoption.
Don't wait until Phase 3 to think about commercialization. Biotech firms must embed secondary endpoints in Phase 2 trials that capture quality of life and patient journey insights. This data is critical for building a compelling value proposition that resonates with payers and secures market access.
The future business model for health tech will shift from subscriptions (SaaS) to outcomes. Vendors will be paid based on the tangible results they generate, such as cost savings or improved patient health, aligning incentives.
A $2,000 preventative injection like a PCSK9 inhibitor sounds expensive. However, its cost is likely justified when calculated against the massive societal and individual expense of future medical bills, plus the economic value of additional healthy, productive years.
True innovation in getting drugs to patients is not about pharma creating pricing models alone. It requires a multi-stakeholder partnership where payers, physicians, and manufacturers work together to solve problems for specific patient subgroups. This collaborative effort, not a unilateral one, is what truly saves lives and reduces costs.
Biotech leaders must stop viewing commercialization as a post-approval task. The critical window is Phase 2 clinical trials. By embedding patient journey and quality of life insights into secondary endpoints, companies can build a compelling value proposition for payers and physicians. Waiting until Phase 3 is too late.
A traditional IT investment ROI model misses the true value of AI in pharma. A proper methodology must account for operational efficiencies (e.g., time saved in clinical trials, where each day costs millions) and intangible benefits like improved data quality, competitive advantage, and institutional learning.
Instead of only funding internal innovations, UPMC Enterprises actively sources best-in-class technologies globally and uses its integrated health system to pilot and validate them. This accelerates adoption of cutting-edge solutions and provides a unique value proposition beyond just capital.
Unlike labor-dependent services that get more expensive, prescription drugs offer a unique societal ROI because they eventually go generic and become cheaper. This deflationary aspect is a powerful, underappreciated argument for investing in drug development, as successful medicines provide compounding value to society over time.
