The Biopharma-Led Platform Business Model in Healthcare

December 21, 2018
Ruchin Kansal
Pharmaceutical Executive

What we can learn from an early leader?

Platform business models and ecosystems, such as those established by Amazon and Alibaba, allow transactions that transcend the limits of space and time. As more customers sign up to transact on a platform, the resulting data insights are used to create new customer experiences and expand product and service offerings-from consumer goods to financial services to insurance and more. This is why the potential for resulting disruption of incumbent business models is real. Many incumbents are responding by creating their own niche platforms.  For example, Kroger is selling chicken at Walgreens, Travelers insurance is selling smart home products on Amazon, and Reliance Jio in India is providing high speed internet at throw away prices to get customers enrolled on its network with the strategy to cross-sell and up-sell to them.

Disruption seems more distant in healthcare, as the business remains transactional and heavily regulated. Apart from CVS/Aetna, which is an example of a platform business model where the combined entity is looking to become an end-to-end healthcare service provider to its affiliated members, we haven’t seen many other examples with the exception of the Luye Group, a company that seems to have embraced the concept of a platform business model.

 

Building a world-class healthcare solutions company

The Luye Group has its roots in the biopharmaceuticals business. Its subsidiary Luye Pharmaceuticals is committed to the development, production, and sales of innovative drugs worldwide, and the company currently has more than 30 listed products. It is continuing to invest for growth in the biopharmaceutical sector-generics, traditional Chinese medicine as well as in the emerging fields of precision and regenerative medicine-with global ambitions. At the same time, it’s also investing heavily in the fields of molecular diagnostics, real-time PCR and Next-Generation Sequencing on an integrated platform and has entered into the genomics result interpretation market. Most recently, a herpes simplex virus nucleic acid amplification reagent developed by Luye was approved by the US FDA for clinical testing.

The Luye Group is also diversifying and expanding its footprint in the healthcare delivery business, either through acquisitions or close collaboration with leading healthcare organizations. In 2016, Luye completed its acquisition of Health Care Australia (HCA), the third largest network of high-end private hospitals in Australia, and in 2017, the group acquired Pulse Health, a network of hospitals specializing in mental health treatment services in Australia and Singapore. By joining forces with HCA and Pulse Health, Luye Medical Group acquired the operational expertise to build and run hospitals in the Chinese market and has built them in Yantai, Chongqing, Chengdu, and Guangzhou.

In Singapore, Luye Group is developing Oncocare Cancer Center and Novena Heart Center as integrated healthcare solutions centers that combine Luye’s biopharmaceutical products in oncology and cardiovascular therapeutic areas to serve patients with cancer and cardiovascular diseases. As they gather experience operating such integrated centers in Singapore, they will likely look to replicate the model globally.

Luye Group has announced a partnership with Ping An Bank to establish “Ping An - Luye Medical Health Industry Fund” to support Luye’s strategic objective of becoming a total healthcare solution provider. In my opinion, it’s only a matter of time before we see the announcement of a partnership between the Luye Group and Ping An’s “Good Doctor” to further scale its ambitions to become an integrated health solutions company. With more than 800 million registered users using Ping An, the platform can provide Luye Group unparalleled access to a large pool of technologically savvy, mostly young, affluent customers who are willing to experience a different kind of healthcare. Ping An’s Good Doctor may become the gateway between the digital and the physical, transitioning the consumer effortlessly between Luye’s physical infrastructure and its digital capabilities in telehealth, medical adherence, remote monitoring for chronic conditions, and smart diagnostics to state a few. Ping An’s ecosystem data offers a comprehensive view of consumers’ economic, behavioral, lifestyle, and medical condition aspects. Deep insights from this data can be powerful enough to create strategic assets, which could be replicated globally.   

 

Should the incumbents worry?

Luye Group is still experimenting with the platform business model and its success is still an unknown. It might be the case that the economics of the Luye Group might not be as appealing as the high margins of western biopharmaceutical companies primarily driven by the U.S. market. And, maybe Luye Group has a better chance of succeeding only in China, where it doesn’t face as much competition and, therefore, has an opportunity to innovate its business model more broadly. What I find intriguing is that Luye group has established R&D facilities in New Jersey and Boston and that 60% of the group’s workforce is present outside of China. Whatever the long-term strategy is, Luye is set to make an impact in Southeast Asia, one of the largest markets for healthcare, and it will be interesting to watch as it evolves its platform for future growth opportunities beyond the Chinese market.

Closer to home, the appointment of Dr. David Feinberg to lead Google Health could result in Google Health becoming an integrated healthcare solutions company. I learned in a recent conversation I had with Dr. Feinberg that he’s a proponent of strategic partnerships to create ecosystems of care. By bringing Calico, Verily, DeepMind, and other fragmented healthcare initiatives to Google, the new healthcare company now has the assets it needs to execute upon an integrated health solutions company-from drug R&D to technology-enabled medicine to advanced clinical decision support technologies. Will Google Health take away from the share of current incumbents? Absolutely.

Healthcare organizations need to study platform business models more deeply for relevance and impact to their own respective businesses. If they don’t know how to approach that investigation, they need to partner with someone who can guide them toward a strategy for long-term success. 

 

Ruchin Kansal is Digital Business Strategy leader for Healthcare, Insurance, and Life Sciences (HIL) at Virtusa.  Virtusa’s Avik Roy, Rajbeer Kaur, Hanying Liu and Yiqun Zhang also contributed to this article.