When you hear about the likes of “Apple”, “Amazon”, “Facebook”, “Google” and Microsoft”, healthcare is not typically the first thing that springs to mind.  However, in recent years these tech giants have been emerging in the healthcare sector.  What triggered this diversity in their market strategy? How might this affect existing and future healthcare and pharmaceutical companies?

Why and how are tech giants entering the healthcare scene?

Tech giants have the resources required and expanding their product portfolio maintains their growth and pleases their shareholders.  It is challenging for companies that have an annual revenue exceeding $100 billion to find new sectors that can provide meaningful growth.  The healthcare sector, which accounts for over 10% of the world’s GDP, certainly provides an attractive opportunity for growth and increased revenue in this sector.  Furthermore, these companies excel when it comes to big data and modern healthcare is increasingly data-centric, creating opportunities for these tech giants to innovate in the provision of healthcare and development of medicines.

There has been a mixture of commercial business strategies that tech giants have been implementing, such as collaborations, purchases and launching new brands and enterprises.  For example, in 2018 a joint venture between Microsoft and biotech company Adaptive Biotechnologies, utilised artificial intelligence to map the interactions between the immune system and multiple diseases leading to their detection from a single blood test.  2018 also saw Amazon acquire PillPack, a full-service online pharmacy that packages medication and delivers to the consumer every month.  Google has launched two life sciences companies, Calico and Verily, both of which use technology to assist with drug discovery and the development of health platforms.

As shown by the examples above, “healthcare” is a broad term and the tech giants have been influencing various aspects of it.  This includes the drug discovery avenue, which is typically the most thought-of area of the pharmaceutical sector within healthcare, but it has certainly not been limited to this avenue.  Some tech companies have entered the healthcare market by transforming delivery.  Perhaps unsurprisingly, given that they are primed for this aspect of healthcare as they can deliver choice and easy access and obviously companies like Amazon have vast experience in goods delivery.  Apple has created apps called Health and HealthKit for a variety of platforms.  The purpose of these apps is to help improve general patient care by enabling hospitals to work more efficiently and to allow patients to remotely connect with their clinicians from home.

So where does this leave the traditional healthcare companies?

The biggest threat looks to be for high street pharmacies rather than pharmaceutical companies developing new therapies.  This is probably due to the fact that the primary focus of pharmacies is on the delivery of medications, rather than innovation, so it is easier for tech companies to encroach on the space without as much health-related scientific knowledge.  PillPack is one example of this threat.  However, the healthcare sector is embracing the challenge from the tech giants and upping their own game plan too, such as the UK’s Well Pharmacy, which has released an app that delivers NHS prescriptions to its customers.

With the evolution of artificial intelligence and machine learning, which is showing great promise to utilise big data to help improve a whole manner of health-related issues and processes, it seems obvious that technology has a lot to offer the healthcare industry.  However, a healthcare company also requires scientific and medical knowledge in order to develop therapies suitable for treating people, which technology does not have covered by itself.  Therefore, many hold the view that traditional healthcare companies will not be squeezed out of the sector by big tech companies.

Nevertheless, undeniably technology can provide improvements to healthcare companies by increasing efficiency and the pace of innovation and development whilst reducing the associated costs.  Thus, collaborations between healthcare and tech companies could be the best way forward.  Various pharmaceutical companies have begun to do that and take advantage of what technology has to offer.  For example, Pfizer collaborate with IBM to use their computer, Watson, to remain up-to-date with the latest literature and detect potential research that may bring about novel therapies.

Considering the IP issues surrounding collaborations, it is prudent to have non-disclosure agreements in place before beginning initial discussions with a potential collaborator.  Collaborators should ensure that any IP rights that may arise are considered prior to work being carried out and details of who will be entitled to own and/or use the innovation should be put into a contract beforehand.  Commercial considerations regarding the financial agreements should also be carefully considered.  For example, one option is to agree on a higher initial payment but with little or no royalty payments going forward.  Alternatively, another option is to receive a small initial payment in return for larger royalties, which can ensure a collaborator receives continued income which is aligned with the commercial success of the innovation.

Technology has greatly advanced other sectors, such as grocery delivery services, voice assistants and autonomous vehicles, and now it looks promising to further advance the healthcare industry, which has been typically a slow-moving field to progress due to the challenges of developing new therapies and the natural caution with people’s health.

If you would like to discuss IP collaborations or other aspects of your intellectual property strategy, please get in touch with Esmé Swindells via Esme.Swindells@gje.com.