When it comes to the challenges of raising an up-and-coming young company into a major player in its industry, former Apple and Pepsi CEO John Sculley is no spring chicken. A serial entrepreneur and investor across numerous industries ranging from consumer technology to data management to telecommunications, Sculley has set his sights on the healthcare and currently serves as the chairman of hopeful PBM disruptor RxAdvance.
Speaking Wednesday in a one-on-one session at BIO18, he echoed the criticisms of others regarding healthcare’s slow adoption of new technologies and its general aversion to risky innovations. While a certain level of hesitation is understandable — especially when dealing in a regulated industry with human lives at stake — he highlighted the insular nature of many well-established healthcare players as a clear driver of the industry’s inflexibility.
“The culture in the healthcare industry is one that is largely parochial, in the sense that executives in one healthcare company may well have come from another healthcare company,” Sculley said during the session. “Invariably, when I’m inside of a healthcare company and meeting new people, and they’re meeting new people, they say “oh gee, I remember meeting you 10 years ago.” There’s a very strong bias in the healthcare industry to recruit from within the industry, and so the high-tech industry has not been a traditional recruiting ground.”
Dipping into the tech industry and will be key if healthcare is to move toward the platform-based business architectures being embraced by other sectors, Sculley said, a “fundamental” shift that he believes will have an economy-wide impact akin to industry’s adoption of factory automation in the 20th century.
“It’s just so much more efficient, so much more capable of what you can do, and incredibly less expensive, and so much innovation that is going on in platform technologies,” he said. “The people who have been building the most successful platform technologies have done it in non-regulated industries — you see the Facebooks, Amazon, Google, Apple, LinkedIn, and others. These are all non-regulated industries, and so a lot of talent is doing a lot of innovation. You come over to the regulated industries, particularly healthcare, and it’s amazing how little evidence there is of these platform technologies.
“My focus has been on businesses in the healthcare sector that can take advantage of a platform as a business architecture, but you’ve got to have not just the technology background. You’ve got to have the deep domain expertise in healthcare that is so complex.”
To embrace platform-based architectures, Sculley said that the healthcare and pharmaceutical industries will need to be more willing to embrace development approaches that are commonplace in faster-moving sectors.
“The way that we build things in the high-tech industry, which has been as surprise to the healthcare industry, is that it’s done by very small teams. The original Macintosh was less than 10 people, the iPhone was less than a dozen people,” he said as an example. “When you build platforms, it’s relatively few people that are involved. But you have to be able to reimagine an industry, not just say ‘How do you do the current task cheaper?’ Reimagining industry means that you cannot look as healthcare is traditionally organized, into functions. You have to look across.”
These examples weren’t the only time Sculley described his former company. Responding to an audience question about his thoughts on consumer tech companies’ recent moves toward healthcare, he said that recent events have granted Apple a better opportunity to stake its claim than it might have expected.
“Apple has been given a chance [with the Cambridge Analytica/Facebook news, GDPR, and other recent privacy concerns] to comment how they’re different, because Apple is not interested in being in, according to Tim Cook, the business or services of selling data,” he said. “They’re interested, in the case of the iPhone and [Apple Watch], in being a device and a cloud that can be a repository for all of this information. They’re working with a number of providers around the US, enabling a place that information can be archived and information can be accessed, and obviously it’s got to be able to adhere to HIPAA rules. I suspect that’ll be a successful business for Apple over time.”
The “over time” part is key for Sculley, who made it clear that consumer tech’s move into consumer-focused healthcare won’t happen overnight. Rather, much like the rollout of Apple Pay and its gradual adoption by device owners, the company will be best served with a more patient approach, he said.
Sculley speculated that despite its healthcare aspirations, Apple would be content to leave any kind of regulated healthcare market to its competition. Here, he invoked talks of Amazon (and Jeff Bezos, whom he considers “the most talented CEO in the world) using its expertise and clout to establish itself as a tech-enabled, consumer-friendly PBM.
“My sense is it’ll be quite a few years before we see Amazon going into the high complexity of the PBM-related world,” he said, “not because they don’t understand the technology or they couldn’t scale the business, but there’s so many other low-hanging fruit they could go after, such as medical supplies or mail-order prescription drugs.”
By and large, Sculley was firm in his belief that most analysts and commentators had “gotten a little bit ahead of themselves” when predicting that Amazon and others could rock the boat within the near future — especially considering that the Amazon-JP Morgan-Berkshire Hathaway partnership has yet to find its CEO. Despite this, he said, a major shakeup to the conservative healthcare industry headed by these players is inevitable.
“I would say we’re still in early days in terms of [what] Apple and other high-tech companies are going to do in these consumer-type businesses, and even some like Amazon, who when they decide to jump into something they’ll be incredibly successful at it. But it’s inevitable; these companies are going to be getting closer and closer, and eventually they’ll be mainstream in parts of healthcare,” he said.