Pharma and the Direct-to-Patient Superbloom

A 'Me Too' Selfie or Dynamo for Big System Change?

A superbloom is a rare desert botanical phenomenon in which an unusually high proportion of wildflowers whose seeds have lain dormant germinate and blossom at roughly the same time. It’s one of the best known rites of spring in California: extraordinary displays of poppies coat the hillsides in an abundance of color. Some years the blooms are massive enough to draw tourists from around the world to revel in the fields, such as in 2019 when more than 100,000 people showed up on a weekend to gawk at the poppies in Lake Elsinore, a small city about an hour outside Los Angeles.

“It’s better than going to Disneyland,” said Randy Solis, a patrol officer with the Riverside County Habitat Conservation Agency, who was was stationed at a trailhead in the Temescal Mountains that year, where the hills were carpeted in Day-Glo orange poppies. But with all the crowds, the flowers pay the price. Blooms get trampled by the Instagram-hungry.

Covering the spectacle that year for The New York Times was freelance journalist Zak Stone (Under the Influence of a ‘Super Bloom’)

“We’ve never had 50,000 or 100,000 in this city all at one time,” Steve Manos, the mayor of Lake Elsinore, added. “The city’s not advertising this. It’s not an event, and for those reasons it’s really hard to plan for anything like that.”

Perhaps no one had a better plan than Jaci Marie Smith, a 24-year-old influencer from Los Angeles with more than 400,000 Instagram followers. In a post from March 1, she is shown nestled amid poppy blossoms in an all-orange outfit of overalls and a henley, with a wide-brimmed hat atop her head. A single orange poppy pokes out of her mouth. Some 60,000 people liked that post, and on March 5, she posted more poppy content — this time, of her holding a bouquet of the flowers — as a vehicle to promote a brand of press-on nails (“$7.99 at Ulta, CVS, Walgreens, Walmart, Rite Aid, or impressmanicure.com!”).

“You’ll never influence the world by trying to be like it,” read Ms. Smith’s first poppy photo caption.

And yet, as more people posed for poppy pictures, and international news outlets picked up the story, influence the world they did. Within three weeks, so many people were influenced to come pose in the flowery hills that the city had to figure out how to intervene. After a Lake Elsinore official was hit by a car, and a visitor was bitten by a rattlesnake, the city shut down access to Walker Canyon, the main trailhead, from the nearest roads and set up a $5 shuttle service to bring visitors from the local outlet malls.

But the hordes found other places to park and walk in, and the city lacked the manpower to enforce the closure.”

One way to think about the history of mankind is as a journey of empowerment, marked at certain points along the way by “creative destruction” of the prevailing organizing pattern, the synergic combination of a particular technological advance plus an new social (i.e., political and human) adaptation that together eliminate a debilitating constraint. Strategically, you have to step off into the corner to give yourself different perspective, to see and then ask “first order questions” (i.e., system level) and bring “non-rival ideas” together, to find unique combinations that “were not jointly present prior”, to quote from the Nobel committee’s statement this week in awarding its prize to three economists.

The term-of-art for organizing the pieces in the right frame is value alignment. The result is a leap to a new isoquant of productivity. When value alignment fails, we may inadvertently imbue economic systems with objectives that counter to ‘a common good’ — like a superbloom of wild flowers trampled by hordes of dopamine-seeking social media stars; like a healthcare system whose economics and market strategies are organized around servicing sick care (versus producing health and public value); like a $5 trillion investment in artificial intelligence infrastructure distorted by positioning the technology-led vision as a moral force, one that assumes away the role and value of human beings.

In the network economy, ever-less energy and expense is need to complete a single transaction — say taking and then posting a selfie to your 400,000 followers on Instagram, or setting up a direct-to-patient sales programs in as little as three weeks, as BlinkRx promotes — but ever-more effort is needed to agree on what pattern that transaction should follow.

And how long to sustain it.

Marching Backwards?

The vast majority of drugmakers are either considering or have already established direct-to-patient (DTP) programs, according to market research from ixlayer conducted in partnership with Digital Health Coalition, revealing that 94% of pharma leaders — essentially all — are running, planning, or assessing this new form of direct-to-consumer programs. “The survey results underline the model’s increased popularity within the industry, yet 82% of surveyed leaders claim the traditional health care experience reduced the effectiveness of their DTC spending, resulting in an increased need for marketing strategies moving beyond awareness to action.”

“This survey found that half of pharma leaders believe DTP will be standard practice within five years. That’s not a far-off future that’s tomorrow. The companies that adapt their playbooks now will be the ones shaping the patient experience, building loyalty, and accelerating time to treatment,” said Debra Harris, head of marketing at ixlayer.

It’s the “playbook” thing that needs some unpacking, because the Big Miss here is misreading an opportunity space like this, squandering the chance to establish a whole new framework for competition (and deal-making with governments) by thinking of DTP as simply another kind of ‘brand.com’, the ubiquitous and nearly identical pharma brand sites (whether HCP- or patient-facing) with low engagement and high bounce rates.

In physics, the center-of-gravity (COG) represents the point at which the forces of gravity could be said to converge within object, where its weight was balanced in all directions. If struck there it would lose balance and fall. The nation’s war colleges teach ‘center-of-gravity’ as part of the curriculum in strategic thinking, based on the idea that the center-of-gravity represents the source of an opponent’s power and strength and was therefore “the point against which all our energies should be directed.”

Center-of-gravity matters to pharmaceutical brand teams because ‘market access innovation’ in the pharmaceutical industry is a three-body problem whose solution starts with a different objective: how to position a new narrative layer — a different narrative center-of-gravity — that aligns the business, growth and innovation agendas of payers and providers. That value alignment is not about drug alone, which leads you back to the past. It’s about drug positioned within the context of everything else, which leads you to a different future (for more Blue Spoon insight, see Whatever Happened to Eisai’s “Dementia Ecosystem”?).

The ability to quickly assemble new ‘care and service infrastructures’ — to invent your own channel — is the ability to change the practice of medicine and dislodge embedded economic systems, to degrade or displace control points like ExpressScripts or Epic or UnitedHealthcare whose staying power comes from processing the economics of healthcare. For the pharmaceutical industry, this is about approaching commercial strategy through the lens of infrastructure-as-a-service, as the means to create gravitational pull into a new orbit, to invent leverage, to define the rules by which others have to play.

And maybe in the process prevent the strategic collapse of OpenAI.

If You Build It, Assume They Won’t Come

OpenAI suddenly looks like Atlas, holding up the whole AI sector (and, potentially, the U.S. economy) with vague IOUs about the future, writes Bryan McMahon in The American Prospect this morning (The AI Ouroboros). OpenAI is using a “if we build it, they will come” approach to future AI demand, he says. But just as we saw with the latest round of circular funding agreements, there are gaping holes in the future OpenAI promises that spell trouble ahead.

A growing feature of this ouroboros AI economy is the involvement of public markets. The sums needed to train and run AI models are forcing OpenAI to turn to the deeper pools of liquidity in the stock market, as the recent deal between OpenAI and AMD underscores.

After the Oracle and AMD deals were announced, Goldman Sachs analyzed OpenAI’s finances. If you exclude its massive capital commitments, OpenAI’s operating expenses are projected to be $26 billion in 2026. Internal revenue will cover 47 percent of the cost, while vendor financing and external capital will cover 27 percent and 25 percent, respectively. However, once you include its capital commitments totaling $114 billion, the balance sheet becomes dangerously unbalanced. Internal revenue and vendor financing account for only 17 percent of operating costs, while external funding swells to 75 percent. And the cash crunch is set to get worse, as OpenAI predicts it losses to grow from $9 billion this year to $47 billion by 2028. OpenAI simply doesn’t have the money to meet its commitments.

There are other holes beyond OpenAI’s questionable financing math. Bain & Company releasedits annual technology report in September, estimating that the AI industry needs $2 trillion in annual revenue to complete the projected data center buildout by 2030. However, even factoring in cost savings from AI, Bain expects the industry will be $800 billion short, a 40 percent funding gap. It’s not easy to come up with an extra $800 billion, even for the money-printing Magnificent 7.

In addition, even if that revenue gap is filled, the biggest bottleneck may be in delivering the electricity to power the data center buildout. According to a recent analysis by Morgan Stanley, data centers in the U.S. are projected to guzzle 57 GW of power between 2025 and 2028—equivalent to more than five New York Cities. But the power industry grows slowly, even in periods of intense demand. Between now and 2028, the power industry will deliver only 21 GW of electricity to data centers, a 36 GW shortfall of projected demand. In other words, less than half of the power needed will be available. The $800 billion shortfall starts to look like an underestimate given these constraints.

Simply put, the numbers don’t add up, and the tech industry is using circular flows that pull in billions from the stock market to try to patch the growing gaps

Pharma’s Magic Quadrant

Pure “strategy” never leads to a conclusion. And this is the way it should be: continuation is the goal of strategy, not culmination. “Value” is a flow, not an end state.

The binding constraint on economic growth isn’t cognitive ability or insufficient intelligence (“We’re all smart, Jeremy” says CIA director Leon Panetta, played masterfully by James Gandolfini in Zero Dark Thirty). People today collectively have more cognitive ability than at any prior point in human history.

The binding constraint has to do with how all that intelligence interacts with the material world, in bringing these “non-rival ideas” together. You can’t cyber your way across a river, you can’t automate the ability to change bedpans and insert IVs. What the big technology visionaries miss or misunderstand is this: our understanding of the role of intelligence and the nature of big system innovation has been distorted by positioning the software paradigm as the dominant one that will characterize the AI age.

Economic growth depends on the ability to build real objects in the real world.

The best ecosystems are products of ‘differential connectedness’ -- whoever does the better job combining market sets into new economic systems will emerge the sustainable winner. Strategic atrophy is a thing. In both the short and long term, our ability to solve social and economic problems — to get big things done — will be limited primarily to our lack of imagination in seizing opportunities, rather than trying to optimize solutions.

“You’ll never influence the world by trying to be like it,” read Ms. Smith’s first poppy photo caption.

/ jgs

John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy at a system level. Blue Spoon specializes in constructing new industry narratives.