Author: Michael Dalgleish

In our latest blog, Novarum founder and BBI Group Head of Mobile, Dr Neil Polwart, discusses how best to monetise an mHealth app.

With mHealth apps forecast to generate $189 billion annual revenue to app providers by 2020, pharma companies hoping to jump on the mHealth bandwagon may soon find themselves facing an interesting question — how do I make money from the app?

Compared to time and risk factors involved in developing new pharmaceuticals, the ability to produce mobile medical apps can seem attractive. Unfortunately, that often means apps are not perceived as justifying high value in return.

The mHealth market is rich with start-up companies often either ‘bootstrapped’ on the founders’ own funds or backed by venture capital firms looking for the next ‘unicorn investment’. As is often the way with technology start-ups, the business model is unclear, or even non-existent. In the mobile market, the typical strategy is to build a user-base first and worry about how to make money later.

Traditional approaches for apps to make revenue (like selling targeted advertising or in-app purchasing) are likely to cause ethical, regulatory and brand perception issues for most pharma applications.

Of course, a well thought out mHealth strategy isn’t all about trying to get direct revenues. Where a pharmaceutical is used for treating long-term chronic disease, potential exists for helping patients and clinicians to track drug use, symptoms and even biomarkers that would help build brand loyalty in markets where users play a key part in such decision making.

Over the counter pharmaceuticals and nutraceuticals are potentially even more sensitive to brand loyalty and value issues. These manufacturers might also look to how they can engage users on a recurring long-term basis.

Simple tools like reminders and reorder levels can also have a surprising impact on financial feasibility. For instance, if your average patient forgot to take their daily medication once every month, using an app to prevent that could see a 3% revenue increase.

mHealth brings with it the promise of significant disruption. When the term was originally coined by Harvard Professor, Clayton Christensen, in his book: ‘The Innovator’s Dilemma’, Christensen suggested disruptors are a product that addresses a market that previously couldn’t be served — or it offers a simpler, cost effective or more convenient alternative to an existing product.

Pharma companies need to be alert to the potential for disruptive influences in their markets and should also be acutely aware that large organisations often find it impossible to adapt to change at the pace needed to match these. By the time you become aware of disruptive threats it is often too late. The only real option to safeguard a market position is to acquire the upstart. A more proactive approach is to disrupt your own market before anyone else gets a chance.

In healthcare one of the most significant shifts is to emphasise outcome-based medicine and it follows that payers will start to expect pharma to adopt pricing models — not based on a population wide outcome, but on the outcomes for that specific patient.

As some insurers start to use mobile to incentivise healthy behaviours with long-term benefits, pharma companies may also want to look at how to incentivise patients. Mobile may provide a key tool for tracking either individual or anonymised average patient outcomes, the pharmaceutical provider which can adapt its models to enable this surely stands to reap the benefits when the healthcare economic models get reviewed.

One of the challenges product managers face is that there is a temptation to attempt to define, devise and develop the ultimate solution to achieve the maximum value, a process which is not only expensive and slow but almost invariably wrong. In the meantime, some previously unknown company develops a niche offering for a fraction of the cost and begins eroding parts of the market.

Mobile is increasingly impacting every aspect of our lives and even if a pharma business can’t see how to make revenue directly from mobile, it may need to embrace it to stop someone else usurping its target market segment.