Health Executives See Tech Firms Like Alphabet Remaking Industry

  • Lazard finds ‘transformative’ changes expected in health care
  • Investment bank surveyed 213 executives, 87 investors

Health-care executives expect counterparts at tech companies like Alphabet Inc., Google’s parent company, to transform their industry over three to five years, according to a Lazard Ltd. survey.

“We’re seeing significant pricing pressure in the industry, and the response to that pricing pressure will be innovation,” David Gluckman, co-head of Lazard’s global health care group, said by phone. “It’s not only scientific and technological innovation, but maybe even more importantly, new business models.”

More than 80 percent of respondents in the U.S. and Europe said nontraditional competitors including Apple Inc. and Fitbit Inc. will have an impact on the industry, Lazard said Monday in releasing its survey. About a quarter said the change will be “transformative” within three to five years.

Alphabet has set out to invest in health care and biotechnology ventures, while joining with companies like GlaxoSmithKline Plc, the U.K.’s biggest drugmaker, to use science to help treat diseases. Survey responders said the most transformative change will be a shift to value-based pricing, in which some money may be refunded to insurers if a drug doesn’t work as expected.

“There has been some question about whether the shift to value-based payment would continue in the U.S. after President Trump’s election,” Lazard said in the survey. “The survey suggests strongly that it will.”

Gluckman, a physician, founded and operated an outpatient medical clinic in Toronto before joining Lazard in 1998. The Bermuda-based investment bank hired Peter Orszag from Citigroup Inc. last year to boost the health care business. Lazard advised Johnson & Johnson on its $30 billion agreement in January to buy Actelion Ltd. It worked with insurer Aetna Inc. on an attempt to combine with rival Humana Inc., a deal that unraveled amid antitrust concerns.

Lazard said it surveyed 213 C-suite personnel and 87 investors globally from Sept. 9 through Dec. 20, in pharmaceuticals and biotech; medical devices, technology and diagnostics; and health services. C-suite included “CEOs, CFOs, and senior executives involved in strategic decision-making,” the investment bank said.

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