About 14 years ago, John Sculley realized that something had to change — in him. Actually, the roots of this epiphany went even farther back in time, to 1983, just three months after Sculley was named CEO of Apple. He remembers it well, because after all, he was sitting in the MacIntosh engineering lab with Bill Gates and Steve Jobs.
Gates was talking about how he felt the industry was all about software. Jobs, on the other hand, explained how he wanted to focus more on creating a computer so easy to use that nontechnical people could use it. In doing so, he felt the everyday person would be empowered to do amazingly creative things. “They were the two visionaries talking about how they were going to change the world one person at a time, and they referred to their efforts as a ‘noble cause,’” Sculley recalls.
That encounter stuck with him long after leaving Apple (1993) to become an entrepreneur and investor in high-tech startups. “Around 2005, I thought to myself, ‘If I’m going to reinvent myself, I have to find my noble cause, something that needs the kinds of experiences I’ve had, where you have to start from scratch, build things from the ground up, and develop solutions that are all about the customer and not about the incumbent institutions.’”
For Sculley, that noble cause turned out to be healthcare. And though he admits to not knowing a whole lot about the field when he first got started, being a curious hard worker who likes to learn, he believed he could figure it out.
What follows are excerpts from a one-on-one conversation I had with Sculley following his keynote address at the 2019 CNS Summit. Of course, there was some talk about Steve Jobs (see sidebar), but mostly we discussed the future — where he sees opportunities in healthcare, and which leaders he views as visionary.
OPPORTUNITIES ABOUND IN HEALTHCARE
According to Sculley, 40 percent of hospital beds are currently being eliminated, yet 20 percent of the U.S. population is at an age where they will increasingly need more care (i.e., youngest baby boomers turn 56 in 2020). This means that the people who would go to hospitals are increasingly going to be treated in their own homes. And while preventive care and wellness are really big growth areas for healthcare, as 75 percent of healthcare system costs involve chronic care patients, figuring out how to best care for those patients (in the home) is not only necessary to making the U.S. healthcare system sustainable, but it’s also a significant market opportunity. Companies developing technologies that can facilitate in-home chronic care at low cost hold the potential to be real winners. For example, imagine being able to use Alexa or one of the other voice-activated assistants already on the market to monitor patients in the home. “Ambient sensors that are able to measure breathing, heart rate, motion, sound, temperature, and various other attributes in a patient’s home will be able to collect data that can be sent to offsite care managers 24/7 to monitor, manage, and intervene if and when necessary.”
The most expensive patients have eight or nine chronic care diseases, defining them as high comorbidity patients. And as they have diseases involving multiple body systems, most are getting their prescription drugs from many types of specialists. But not every specialist knows what the other specialists are prescribing. And as nearly every medication has unintended side effects, there’s no way to measure avoidable versus unavoidable drug events. As a result, these patients often go back to their physicians to get other products to deal with the various side effects. “Then, you have the other problem of people not taking the prescription drugs that they’ve paid for.” In other words, companies working to figure out better ways to track prescription medication adherence and drug-to-drug interactions in certain patient types have a significant opportunity.
Sculley talked a lot about how the retail industry is evolving to offer healthcare services. Much of this evolution is due to the fact that fewer people are going to brick-and-mortar locations to shop, and consequently, many large retailers have more space than they need. For example, Walmart estimates needing about half of its current retail space to handle its walk-in traffic. Considering they often negotiate long leases for some of their larger stores, what, then, do they do with that excess space? “In Georgia, they have begun testing the viability of in-store health clinics,” says Sculley. And, as the Walmart shopper tends to be lower-income, the company is giving those loyal shoppers an alternative to health insurance (i.e., physicals, annual dental checkups, eye exams), as well as prevention (e.g., fitness, exercise, Pilates, yoga), at incredibly low prices, often less than the copay to get these same products or services via traditional health insurance.
With the slow transition to more in-home patient care, the concept of doctors making house calls has received increased attention, especially with the advent of telemedicine. Best Buy, another retailer with a larger-than-necessary retail footprint, may soon be addressing this issue. “The company already has a trusted organization that goes out and visits people in their homes to help with product installation (i.e., The Geek Squad), and has announced plans to expand into healthcare services in the home (e.g., a health squad).” Not only does the company’s new five-year strategy indicate a move from selling devices to adding analytics and services to help seniors age in place, but the company has also been acquiring companies with technologies (e.g., remote monitoring) that will enable them to successfully execute. “Walgreens is another retailer working on something similar, though they intend to outsource the operation of these in-store health hubs to strategic partners such as the United Healthcare Group,” Sculley explains. In other words, retailers are finding ways to reinvent themselves, and as a result, traditional healthcare companies are seeing competition from nontraditional sources.
The ability to deliver virtual primary care is the next era of telehealth, and Sculley believes it will be far more inclusive and go well beyond low-acuity care. “It can embrace all types of special needs that people have with a primary care physician or nurse practitioner, and will be able to be delivered via a mixed model (i.e., virtual and in-person). And those sitting inside the traditional payer/provider ecosystem aren’t necessarily looking at these opportunities the same way as an outsider.” The outsider sees the game is changing and is trying to figure out how to be in this new game, while incumbents are content not to rock the boat. But here’s the problem: The outsiders with which healthcare incumbents are competing aren’t all bootstrapped entrepreneurs, but well-funded big tech. For example, Apple’s desire to enter healthcare is evidenced by the evolution of its Apple Watch. No longer is it just a device that connects with your iPhone or a fitness tracker; it is becoming a fully enabled preventive-care technology. “But Apple, unlike Facebook and Google, doesn’t want to see or touch the data, which is why they have put together an ecosystem involving about 50 of the largest and most respected health providers to work with,” Sculley says.
Google is another big entrant into healthcare, and one that Sculley says is clearly ahead of everyone else in terms of AI and machine learning (ML). However, they are focused on artificial general intelligence (AGI). “Through its acquisition of DeepMind five years ago in the U.K., the company is figuring out how to use its data science knowledge to give people a source of information they can’t get any other way, and then help map out the necessary support services.”
Amazon, which has an amazing track record of reinventing industries, is entering healthcare, too, as evidenced by its acquisition of PillPack (an online pharmacy) and Health Navigator (a provider of technology and services to digital health companies). The company is also piloting Amazon Care (a benefit for Amazon employees and their families) in Seattle. “My sense is that everybody’s getting into the game of reinventing healthcare,” says Sculley. But what’s really interesting is that politicians think that they are going to be making the important decisions on the future of healthcare. In reality, though, the future of healthcare will be far less about policy and far more about private sector innovation being able to eliminate hundreds of billions of dollars of increasing costs of the inefficient U.S. healthcare system.”
SOME OF THE NEXT HEALTHCARE VISIONARIES (AND THEIR COMPANIES)
Since pursuing the healthcare industry 14 years ago, Sculley notes having come across a number of amazingly talented people. “They are just as big risk takers and visionaries as those I used to work with in high-tech,” he concedes. But, unlike those in tech who have become household names (e.g., Gates, Jobs, Musk, Page), many life science visionaries aren’t nearly as well-known. Sculley hopes this will soon change.
One of the first healthcare companies he got involved with was Rally Health, which was founded by Brown University dropout, Grant Verstandig. Though just 22 years old when the two first met, Sculley could see that Verstandig was a confident, clear thinker with the charisma necessary to recruit top talent, much like Steve Jobs. “He had a series of knee operations from college lacrosse injuries, which enlightened him on how broken the U.S. healthcare system was,” Sculley shares. Verstandig saw an opportunity to develop a consumer-oriented preventive care and wellness business using a large-scale platform, and Sculley joined as a founding board member and investor in 2010. UnitedHealth Group (UHG) acquired a majority stake in 2014, and as part of the transaction, Optum, UHG’s division for healthcare services, transferred 10 million preventive care lives and another 10 million wellness lives. “They had been losing money on these patients, while Verstandig’s platform would enable them to make money.” How? By building an online gaming experience that enabled Rally to build detailed individual profiles. “From this, we learned that women in their late 30s through their 50s are actually the largest online gaming consumers, and so we worked to develop an experience they’d want to engage in, complete with recognition and monetary rewards around things like nutrition, losing weight, and exercise.” As for Verstandig, he is now employed as UHG’s chief digital officer — well before his 30th birthday.
Sculley first met the founder of RxAdvance, Ravi Ika, in 2013. Unlike Verstandig, Ika had already built a company (i.e., IkaSystems), and had been very successful. “The McKinsey Global Institute (MGI) estimates there is about $900 billion of fraud, waste, abuse, misuse, and avoidable costs in the current PBM system, and this is what Ika had his eye on fixing,” he shares. But this is no small task, as there is a lot of money moving back and forth among various stakeholders, and that whole process is very opaque. “No one is quite sure who is getting what,” Sculley states. Ika believed that platform automation technology, which has changed nearly every other industry, could be a real game-changer for healthcare, too. Remember all those chronic-care patients mentioned earlier who will increasingly be managed in their home? This is where RxAdvance intends to make a dent. How? “One of the largest PBMs probably has between 30,000 to 40,000 employees.” But a platform automation company can do the same work with about 90 percent fewer employees. “When you spread that out across all PBMs, we’re talking about taking hundreds of billions of dollars out of the system.”
But Sculley isn’t just focused on the payer side of healthcare. “I’m also involved with a company called Zedsen, which has a primary mission of doing noninvasive blood glucose monitoring,” Sculley notes. And while the company has been working to use that to create digital watches, smartphones, and various other devices, they discovered that the technology might have other beneficial properties. “Because the technology can look through tissue layers noninvasively, it can detect melanoma without a biopsy, or a tumor in a breast long before it could be discovered with mammography.” But research revealed digital signatures for other blood constituents, meaning that it can look at electrolytes, potassium, sodium, hemoglobin, HDL, LDL, A1C — you get the idea. Sculley believes we are in the early stages of the era of sensors, and soon, the whole planet will not only be covered with sensors, but they will also become interconnected, and therein resides their real power.
On the biopharma front, Sculley is involved with Kaleido Biosciences, a company looking at the human microbiome as an organ, as well as Celularity, a cell therapeutics company delivering transformative allogeneic cellular therapies engineered from the postpartum human placenta. You might recall Life Science Leader featured Celularity’s founder, Robert (Bob) Hariri, M.D., Ph.D., in our August 2019 issue. “When I first met Bob,” begins Sculley, “l thought, I’ve been around people like this before (i.e., Steve Jobs), and there aren’t many of them.” Sculley, who serves as vice chair on Celularity’s board, proceeds to describe Hariri as a polymath, highlighting his background as a pilot who can fly virtually any kind of plane and an electrical engineer with a Ph.D., who also just happens to be a medical doctor. “He’s a life science technology inventor and an entrepreneur, does all of these things well, and people like working for him, too; and yet he’s not well-known, not even in the life sciences industry,” he exclaims. And when you’ve worked closely with visionary people like Jobs, Hariri, and the few others in various fields, Sculley says it isn’t that difficult to see how different they are from the rest of us. “They have this ability to see things in a different way, are able to simplify what they see so the rest of us can understand, and are able to recruit the talent to actually do something with what it is they see,” he contends. While it remains to be seen if Sculley will be successful in his pursuit of a second noble cause, the executive seems to have aligned himself with people who are more than capable of achieving theirs.
WHAT WAS IT LIKE TO WORK WITH STEVE JOBS?
“Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?” That was, famously, the line a young Steve Jobs used to lure John Sculley, then president of Pepsi, to Apple in 1982. “He had a gift for finding the words to explain things in a simple way that was incredibly helpful,” Sculley says of Jobs. For example, he referred to enabling people to do incredible things on a computer as “building a bicycle for the mind.” When he introduced the iPod, Jobs didn’t try to explain how it worked or talk about the next generation of miniaturized disk drives that made it possible. “He said, ‘How would you like to have a thousand songs in your pocket?’” says Sculley with a smile.
Back when the two worked together, it was seven days a week, and rarely inside an office. “We were always walking around the Stanford University campus, Silicon Valley, or up in the skyline above Silicon Valley, and various other places,” he remembers. And whenever they traveled, they always shared a room together. “One of the things I learned from Steve was something he called zooming,” Sculley recalls. Zoom out, connect the dots, zoom in and simplify. Connecting the dots means looking beyond the boundaries of the industry as it is understood by everybody else, and looking at the other industries that may be touching, converging, or having the potential to be radically disrupted. Jobs was amazingly good at that, as demonstrated by Apple’s evolution from a computer company to a consumer products company, disrupting multiple industries along the way (e.g., cellular/telephones, computers, music). “His genius was taking the same set of facts that everyone else had and being able to see the world in a completely different way.”
Jobs also was naturally charismatic. And one of the great benefits of such charisma, in addition to making him a powerful presenter, was how it helped him with recruiting. “People don’t always realize how much talent Steve was able to bring together,” Sculley continues. “He recruited me to help him learn about consumer marketing and how to build big brands, and as we all know, he ended up being better than the teacher.” But anyone doing serious innovation understands that being able to achieve a vision requires being able to recruit and retain top talent. And while genius includes being able to see the future 20 years before anyone else (something Jobs was great at), Sculley says it doesn’t take a genius to see how radically different healthcare is going to be by 2030. “It’s not a question of is it going to happen, but how, when, and who is going to make it happen.”