Greatest Wonders of the World 2.0: The New Library of Alexandria – Japan’s Largest Database of Medical Data | H.E.R.O. Issue 16, 28 December 2020
Open to scholars from all cultures, the Library of Alexandria, one of the Seven Wonders of the Ancient World, epitomized the zenith of learning and knowledge for over six centuries. Built by the Ptolemaic kings of Egypt, successors of Alexander the Great, they had a staggering ambition: to house all of the books ever written under one roof. To this day, it symbolizes the noblest aspirations of the human mind and the greatest achievements of the intellect. The amazing community of scholar at the Library mapped the heavens, organized the calendar and universal knowledge, established the foundations of science, launched a new era for medicine, pushed the boundaries of knowledge, opened up the cultures of the world, and established a true dialogue of civilizations. While the Library completely disappeared over sixteen hundred years ago, it continues to inspire scientists and scholars everywhere.
The Library lived on in Japan's largest database of medical data owned by the #1 pioneering leader in the collection and utilization of medical big data generated from actual medical treatments in DPC (diagnosis procedure combination), which enables the analytics of patient characteristics, disease conditions, and the procedures, surgeries, and prescriptions physicians handle daily. This innovator has a leading market share of 45% in the DPC benchmark analysis software system which is installed at half of all DPC hospitals which make up more than half of all hospital beds in Japan. The innovator holds medical data on 34.1 million people, or over one out of every four Japanese people, the largest among private companies. The medical data, with permission or consent from hospitals and individuals and permission for secondary use, is used by numerous domestic and overseas pharmaceutical companies and research institutions for marketing and research on adverse effects of medicine. Analyzing these data can elucidate drug prescription, disease severity, etc, at DPC hospitals.
The company is also making inroads into connecting to core systems to collect patient medical records and vital signs (such as pulse and heart rate, respiratory rate, and blood pressure). It aims to build systems for collecting and utilizing medical data from various sources (such as electronic medical records). Like the Library of Alexandria in positively impacting the ancient world, this innovator will play an important and indispensable role in the digital transformation (DX) of the healthcare industry in the future.
This week, we highlight one of our portfolio companies, Japan's Largest Database of Medical Data, which is up +4.7% during the week (21 to 25 Dec 2020). It had earlier reported on 9 Nov 2020 a strong set of 3Q2020 results, in which sales climbed 14% yoy, operating profit rose 60.7% yoy with EBIT margin improving from 19.7% to 27.7% (9M2020 sales +14.4% yoy, operating profit +69.6% yoy), with strong profitability in GP/TA (Gross Profit/Total Asset) of 78% and ROE (= EBIT/Equity) of 27.3% and a strong balance sheet with net cash as % of total asset at 59%, supported by its unique resilient business model with stable recurring monthly subscription revenue. This rising dividend-yielding profitable and cashflow generative innovator has also compounded +1,157% in capital gains in the recent five years vs MSCI ACWI World index +60.5%.
DPC is a uniquely Japanese government-driven comprehensive evaluation system of medical fee reimbursements for acute inpatient medical care with around 1,600 categories. The system categorizes patients according to Japan-specific diagnosis groups, such as by disease, whether surgery is necessary, etc. The system sets medical fees accordingly for each hospital day (although fee-for-service rates apply for certain types of medical care, including surgery and rehabilitation.) DPC data refers to data DPC hospitals provide to the Ministry of Health, Labour and Welfare regularly to obtain medical fee reimbursements. The company's software utilizes these data to allow hospitals to conduct a comparative analysis of their medical care and management status versus their peers. The DPC system has resulted in a wealth of medical information being submitted in standardized formats, enabling various types of analysis. DPC data in particular facilitates deep analysis because it is based on diagnosis group categories (and given the data structures and diagnosis group category definitions). DPC data obtained under license for secondary use adds value for pharmaceutical companies.
The H.E.R.O.'s Journey with Purpose Quotient (PQ) started when Mr. I, who has an IT background, founded the firm in 2003, after coming to the conclusion that Japan’s medical institutions are well behind the information sharing curve. The company was established in 2003, the same year the DPC system was introduced, and has grown as the system expands. His aim is to improve the quality of medical care by analyzing and sharing the medical results using clinical data, epidemiological studies, market research, and drug development. In order to access sensitive medical data in hospitals, the company provides hospitals with data management tools that allow hospitals to become more efficient and profitable. The company's software displays the disease treatment data and financial performance of hospitals. This improves the quality of services.
The company is a pioneer in the field of medical data utilization, which it entered in 2008. Since then, it has developed knowledge on how those in the medical care industry can apply its collected data and cultivated analysts with expertise both in medical care and data utilization and cleansing (improving data quality). In these ways, MDV has accumulated advanced knowledge on the utilization of medical data. This advanced knowledge and the utilization of its medical data represent high barriers to entry.
In the past, pharmaceutical companies used drug manufacturers’ and wholesalers’ shipment data. Yet this data was not enough to understand patient or end-user drug usage in hospitals (key information for pharmaceutical companies’ marketing activities). In contrast, DPC data that this innovator collects allows for clear insight into end-user drug usage, so numerous domestic and overseas pharmaceutical companies and research institutions use the company’s medical data and data analysis.
Thus, the company has two business segments:
(1) In the Data Network Service segment [(I) DPC software, (II) Management support software system that analyzes hospitals’ management status, and (III) System for hospitals that includes functions for patients], it provides management support systems to medical institutions, which gives it access to the medical data from those institutions. It also gathers health information (such as symptoms) of patients, with their consent.
(2) In the Data Use and Application Service segment, it provides analyzer online tool, customized reports tailored to pharmaceutical companies’ specific needs, and data sets that pharmaceutical company managers can analyze themselves. The company receives permission from medical institutions to provide the data it has collected as secondary data to pharmaceutical companies and insurance companies. In 2015, the company began providing services in the OTC/health & beauty care categories. In 2016, it extended its offerings into the insurance sector.
Although the company already has an extensive clinical database, it launched a new system for hospitals that includes functions for patients in October 2016 to collect more diverse, real-time data. This digital health solution service for hospitals links its online service (that allows patients to view and manage a portion of their own medical information), and its Pay service (that allows them to set their own payment conditions for the deferred payment of medical fees), with existing electronic medical record (EMR) systems. It plans to raise the quality and quantity of its Data Bank (a database of DPC and EMR data) by obtaining increasingly diverse medical data in real time. With this additional data, the company aims to provide analysis data to various industries rather than just pharmaceutical companies and research institutions, and grow Data Use and Application Service explosively. This data service provides solutions to the top causes of patient dissatisfaction with medical care, namely waiting time, doctor’s explanation, and medical fees. The company will also be integrating data obtained from not only hospitals, but also clinics, pharmacies, and nursing care facilities.
Besides its dominant market share leadership in DPC software and having the largest medical database in Japan that provides the foundation for resilient recurring revenue streams, the company has a near 100% share in online pharmaceutical patient drug tools analyzer and ad-hoc research service (data utilization) for pharmaceutical companies. The data analysis reveals how the patient is using prescribed drugs which will enhance the pharma company’s sales and marketing abilities. This online tool allows its pharmaceutical companies to analyze dosage information on a daily basis, using the medical information the company has obtained under licenses from medical institutions. Pharmaceutical customers can analyze patient count by drug, concomitant drugs, concomitant illnesses, dosage volume and days, as well as dosage and illness patterns, among other factors.
For instance, Anti-cancer agent A might be prescribed for multiple types of cancer such as colon cancer, lung cancer, and breast cancer. In the past, pharmaceutical companies only had access to information about the drug’s overall sales. The company's analyzer provides a simple way to determine the amount of money spent on each type of cancer. Because it also allows analysis of dosage and prescription period for each type of cancer, pharmaceutical companies can analyze constituent sales by drug, and use this dosage information when creating sales and marketing strategies.
Since this innovator is the only company with access to sensitive patient data, it has a virtual monopoly and can scale this pharma business dramatically. The customized reports service enable pharmaceutical companies to analyze trends in their own and competitors’ drugs to determine new usage, ongoing use, switching, or discontinuation, as well as the number of patients in each category. Also, to determine how long the dosage continues, what drug switches are being made, and why. For example, reports analyzing factors involved in the increase or lagging growth in the number of patients can be used as guides for understanding changes in patient numbers and devising future promotion policies. Also, they can help categorize patient dropouts based on reasons for dropping out, e.g., those who switched to using other drugs, those who stopped using drugs because of complications.
The company also has a clinical trial support business subsidiary since June 2017, providing selection services for matching hospitals and patients to clinical trial protocols formulated by pharmaceutical companies by utilizing its medical big data. Currently, the use of human wave tactics to identify suitable subjects (patients) is common. However, the company has applied the concept of PRO (Patients Researched Organization) and plan to use its database medical big data in selecting test subjects. This will make it possible to shorten the time required to conduct clinical trials and reduce costs, while still ensuring safety.
Some recent new innovative initiatives include: In April 2020, the company started to handle health insurance association data. On 20 Oct 2020, the company announced that it will begin providing Online Doctor Bank services. By using this service, doctors can check patient information such as medical examination history before examining them. In addition, the company plans to implement an interview system utilizing Japan's largest medical database, and doctors will be able to refer to an interview system backed by big data. On 4 Dec 2020, the company announced a collaboration with Omron that the smartphone health management app Omron Connect will be connected to its online service that allows patients to view and manage a portion of their own medical information. As a result, users can automatically transfer health data measured by OMRON Healthcare products such as body composition meter, sphygmomanometer, and activity meter to its online service and store and view it. On 8 Dec 2020, the company announced the launch of its new medical care visualization system for hospitals and clinics.
On 14 Dec 2020, the company announced a collaboration with Immunity Research Co., Ltd., which has the world's most advanced immunoanalysis technology, to generate data that will help doctors consider the application and timing of immune checkpoint inhibitors in cancer treatment. While immune checkpoint inhibitors are known to have high therapeutic effects for a variety of cancer species, there are cases where drug effects are not shown even in patients of the same cancer species, so if the therapeutic effect can be predicted before administration, it is possible to select drugs that can be expected to have a higher therapeutic effect for each patient. It is also expected to lead to a reduction in wasteful medical expenses. The two companies will work together to establish an algorithm that can select the optimal treatment method for each patient's immune status using the company's medical care database and immunity immune cell analysis technology.
Founder and CEO Mr. I shared: "Since our establishment in August 2003, we have been developing our business with the vision to create a better medical and healthcare system in Japan, and the creation of patient benefits, through utilization of abundant real world data. In the background of the company's founding, there was an awareness of issues such as the inability to utilize medical and health information, and the inability of people to grasp their own medical information throughout their lives. For example, how many people have a perfect grasp of the history of consultations and prescriptions from birth to the present? I imagine it's very little. We aim to clear these problems and not only improve the quality of medical care more than ever by utilizing information, but also realize a society where people can grasp their own medical and health information throughout their lives, and a society where people can select services in the medical and health fields by themselves based on such information."