A Novel Pharmaceutical-ACO Collaboration: The Merck/Heritage Provider Network Open Innovation Challenge

March 19, 2014
Aman Bhandari, PhD

Arnaub Chatterjee, MHA, MPA

Sara Holoubek, MBA

Brian Powers, BA

Jonathan Gluck, JD

Sachin H. Jain, MD, MBA

The American Journal of Accountable Care, March 2014, Volume 2, Issue 1

Merck and the Heritage Provider Network forge a new kind of relationship, with the goals of spawning innovation in healthcare delivery and of providing an outline for future collaborations between ACOs and other healthcare stakeholders.

Accountable care is forcing providers to develop new capacities and strategies for managing cost and quality trends. Prospectively managing the health of populations requires shifting the focus of care delivery from episodic interventions to continuous population management. As a result, accountable care organizations (ACOs) are dedicating considerable focus to developing the infrastructure and tools needed to help patients manage their chronic conditions. This is a significant departure from traditional care-delivery models and will require provider organizations to develop new partnerships and embrace new methods.The enhanced focus on patient outcomes and value for ACOs in general will mean that pharmaceutical companies will have to reshape their relationships with ACOs along these lines. Refocusing these relationships around value will require (1) collaborative measurement of patient outcomes; (2) new commercial models that enable value-based payment; and (3) a broadening of the relationship to develop solutions and services that enhance outcomes independent of the pharmaceutical companies’ products. It is this latter requirement that prompted Merck & Co, Inc, a global pharmaceutical company, and the Heritage Provider Network, Inc (HPN), a Southern California based managed care organization with affiliates in Arizona and New York, and the largest of the Pioneer Model ACOs, to engage in a collaborative process to identify novel solutions in disease areas of considerable shared epidemiological interest: diabetes and heart disease. During the fall of 2013, Merck and HPN launched an open innovation challenge around care plan adherence for patients with diabetes and heart disease. To our knowledge, this is the first collaboration between a pharmaceutical company and an ACO.

This article describes this collaboration, the innovation process, and implications for further collaborations between ACOs and other healthcare stakeholders.

Defining the Problem

As we transition to a clinically integrated system that incentivizes quality and better health outcomes, care plans are critical patient engagement tools that will be invaluable in helping patients become informed and educated.

Care plans serve as road maps for patients, because they outline diagnosis and treatment, schedules for follow-up, and vital information and resources postvisit. Additionally, they serve as a lifeline, allowing providers to monitor their patients and ensure coordination among the healthcare team. But there are significant challenges associated with creating and delivering successful care plans between the provider and the patient. More than 40% of patients misunderstand, misinterpret, forget, or ignore healthcare advice given by their providers.1 Factors associated with patient compliance to provider-recommended care plans include patients’ knowledge and understanding of treatment and effective communication between the patient and provider.

HPN has a long history of providing coordinated care, and both Merck and HPN realized that adherence to care plans for patients with chronic diseases is an underutilized lever for improving a patient’s quality of life, while also potentially creating cost reductions in healthcare. Together, leadership from the 2 organizations decided to use an open innovation process to identify and incubate ideas that would advance shared aims around improving adherence to care plans for patients with these conditions.


Many sectors have looked to “the wisdom of the crowd” or the phenomenon that the collective knowledge of the community is greater than the knowledge of the individual2 to devise novel solutions to complicated problems. The use of challenge competitions and an open innovation process to drive breakthrough results has a very long history, going back hundreds of years.3 For example, Charles Lindbergh’s flight across the Atlantic can be traced back to a challenge famously titled The Orteig Prize, a $25,000 reward offered to the first aviator to fly nonstop from New York City to Paris. While this mechanism has been well defined in other sectors, it is relatively new to the healthcare services arena. Challenge-based competitions have proved to be successful frameworks for addressing fundamental research questions by presenting difficult problems and data to the community and enabling the open exchange of ideas and methodologies. Merck and HPN quickly realized that the long-standing problem of treating chronic diseases could benefit from a community approach, and as a result, the 2 organizations collaborated on devising an open innovation challenge competition that aimed to source and incorporate novel care plan products or services to support providers and patients in the area of chronic disease management.4 (HPN has sponsored a number of other prizes, including prizes related to hospitalization prediction and cancer cell networks, but this is the first nondata, nontechnology challenge in which HPN has participated.)

Merck and HPN’s aim was to apply the best practices of open innovation to identify novel solutions for managing patients with chronic diseases. There has been some experimental research indicating that traditional approaches like “winner-take-all” prizes are suboptimal for generating solutions.5 We therefore opted for a staged process, with the opportunity for multiple prizes across teams.6 Additionally, other innovation processes, such as lean methodology and design thinking, were embedded into the structure of the challenge. Drawing on established principles for open innovation challenges, Merck and HPN designed an innovation challenge with several phases.

Challenge Launch and Submission Phase

Outreach is essential for open innovation challenges. Merck and HPN partnered closely with Luminary Labs, an innovation and strategy consultancy, for the operational components of this challenge, and to ensure that the right community of solvers was involved.

Following announcement of the challenge, there was a 1-month open call to the public for submissions. To spread awareness of the challenge and ensure that there would be broad outreach, Luminary Labs notified key media outlets in technology, big data, and healthcare.

Overall, 90 teams submitted solutions for consideration. These submissions spanned from initial concepts to fully mature products or services: 17 in the idea phase, 33 in the early prototype phase, 14 in the full prototype phase, 14 in the beta phase, and 12 that were publicly available. Concepts included hardware, stand-alone care planning solutions, communications platforms, and comprehensive integrated care systems. Eighty-four percent (84%) of submitted solutions were patient-facing; the remaining submissions aimed at multiple segments of the ecosystem. With over 17,000 visits to the challenge website, there was wide-ranging interest and geographic reach. Visitors drew from academic, government, and private-sector spheres that included the Broad Institute, the Bill and Melinda Gates Foundation, Facebook, the Centers for Disease Control and Prevention, and the White House.

Virtual Accelerator & Finalist Selection

An independent panel of judges from the healthcare, innovation, development, and design communities selected 5 teams to proceed on to the virtual accelerator process. Submissions were then evaluated on several dimensions. The 5 semifinalist teams were composed of clinicians, scientists, patient-entrepreneurs, media producers, and technologists, and the solutions ranged from early prototype to established startup.

Accelerators are designed to support the successful development of entrepreneurial companies and are aimed at increasing the likelihood of success for those companies and iterating their concepts. The 5 semifinalists took part in rigorous design, prototyping, and business modeling sessions tailored to the strengths and weaknesses of each team. The virtual accelerator process consisted of 3 core modeling sessions.

Modeling session 1 focused on an introduction to design thinking also on need-based solution development. These exercises functioned as primers on cultivating empathy, end-user focus, and rapid prototyping. The semifinalists were also exposed to interview- based ethnography, where they simulated exercises in patient engagement and were asked to reconsider care coordination from new angles. The sessions were designed with the patient in mind—and more specifically, how entrepreneurial companies can refocus their solutions to ensure that patient and provider needs are met.

Modeling Session 2 commenced with a stronger emphasis on patient interaction and learning how to complement technology with disease self-management. Semifinalists met with 2 panels of patients living with diabetes and/or heart disease, and gained insights by simulating the complex experience of learning to live with chronic disease from the perspective of a patient and of a caregiver. Clinicians provided their observations from the field, noting best practices and pain points regarding increasing adherence and patient engagement to improve health outcomes.

Modeling Session 3 gave semifinalists the opportunity to access experts in different fields, ranging from business modeling and capital acquisition to design and public speaking. Teams were provided hands-on mentorship from industry experts and continually crafted their solutions to focus on the problem at hand.

Lessons Learned

Several insights have emerged from this collaboration. First, by placing a dedicated focus on the challenge announcement and community outreach, Merck and HPN were able to develop a landscape view of the marketplace for care plan adherence solutions. The process also gave both parties proximity to the innovator community, opening up a new opportunity for identifying and harvesting talent from a diverse group of forward thinkers offering fresh ideas and a unique perspective. Second, Merck and HPN were able to successfully source solutions that proactively engage patients to promote lifestyle changes around healthy behaviors and medication management, as well as bridge the communication and coordination gap between patients and providers. This collaboration initiative serves as a model for engaging entrepreneurs and key health stakeholders to work across the care continuum.

As we move toward an increased focus on patient engagement, there is an opportunity for organizations to create dynamic and effective programs that facilitate the exchange of information. Shifting to new models will require an increased focus on identifying clinical gaps to uncover every opportunity and implement patient-centric care plans.


Open innovation, while common in other industries, is still relatively new to the healthcare field. This approach provides a pathway for collaboration, rapid identification of solutions, and access to the broader marketplace. The aim of both Merck and HPN was to apply the best practices of open innovation to identify novel solutions for managing patients with chronic diseases. The quality and quantity of submissions showed notable interest from entrepreneurs to data scientists to clinicians and provided a diverse set of solutions. The challenge allowed both Merck and HPN to look beyond their own walls and gain access to non-traditional partners and products. Additionally, this first-of-its-kind pharmaceutical-ACO collaboration demonstrated how challenge competitions can set in motion communities of innovators to develop sophisticated tools for care management, lay the groundwork for future collaboration, and offer a mechanism for stakeholders like Merck and HPN to collaborate.Author Affiliations: Merck & Co, Whitehouse Station, NJ (AB, AC, SHJ); Luminary Labs, New York, NY (SH); Harvard Medical School, Boston, MA (BP, SHJ); Heritage Provider Network, Inc, Northridge, CA (JG); Boston-VA Medical Center, Boston, MA (SHJ).

Author Disclosures: This study was funded by Merck & Co.

Address correspondence to: Sachin H. Jain, MD, MBA, 33 Avenue Louis Pasteur, 2-403, Boston, MA 02110. E-mail: sachin.jain@merck.com.1. Martin LR, Williams SL, Haskard KB, DiMatteo MR. The challenge of patient adherence. Ther Clin Risk Manag. 2005;1(3):189-199.

2. Surowiecki, J. The Wisdom of Crowds: Why the Many are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations. New York, NY Doubleday; 2004.

3. Thomas K. Prizes for technological innovation. Brookings Institution website. http://www.brookings.edu/research/papers/2006/12/healthcare-kalil. Published December 2006.

4. Chesbrough HW. The era of open innovation. MIT Sloan Management Review. 2003;44(3):35-41. 5. Cason TN, Masters WA, Sheremeta RM. Entry into winner-take-all an proportional- prize contests: an experimental study. J Public Econ. 2010;94(9-10):604-611.