The Pharma Industry's Trillion-Dollar Blind Spot: Why Healthcare Needs Its Balenciaga Moment

Bart de Witte • 8 Feb 2025 • 6 min read

This post is intentionally thought-provoking, my goal is to push leaders to fundamentally rethink current concepts and business models that may seem entrenched but are actually more fragile than they appear. Sometimes the most transformative ideas emerge when we challenge the assumptions that everyone takes for granted.

Hello from Berlin,

Yesterday, I spent 30 minutes playing around with GPT-5, and what happened next perfectly captures everything that's wrong, and right, about how we think about value creation in the modern economy.

Within a half hour, I was able to use AI to reverse engineer working prototypes of Google Sheets, Google Docs, and even an EMR system. For the EMR, I simply uploaded screenshots, described the required features, and GPT‑5 deployed a functional prototype ready for immediate use in AI agent testing against the front-end.

From our experience building Isaree, these technologies still have limits when it comes to creating entirely novel applications, AI excels at reproducing and customizing known patterns, but doesn't yet enable true innovation without significant human guidance. That said, many in the field predict that we may soon see “full” automation (99–100%) of code generation, where AI will handle most of the bulk coding work. Even then, oversight, tailoring, and creative design will remain essential roles for humans for the foreseeable future, as the need for judgment, originality, and contextual understanding cannot be fully automated yet.

This demonstrates something profound: the commodification of software is happening at full speed, and AI is eating SaaS. Why pay for licensed software when you can simply prompt it into existence? We're witnessing the emergence of true abundance in software creation, where the marginal cost of building complex applications approaches zero.

And it's not just software. AI is already generating molecules and RNA sequences on demand, as demonstrated by Jakob Uszkoreit's startup Inceptive which uses AI to design mRNA vaccines by prompting desired cell functions. Uszkoreit, co-inventor of the Transformer architecture that powers GPT, has applied the same principles that revolutionized language models to biological sequence design. Meanwhile, luxury brands have master

Yet here's what struck me: while abundance and experience-based value creation are transforming every other industry, the pharmaceutical sector, dealing with life and death, remains trapped in an artificial scarcity model that stifles innovation and limits growth.

The answer reveals a fundamental misunderstanding of value creation that's costing the industry trillions in missed opportunities.

From Scarcity to Abundance: The Software Revolution as Healthcare's Blueprint

This shift from scarcity to abundance in software mirrors what's possible in healthcare, but only if we're willing to abandon the artificial constraints that currently define the industry. Just as AI is commoditizing software development, open source approaches could commoditize drug development, freeing companies to compete on what really matters: patient experience, outcomes, and innovation.

The question is: is the industry prepared for a DeepSeek moment in biotech? When DeepSeek released their open-source AI model that matched GPT-4's performance at a fraction of the cost, it destroyed $600 billion in market capitalization in a single day. Established AI companies that had built their valuations on artificial scarcity suddenly found their moats evaporated overnight. The same disruption awaits any industry that mistakes patent fortresses for sustainable competitive advantages.

The early signs are already visible in biotech. Genomic foundation models like Evo 2, though still in early stages, are being released under open source licenses, democratizing access to powerful biological AI tools that were previously the exclusive domain of well-funded pharmaceutical companies. These models can analyze DNA sequences, predict protein structures, and identify drug targets, capabilities that once required massive proprietary research investments. As these open source genomic models mature, they could commoditize fundamental aspects of drug discovery, leaving companies that rely solely on patent protection scrambling to find new sources of competitive advantage.

The software industry learned this lesson the hard way. Companies that clung to proprietary, closed-source models found themselves disrupted by open source alternatives that were not only free but often superior. Today, the most valuable software companies—Google, Facebook, even Microsoft—have embraced open source as a foundation for building differentiated experiences on top.

The numbers tell the story: according to the 2025 COSS (Commercial Open Source Software) Report, open source companies raised $26.4 billion across 211 deals in 2024 alone. More importantly, these companies consistently "raise capital faster, achieve higher valuations, exit at stronger multiples, and deliver superior shareholder returns compared to closed-source peers." Red Hat's $34 billion sale, HashiCorp's $6.4 billion acquisition, and MongoDB's $30+ billion valuation aren't outliers—they're part of what the report calls "a repeatable financial pattern" in open source innovation.

Healthcare is at the same inflection point. The question isn't whether this transformation will happen, it's whether established players will lead it or be disrupted by it.

The pharmaceutical industry could follow a similar playbook. Instead of each company developing proprietary versions of similar drugs, imagine collaborative open source drug development platforms, or even more powerfully, publishing the most advanced biomedical foundation models and foundation models trained on all available clinical trial data under open source licenses. This would accelerate drug discovery across the entire industry while allowing companies to compete on what truly matters: patient experience, treatment outcomes, and innovative delivery methods.

The Luxury Paradox vs. Pharma's Scarcity Trap

Luxury brands have mastered something pharmaceutical companies haven't: unlimited value creation through experience design. When Balenciaga released their controversial $1,790 "trash bag"—a leather tote that deliberately resembled a garbage bag—they weren't selling leather; they were selling identity, conversation, and cultural positioning. The $1,790 price wasn't a barrier; it was a feature that generated millions in free media coverage and social media buzz.

This isn't just marketing fluff, it's reflected in the numbers. Consider Apple: despite holding only about 20% of global smartphone market share, Apple regularly captures over 80% of the entire industry's profits. This is the experience economy in action, where superior design, brand positioning, and user experience command premium pricing that translates directly to extraordinary profit margins.

Meanwhile, pharma operates on artificial scarcity: develop a drug, build a fortress of patents around it—the average drug is protected by 180 patents, charge premium prices until the patent thicket expires, then watch revenues cliff-dive when generics enter. This creates a perpetual cycle of "reinventing the wheel", companies spend billions developing me-too drugs simply because they need new patent portfolios to maintain revenue streams.

Jakob Uszkoreit, co-inventor of the Transformer architecture that powers GPT, captured this perfectly in our conversation at the Frontiers Health conference in Berlin: when companies independently and secretly develop the same solutions, "this redundancy is also terrible for society, as it ends up paying multiple times, directly or indirectly, for the same outcome." He contrasts this with the tech industry, which moved away from this wasteful model through open-source collaboration, transforming "a game of protectionism into a race that fosters rapid innovation."

The contrast in profit margins between experience-based brands and commodity businesses is striking:

The pattern is clear: companies that compete on experience, design, and emotional value consistently achieve higher margins than those competing on artificial scarcity or commodity features.

This data reveals a profound opportunity in healthcare. While other industries have learned to create value through experience and design, healthcare remains perhaps the most emotionally charged industry in the world. Society desperately wants drugs to be open and accessible to all, while also craving experiences that make patients feel cared for and hopeful. Yet the industry has largely ignored these emotional dimensions in favor of a purely transactional approach that serves neither accessibility nor experience well.

The Chocolate Revolution: AZ Groeninge Shows the Way Forward

In July 2025, something remarkable happened in Belgium that perfectly illustrates the future of healthcare value creation. AZ Groeninge, a hospital in Kortrijk Belgium, partnered with the Belgian The Chocolate Line, led by master chocolatier Julius Persoone, to solve two specific medical challenges through culinary innovation.

The collaboration wasn't just about making medicine taste better; it was about fundamentally rethinking patient experience. Both organizations brought prestigious Gault & Millau recognition to the partnership: AZ Groeninge was the first hospital in the Benelux to receive the G&M label for their kitchen, while The Chocolate Line was named "chocolatier of the year."

Together, they developed two specialized pralines that meet all medical requirements while transforming clinical necessity into genuine pleasure. The first praline masks the unpleasant taste of contrast fluid used in radiology swallowing studies, completely neutralizing the flavor without affecting medical function. Previously, patients had to endure bread soaked in contrast fluid, a poor solution that provided neither good taste nor proper consistency.

The second praline serves post-surgical patients who cannot bite or chew after oral or jaw surgery. Instead of accepting that these patients must go without pleasant food experiences during recovery, the team created what dietitian Kelly Vandendriessche calls a "taste bomb" that provides both nutrition and the fresh, relieving sensation patients crave.

"Our pralines are not only a culinary experience, but also a medical innovation," explains Julius Persoone. As Brian Desplinter, Innovation Project Leader at AZ Groeninge's innovation hub The Greenhouse, puts it: "Innovation doesn't always have to be high-tech. This tastes like more.

"The AZ Groeninge collaboration represents a proof of concept for experience-based value creation in healthcare—showing how medical expertise combined with world-class culinary artistry can create solutions that neither field could achieve alone.

But this isn't the first time someone recognized that making medicine taste better could revolutionize patient care. In 1988, Dr. Manfred Zöller and his wife Monika founded Infectopharm with a simple but radical vision: "children need special medicines that taste good and are popular." Dr. Zöller, a pediatric doctor, had witnessed firsthand the struggles of getting children to take their medications. Instead of accepting this as an inevitable challenge, he asked a different question: what if we designed medicines around the patient experience rather than just clinical efficacy? Their first breakthrough was InfectoCillin, an antibiotic juice that brought three revolutionary advantages: simple dosage, high concentration of active ingredients, and most importantly, better taste.

This wasn't just about adding sugar to medicine, it was about fundamentally rethinking the entire medication experience. By 1990, they had developed InfectoMycin with even better taste and bioavailability that only needed to be taken twice daily. By 1992, InfectoBicillin revolutionized penicillin therapy for children with exceptional taste and extended half-life.

Today, Infectopharm produces 140+ pharmaceuticals, and has maintained 10% annual growth for over three decades. They've proven that experience-based value creation isn't just possible in healthcare, it's extraordinarily profitable and sustainable.

Both examples, AZ Groeninge's specialized medical pralines and Infectopharm's tasty pediatric medicines, demonstrate several early stage but revolutionary principles that could transform the entire pharmaceutical industry:

- Experience-First Design: Both started with patient experience challenges and worked backward. AZ Groeninge asked "How do we make contrast fluid studies pleasant?" while Infectopharm asked "How do we make children actually want to take their medicine?"

- Cross-Industry Innovation: Medical expertise combined with culinary artistry (AZ Groeninge) or food science (Infectopharm) created solutions that neither field could achieve alone. The Gault & Millau recognition both AZ Groeninge and The Chocolate Line brought to their partnership exemplifies this high-level collaboration.

- Emotional Value Creation: These innovations deliver hope, comfort, and dignity, emotional value that extends far beyond clinical efficacy. As Julius Persoone noted, they created "not only a culinary experience, but also a medical innovation."

- Scalable Differentiation: Unlike patent-based differentiation with built-in expiration dates, experience-based differentiation can be continuously improved and refined. AZ Groeninge is already exploring expansion to other hospitals, demonstrating the scalable nature of experience-based innovation.

The Billion-Dollar Treatment Experience

Imagine applying this model at scale. Instead of competing on patent exclusivity, pharmaceutical companies could compete on creating the most beautiful, dignified, and effective patient experiences. We could see healthcare luxury brands that command premium prices not because they have exclusive access to molecules, but because they provide genuinely superior experiences.

This transformation is already beginning. In July 2025, Roche CEO Thomas Schinecker announced the company is considering selling prescription medicines directly to US consumers, cutting out pharmacy benefit managers to lower costs and create direct patient relationships.

This isn't just about price, it's about fundamentally changing how pharmaceutical companies interact with patients. Roche's direct-to-consumer strategy, following similar moves by Bristol Myers, Pfizer, Eli Lilly, and Novo Nordisk, represents a shift toward patient-centric business models.

When pharmaceutical companies sell directly to patients, they can compete on patient experience, service quality, and value delivery rather than just negotiating rebates with intermediaries. This creates the foundation for experience-based differentiation, exactly what luxury brands have mastered and what healthcare desperately needs.

But here's where the tiered market becomes truly powerful: while some companies focus on premium experiences, others could specialize in operational efficiencies and offer low-cost alternatives to life-saving treatments. Consider today's reality: Lenmeldy costs $4.25 million per dose, Hemgenix $3.5 million, Zolgensma $2.1 million, and dozens of gene therapies priced between $850,000 and $3 million. These astronomical prices create massive accessibility barriers that an efficiency-focused competitor could address.

Just as EasyJet revolutionized air travel by stripping away luxury amenities to offer basic transportation at dramatically lower prices, healthcare companies could focus on delivering essential treatments through streamlined operations, automated manufacturing, and lean distribution models. When the underlying drug development is open source, the primary cost drivers become manufacturing and delivery, areas ripe for operational innovation.

This tiered model isn't theoretical, it already exists and thrives in the healthcare provider segment. In Switzerland, the Gstaad International Healthcare clinic in Saanen perfectly demonstrates this approach. The planned luxury clinic, backed by a three-digit million investment and partnerships with Johns Hopkins Medicine International, caters to super-rich patients from around the world with 5-star amenities including hotel pages, shoe shine service, and prepared pajamas. But here's the crucial part: the clinic was only approved on the condition that it includes a healthcare center for the local population, with family doctors serving the 7,000 residents of Saanen who struggle with doctor shortages and aging demographics. The financial resources from treating international elites directly subsidize accessible healthcare for the local community.

This is where the Roche-Gucci analogy becomes reality. But here's the crucial difference from today's broken model: society wants drugs to be open and accessible to all, not artificially scarce. Currently, we've created a system where we "cap" gene therapies at prices like $2 million and fix this price for everyone, a one-size-fits-all approach that serves no one well.

Instead, imagine a tiered system that mirrors what we've seen transform the airline industry. EasyJet succeeded by recognizing that air travel was becoming commoditized and shifting competition to a new value layer: operational efficiency. When the core product (getting from point A to point B) became a commodity, EasyJet competed on cost structure, simplicity, and accessibility rather than luxury amenities. They operated single aircraft types to reduce maintenance costs, used secondary airports to lower fees, eliminated costly services, and optimized aircraft utilization. The result: they made air travel accessible to entirely new market segments while forcing traditional carriers to adapt or lose market share.

This is exactly what's happening in healthcare. As AI commoditizes drug or even biomarker discovery and open source models democratize biological research tools, the core value proposition shifts from "exclusive access to molecules" to "superior patient experiences and operational efficiency." Companies that recognize this shift early, like EasyJet did in aviation, will capture disproportionate value by competing on the new value layer while others cling to obsolete competitive advantages.

The economics are compelling: open source large parts of drug development drives down the cost of basic treatments, making them accessible to all. But for those who want the equivalent of first-class healthcare, personalized medicine, concierge services, luxury treatment environments, or innovative delivery methods like AZ Groeninge's chocolate pralines, premium pricing becomes justified through genuine value creation rather than artificial scarcity.

This isn't about making healthcare unaffordable; it's about creating a market structure where basic healthcare is universally accessible while innovation is rewarded through experience differentiation. The result: faster innovation, better patient outcomes, and sustainable business models that don't rely on patent fortresses.

The Growth Opportunity

This model creates unprecedented growth opportunities currently impossible under artificial scarcity:

• Unlimited value creation potential that doesn't expire with patents
• Market expansion through accessible basic treatments supporting premium tiers
• Sustainable competitive advantages through experience differentiation
• Cross-industry collaboration opening entirely new revenue streams
• Reduced R&D risk through shared development costs

The beauty is that everyone benefits: patients get better experiences at more accessible prices, healthcare systems reduce costs while improving quality, pharmaceutical companies achieve sustainable growth, and society benefits from faster innovation.

The Defensive Response: Red Tape in the Fourth Industrial Revolution

Yet instead of embracing this transformation, we're witnessing a predictable defensive response from industry incumbents and Brussels policymakers. Rather than leading the change, they're creating even more red tape and bureaucracy to defend the existing system. This is a classic defensive strategy, one that signals they've already decided not to embrace the new paradigm but instead to fend off progress and protect the old.

The irony is stark: we're in the midst of the fourth industrial revolution, where AI is rewriting the rules of every industry, yet healthcare regulators are doubling down on frameworks designed for the third industrial revolution. While other sectors are experimenting with abundance models, open source innovation, and experience-based value creation, healthcare policy is moving in the opposite direction, toward more complexity, more barriers, and more protection of artificial scarcity.

This defensive posture reveals a fundamental misunderstanding of the forces at play. You cannot regulate your way out of a technological revolution. The same regulatory mindset that tries to slow down AI development through bureaucratic processes will ultimately fail when faced with the exponential pace of innovation. Companies and countries that embrace abundance-based models will simply outcompete those clinging to scarcity-based regulations.

History shows us that defensive strategies during industrial revolutions are not just futile, they're economically destructive. The question isn't whether this transformation will happen, but whether Europe will lead it or be left behind by regions that embrace the new paradigm.

The Path Forward

The transformation won't happen overnight, but early signs are visible. Forward-thinking companies are experimenting with experience-based models, outcome-based pricing, and collaborative innovation platforms.

The question isn't whether this transformation will happen, it's whether established pharmaceutical companies will lead it or be disrupted by it. The companies that recognize this shift early and begin building experience-based competitive advantages will thrive. Those clinging to artificial scarcity will find themselves increasingly marginalized.

The AZ Groeninge collaboration shows this future is already emerging. When a hospital and chocolatier can transform medication experiences for patients with swallowing disorders, it demonstrates that industry boundaries are more fluid than we think.

If brands can create $2,000 trash bags through design and storytelling, there's no reason healthcare companies can't create billion-dollar treatment experiences that high net worth individuals genuinely value.

The pharmaceutical industry stands at a crossroads. It can continue fighting over patent exclusivity while missing enormous growth opportunities, or embrace the abundance model that has transformed industries from airlines to technology to luxury goods.

The revolution has begun. The question is: will you be part of it?

What do you think? Have you seen other examples of experience-based value creation in healthcare? I'd love to hear your thoughts, reply to this newsletter or reach out on LinkedIn.

Bart de Witte is the founder of Isaree, a Berlin-based company building the next generation of AI-powered healthcare platforms. For over a decade, his predictions about healthcare technology have consistently preceded industry trends. For more insights into the future of healthcare IT, follow him on LinkedIn or subscribe to this newsletter.