The pace of transformation in the world leading healthcare systems has increased dramatically in recent years, reshaping the nature of the pharmaceutical and medical devices marketplace.
In an uncertain economic climate, the progressive increase in resources absorbed by healthcare systems has made performance in the healthcare industry a central topic of both political and scientific debates. Recent health expenditure analyses show a considerable variability of costs for health and non-health related goods and services, across countries but also within the regions and local health authorities of the same nation. This suggests that there could be an opportunity to reduce the costs of some items with a direct impact on the life sciences industry. In connection with this, the recent, deep and controversial healthcare budget cuts haunting health systems around the world include an in-depth review of the purchasing and supply conditions for drugs and medical devices.
As a result of this review, new purchasing trends have arisen, one example of which is the “spending review” approved by the Italian government. This sets reference prices for many key hospital medicines and medical devices (based on the lowest market prices), and further cost-containment measures for medicines in both the inpatient and outpatient sectors. Similar trends can be found in other countries, including the greater purchasing power of the large GPOs (Group Purchasing Organizations) in Germany, the stabilization of procurement hubs in the UK, the new tenders issued in the Nordic countries (often based on a collaborative approach and risk-sharing mechanisms between hospitals and providers) and the rise of “global service management” or a “pay for performance” approach. It seems likely that this cost-optimization trend is set to continue.
This huge pressure for cost-containment and the growth of purchasing systems has led to a multilayered body of institutional stakeholders, healthcare policy-makers and payers who are increasingly dictating or influencing what doctors can prescribe or implant. Life science companies find themselves having to address multiple stakeholders at different levels of the healthcare systems, each of them with varying needs and priorities. This complex structure means that the classical “muscle” approach of the pharmaceutical and medical devices sales force is no longer enough to increase the share of voice for a product and ensure a turnover in line with their company’s expectations.
Although the producers of medical products have already started to adapt to changing market needs by redesigning the organizational structure of their sales force and introducing new sales-supporting roles and competences (market access in primis), the results are still modest. In most cases, market access still focuses on mapping key stakeholders, with their roles and influence in the purchasing process and there is a lack of clear ideas about how to address their needs and ensure strategic interaction with the national health system. Moreover, the NHSs are starting to realize that pure cost-cutting on product and service purchasing is not a sustainable business model. They need to find a solution which focuses on alternative means of attacking their huge inefficiencies and significantly reducing costs.
The objective of institutional marketing initiatives, as explored in this article, is to address these needs by creating “win-win” situations for both pharmaceutical/medical device companies and the NHS. These should involve both clinical and institutional players and aim to forge new longterm relationships, which lead to concrete projects and the creation of a sustainable “healthcare environment”, with tangible benefits for both the companies and the NHS.
This article presents the results of a survey conducted by Tefen in Italy. This survey aimed to:
We will examine the survey results and discuss the relevant implications for the life sciences industry in this article.
In all, Tefen surveyed 82 stakeholders from the Italian national health system, across 7 Italian regions. Institutional stakeholders accounted for the highest number of respondents, representing 55% of total responses, with hospital pharmacy directors, hospital procurement administrators, and regional hub directors accounting for more than 45% of the total institutional respondents. The key therapeutic areas represented by the clinical respondents were cardiovascular and metabolic diseases, oncology and onco-hematology, central nervous system diseases, respiratory diseases, and diagnostics.
The Italian regions were screened for several criteria, the main drivers of choice being population size, number of hospitals, presence of KOLs, and healthcare expenditure. Moreover, the target sample was defined to include regions characterized by different socio-economic and geographical contexts, political orientations of regional administrations, and models of healthcare provision.
Institutional stakeholders were screened according to their role and relevance in the decision- making process for the purchase of drugs and medical devices. The clinical specialties were selected to have a significant sample of the therapeutic areas most represented in the product portfolio and pipeline of medical devices and pharmaceutical companies.
As we can see, the dramatic pressure to contain healthcare costs is influencing the actions and decisions of both institutional stakeholders and clinicians.
More than ninety percent of institutional respondents underlined cost containment as their prime concern. Many prioritized activities aimed at increasing the efficiency of the system, such as in-hospital process re- egineering (seventy-one percent), health pathway redesign1 (sixtyfive percent), and improvement of therapy compliance (fifty-four percent). Fifty-eight percent of institutional respondents thought that education and human resources development still represent a major priority for the NHS, followed by patient and staff safety (forty-eight percent). More than half of institutional stakeholders fifty-two percent) mentioned performance monitoring as a key factor, although most of them revealed that their real priority is to develop and share “operational” KPIs; facilitate benchmarking across interregional hospitals and health authorities and develop practical solutions to fill the current gaps and inefficiencies. In contrast, collection of real word evidence data3 is still seen to be a lower priority which only produces value-based data for the longer term. In the same way, although patient satisfaction is recognized as a key objective for the NHS, the current data collection methods and analyses are still too “subjective” and therefore not seen to be a major driver for policy and decision making. Seventeen percent of institutional respondents also mentioned supply chain management (despite the emphasis placed on this by national and regional health authorities, the general perception is that there is a long way to go before efficient and effective processes can be implemented) and nine percent highlighted green initiatives (mainly intended as levers for cost reduction rather than corporate social and environmental responsibility).
Looking at the outcomes of the clinicians’ survey, we can soon see the difference to the priorities set by the institutional respondents. Overall, clinicians assigned higher relevance to patient satisfaction (high or max priority for 75% of respondents), patient and staff safety (sixty-two percent), and therapy compliance improvement (sixtythree percent), while they were only partially interested in supply chain management and green initiatives. However, a surprisingly high percentage of clinicians have begun to realize the relevance of reducing system inefficiencies by redesigning in-patient processes (forty-two percent) and health pathways (forty-five percent), with a view to slashing delivery costs and maximizing system profitability, without neglecting the quality of care.
Almost 70% of the stakeholders surveyed were open to collaborations4 with life sciences companies, although the degree of this “openness” differs by organizational role and region. Overall the institutional players seem to be more inclined to work alongside the companies on initiatives aimed at improving the NHS efficacy and efficiency (78% of respondents agree or strongly agree that the NHS will benefit from collaborations with the industry). Roughly one third of the institutional respondents even perceive collaboration with the industry not only as an opportunity but as an actual need for the NHS to ensure future sustainability. Although roughly 50% of the clinicians share the same perception of institutional actors, one in four of the remaining respondents do not look with favor on potential collaborations with suppliers. The other 25% were neutral.
The respondents open to work alongside with life sciences companies identified several areas of potential collaboration, prioritized by their attractiveness and feasibility. Over 50% of both institutional and clinical respondents agreed that the comparative effectiveness study and collection/analysis of real world data collection would benefit from support by the life sciences companies, due to the wealth of data and analytics skills available in some companies, particularly pharmaceuticals. Other areas where the respondents see companies adding value through collaboration are in the health pathway redesign and in-hospital process reengineering (37% of institutional respondents, but only 11% of clinicians). About one out of four identified life sciences companies as potential partners for improving compliance and adherence to agreed therapies, by developing conjoint solutions and products to support patients along their therapy path. More than 20% of institutional respondents also identified opportunities for collaborations by developing benchmarking studies across structures and hospitals, both at a national and international level, to identify best-practices and set up knowledge-sharing mechanisms and processes. Seventeen percent of institutional stakeholders said that they would be willing to start collaborations with companies to improve the supply chain management process, by developing integrated systems for hospitals and local health authority inventory management.
The main causes of resistance identified by both clinical and institutional opponents are the current lack of clear legislation to regulate collaborations between the NHSs and the industry (eighty-two percent) and the lack of trust in life sciences companies (seventy-four percent), who are often perceived to be rofiteers. Another potential barrier to the implementation of joint initiatives etween the NHS and the industry is the perception that life sciences companies do not have the right competencies to cope with the major issues affecting the NHS (thirty-four percent). This concern was mainly raised by clinicians, with respect to patient management and health pathway redesign. Other barriers mentioned to a lesser extent by the detractors are the prohibited stablishment of professional collaborations with one specific company, to preserve market competition and avoid anti-competitive conduct (seven-percent), the need to protect safety and privacy of patients data (three percent) or simply the fact hat industry and NHS should not cooperate for ethical reasons (two percent).
On the other hand, institutional and clinical respondents agreed that the critical success factors for the successful implementation of institutional marketing initiatives are the identification of balanced objectives for each joint initiative, to meet the requirements of both companies and the NHS (sixty-three percent), the definition of project scope (thirty eight percent), the availability of companies to invest in long-term peer relationships with the NHS (twelve percent), the definition of structured governance to manage the joint projects, involving both clinical and institutional stakeholders at different levels of the health care system (eleven percent), and the availability of companies to "invest on the NHS” without only considering their economic interests and ROI (three percent).
Life sciences companies are still struggling to address the evolving needs of the key stakeholders at the different levels of the NHS More than two-thirds of the respondents said that they are aware of collaborations between the NHS and the industry, but only fifteen percent believe that these initiatives bring “effective and concrete results”.
The main reasons identified as root causes of failure are the bureaucracy in the NHS (forty-two percent) which leads to long approval processes and slow implementation and the unwillingness of healthcare administrations twenty nine percent) and companies (twenty five percent) to invest in long-term programs. Other potential causes of failure include a project scope which is too wide (seventeen percent though companies often focused on national rather than regional interests) or too narrow (fourteen percent thought that initiatives started as a pilot in small environments and were unconsciously not designed for scaling-up and systematically entering the daily flow of healthcare delivery). The causes of failure least mentioned were the lack of detailed project planning (twelve percent), the attitude of the industry considered reactive rather than confrontational or proactive (nine percent), and the lack of competences by company representatives (four percent).
At the end of the survey, when asked to rank the level of their satisfaction regarding the additional services provided by life sciences companies (excluding technical and clinical support), 58% clinicians showed satisfaction or full satisfaction, while only 11% of the institutional respondents said that they were “fully satisfied”, and 34% revealed complete or partial dissatisfaction.
Pharmaceutical and medical devices companies have traditionally relied on an aggressive marketing and selling approach to promote their products. However, the social, demographic, and economic context in which the life science industry operates is changing dramatically to create new challenges. Several sectors are facing fast price erosion and decreasing volume growth rates, reducing the overall attractiveness of the markets. In this scenario, most companies are struggling to bring new products to the market or to find value propositions that can justify the prices charged with the value provided to the customers.
At the same time, the strong cost-containment pressure, the needs of the new stakeholders involved in the purchasing process and the limited availability of resources in the NHSs represent an opportunity for pharmaceuticals and medical devices companies to reshape their go-tomarket strategy.
Several NHSs already implement “quick wins”, such as the reduction of expenditure on drugs and medical devices but these “quick and dirty” solutions are not enough to ensure the long term sustainability of the healthcare ystems. This is why most NHSs around the world are also starting to address the structural inefficiencies that characterize their hugely bureaucratic organizations. Institutional NHS stakeholders frequently realize that they do not have the resources or skills for this epoch-making change and they are now looking for partners from the industry. Parallel to this, clinicians are slowly opening up to potential collaborations with the suppliers. Overwhelmed by the continuous cost-cutting requests from their administrations, they are turning to industry companies for support.
These forces are reshaping the environment and the positions of the different players in the health care arena, creating the need for much greater collaboration. Although the economic case for change is clear in the national health systems, only few life sciences companies have managed to develop innovative value propositions to meet the need.
Supplier companies now have the chance to broaden their value propositions towards the national health systems and position themselves as real partners who can help address the key issues affecting health systems across the world. Establishing “win-win” collaborations (institutional marketing initiatives) with health care providers, they will not only help national health systems to achieve economic balance and sustainability but also achieve quick benefits for themselves. Besides improving the “customer intimacy” with key stakeholders in an NHS, companies can begin to create feedback loops to capture outcome data and information. This will, in turn, help to establish a more dynamic relationship with healthcare payers and providers, enlarge their potential market and re-direct their R&D investments towards the real needs of the system (both in terms of pathologies and cost expectations).
The survey examined in this article shows that the areas of institutional marketing collaboration are disparate but also that the market is mature enough to support innovative business models based on a collaborative approach. The market access departments play a pivotal role in designing integrated packages of product and services to address the varying needs of stakeholders.
The implementation of a “collaborative” approach and institutional marketing projects will allow companies to diversify beyond their core offering, enabling different players to build specific areas of expertise which give them a competitive advantage.
The traditional business model employed by life science companies has allowed them profitable returns for many years. However, external constraints are now placing huge pressure on this approach. From a positive perspective, this current situation offers companies the ideal opportunity to partner with healthcare systems, thereby promoting and conducting institutional marketing initiatives with the intent to generate benefits for the national health systems.
These initiatives will allow the industry to build long-lasting relationships with institutional players, by collaborating in projects with a final pay-off for all participants.
If companies are to improve their performance through institutional marketing initiatives, they will need to move fast to create their integrated product-service offerings and the supporting network and infrastructure to deliver them.
The transition will not be easy as it involves expansion of the company, its core offering and the development of new and more complex competences, but it does offer higher added value for the whole system. Bearing in mind that not all marketing initiatives will suit individual companies, now is the crucial time for companies to assess their current position, portfolio and pipeline, defining their individual strengths and key objectives. The future is bright for those companies which manage to switch towards a more collaborative model and implement institutional marketing initiatives.