Monday, January 28, 2008

The Public Arena

Last Post Review

In my last post I basically demonstrated that Employers (companies) are among the most important stakeholders in the health care business scenario. And that is because, in most cases, they pay for most of the medical expenses.

Having said that, what are we doing to target employers? Are we focusing on them with our Marketing strategies?

My Answer to the Last Question

“Since the average U.S. employee stays at job for only 4.5 years, is it enough time for companies reap the benefits of investing in their employees’ health?”

My answer is: it depends! (that is the best answer we learn in the MBA!) And indeed, it depends on the patient’s (employee’s) medical condition.

Employees with chronic diseases tend to stay longer in their jobs; and that’s basically because their companies keep paying for their expensive drugs. Thus, employees that have heart conditions or Diabetes, for instance, usually look forward to staying in their jobs.

On the other hand, asymptomatic employees (without disease symptoms, which may be or not “healthy”) have a shorter turn-over rate. However, they respond better, and quicker, to corporate health programs.

In summary: YES, it is worthy to invest in your employees’ health, especially on those with chronic conditions.

Feel free to send me your comments.

The Public Arena

As you may have noticed, I’ve worked for the World Health Organization, which exposed me to more than 10 different governments in the America and Europe. In addition, I held a position with the Brazilian Ministry of Health and had my MBA summer internship focused on the US Public Market. All that said, the Public Arena is definitely something which I’m at least familiar with. And, like it or not, governments across countries think very much alike!

There are two aspects that define a really good Public Health Care Strategy:

Partners, Not Clients

Partnership is the name of the game. Governments are usually cautious when dealing with health care companies, and that is basically because their value proposition is very different from ours. While we focus on market growth and profit, governments essentially want to demonstrate results to the population.

The problem; or, should I say, opportunity; is the fact that most governments don’t know how to collect data and demonstrate results. I remember I public campaign that was focused on Preventive actions against Heart Diseases. Although the message was clear, and the targeted population was demonstrating a change of habits, that government was not able to translate the benefits into numbers. In other words, the government didn’t know how to show how well tax money was spent on Preventive Medicine; which eventually led to the campaign cancellation.

How can companies help governments to identify and measure the positive outcomes of investing in a certain condition? The first step is to treat governments not as clients, but as partners. And, by definition, a partnership occurs regardless of money incentives. If you pay someone to do something, that cannot be called partnership (maybe a very positive commercial relationship).

Promote Results

It is better to treat 10 individuals and demonstrate the results than treating 10,000 individuals and do nothing with it.

Any Marketing campaign focused on governments should consider a few approaches to identify measure and promote the benefits. Few governments have these skills in their PR area, which is a very promising venue for developing a relationship which will, hopefully, lead into a business deal. Not the contrary.

See this article about a partnership among the Natural Sciences and Engineering Research Council of Canada, Merck Frosst Canada Inc and Boehringer Ingelheim (Canada) Ltd. The deal resulted in a $915,000 grant towards the establishment of a Industrial Research Chair, which is a promise for strong pharmaceuticals innovation.

Final Words

Overall, the public markets may represent either low ROI or very long-term efforts to companies. However, they are also the major market, and it doesn’t make sense to leave them out of Marketing strategies.

See you next time; keep sending me your comments or e-mails!

Ernesto M. Nogueira

Monday, January 21, 2008

Focus on Employers

Last Post Review

My last post described the complex scenario of health care business. In summary:

1) The market is more than companies, physicians and patients.

2) Market stakeholders are also health plans, hospitals, government and others described in the post.

3) If you want to have a successful Marketing strategy, your product must deliver a specific value for each stakeholder.

And don’t forget: each stakeholder demands a different value proposition!

My first feedback: According to one of my colleagues, the last post “Creating a Multi-Stakeholder Approach” was very complete but too technical.

I accept the comments and appreciate the frankness. This blog is focused on the strategic-level discussion around health care business and it seems my last post went a little bit out of the scope. I will keep further discussions at a higher level and, if necessary, we can all dive into a certain topic using the comments section or exchanging e-mails. Thank you again!

Employers, the Big Payors

Employers may have the largest stake on the health care business, and that’s because of one single reason: they pay the majority of medical costs. If we take the example of Brazil, employers pay approximately 80% of managed care costs, and finance a significant portion of public health with their tax payments. This is not very different in the U.S.

However, employers are usually one of the less involved in health care discussions. Usually, they don’t realize how much profit (yes, profit) can be made by managing employees’ health. On the other side, few health care companies know how to promote their products to this segment.

But the situation is changing. See this very short list of articles that give real-world examples of the discussion around employers and health care costs.

What Fat Costs America – Forbes; November 8, 2007 (article)
“Obese people miss more work, costing employers something on the order of $4 billion.”

The Public Face of Wal-Mart’s Health Care Program – NY Times; November 13, 2007 (article)

Q: “When you think about solving the American health care crisis what are the roles of an employer like Wal-Mart, the government and the individual worker?”

A: “Clearly, we need to do something differently (…) We believe there is always a role for the employer, as well as the individual and the government. So it’s shared responsibility.”

Judges Tell San Francisco It Can Begin Health Plan – NY Times; January 10 2008 (article)


“The unanimous decision, from a three-judge panel of the United States Court of Appeals for the Ninth Circuit, allows the city to require businesses with more than 20 employees to pay a fee to help cover employees’ health care costs…”

Company Clinics Cut Health Costs – NY Times, January 14, 2007 (article)


“Within the last two years, companies including Toyota, Sprint Nextel, Florida Power and Light, Credit Suisse and Pepsi Bottling Group have opened or expanded on-site clinics(…) Today a new wave of clinics is opening, driven largely by a motive that was less of a factor in the past: employers’ desires to reduce their health insurance premiums by taking care of workers before they need to see outside doctors.”
“A clinic serving a couple thousand employees can probably save $1.5 million to $2 million a year,” said Mr. Beech, a health care specialist at the Watson Wyatt benefits consulting firm.”

Aiming at the Value Proposition

Let’s remember our Income Statement: Revenues (minus) Cost of Goods Sold (equals) Gross Margins.

Gross Margins (minus) Sales, General and Administrative expenses (minus) Depreciation (equals) Earnings Before Tax and Interest, or Operating Profit.

If you still need a cheat sheet, see below:

As a classical approach to increase Profit, you should either increase Revenues or Decrease Costs. Considering that almost all approaches to increase Revenues (enter new markets, target new customers, increase prices, sell more…) demand higher investment in Advertisement and Marketing Campaigns, it is very unlikely that profits will grow as much as sales. You don’t need to be an MBA to reach this conclusion.

That leaves us with the less risky way to increase profits: reduce costs. Let’s see how it applies to our situation.

For instance, your health care company sells a product that reduces length of stay in the hospital by 2 days on average by patient. How much that translates into value for employers?

Benefit: less 2 days of LOS
$ Benefit: Cost-savings of $200 (each day in the hospital is around $100)

Company XPO has 1,000 employees that could benefit from this product in one year

Potential cost-savings: 1,000 emp x $200 = $200,000
And by the way, that benefit goes directly into the Operating Profit

Now the final question: How much more sales (units or $) should Company XPO make in order to reach the same increase in Operating Profits?

Suddenly, your product can be a terrific asset for a company looking forward to improving its bottom line. Your value proposition for employers should then be divided into two parts:

Part 1: “My product can help Company XPO reduce medical costs by $200,000 in one year, thus increasing Operating Profits.”

Part 2: “If Company XPO would like to see the same result, they would have to increase sales by (%, more units, more $...)”

The Invisible Impact

So far, we have been discussing the “Direct Costs”. These are the actual visible costs that companies can assess by checking claims and bills. But Direct Costs are far from being the end of the story.

In 2006 the Thomson Corporation estimated that Migraine Headaches cost U.S. employers more than $24 Billions annually (see the article here). Of these $24B costs, slightly more than 50% were due to Indirect Costs. These hidden costs can be divided into Absenteeism and Presenteeism.

Absenteeism is the absence of a worker from his job, in our case due to a medical condition. It can be easily translated into costs by multiplying the worker’s hourly wage by the number of hours he is absent from work. The final number will represent how much the company is investing in an employee while getting no return form his work.

John’s hourly wage is $30

John has been absent for two days: 2 days x 8 hours/day of work x $30

Total Absenteeism cost of $480. In other words, the company lost $480 since John didn’t work or produce anything during those 2 days

Remember the case about Company XPO above. Do the math: $480 absenteeism cost/employee multiplied by 1,000 employees…Much more than the Direct Costs we calculated!

Presenteeism happens when employees are working in spite of medical problems. The concept is very straightforward: if you have an employee feeling pain or any other kind of discomfort, he or she won’t be able to concentrate and, thus, will produce less than expected. Healthier employees work faster and more productively.

There are several ways to calculate Presenteeism, and I strongly recommend only two approaches:

1) Speak with your target employer. Ask if he understands the Presenteeism costs related with the condition and discuss ways to measure it.

2) If the first approach doesn’t work, look for published papers for relevant data.


Step 1: See how much Direct Cost savings your product can generate for a certain employer. The most challenging part will be to get the employer’s cost structure.

Step 2: After you get the numbers, assess the benefits of reducing Indirect Costs. Don’t forget to break it down into Presenteeism and Absenteeism.

Step 3: It is always a good idea to see how much familiar the employer is with the concept of Direct/Indirect Costs before demonstrating your results.

There is much more I’d like to describe and discuss, but I must refrain this blog to a strategic discussion. However, feel free to contact me for any other information you would like to share or receive in regards to employers.

Before I finish this post, I want to provoke you with a question:

“Since the average U.S. employee stays at job for only 4.5 years, is it enough time for companies reap the benefits of investing in their employees’ health?”

Let me know your thoughts. My answer will come with the next post.

May we all improve our value propositions for our clients!

Look forward to hearing from you,

Ernesto M. Nogueira

Friday, January 11, 2008

Creating a Multi-Stakeholder Approach

Last Post Review

In my last post I approached the reasons that led me to start this blog. In summary, the changing health care market and increasing barriers to access to new medical technologies are significantly impacting business. The proposal is to develop a channel where my ideas can (hopefully) stimulate other health care professionals to participate and share their thoughts. The health care market has changed, and health care business must change as well to be effective.


The word “stakeholder” has a few definitions. Here it refers to a group which has a share or interest in something. Thus, stakeholders are participants of the health care cycle which impact and are impacted by health care businesses.

We typically divide the market into companies, physicians and patients. Although incomplete, this scenario already brings three stakeholders to the table. However, this is not how things work; health care is much more complex, and therefore demands more comprehensive business strategies than simply “focus on key opinion leaders for driving growth”. Let’s see why…

Imagine you work for a Biotech company (feel free to substitute it for a medical device or pharmaceutical company as well) and are about to release a new product in the market. You probably have already done a few things: identified epidemiological factors (related incidence and prevalence), defined a price that will provide you a good ROI and NPV, positioned the new product versus competition, talked to patient groups to gain support, spoke with KOL physicians etc. However, have you asked yourself how will patients gain access to this product; in our case, a new compound? After all, several stakeholders interact between your company and the patient, and I’m not limiting myself to physicians.

To get a better idea, take a moment to analyze the image below. This is a perfect representation of the path followed by our new product until it reaches the patient.

Basically, we see 5 groups:

Manufacturers: Companies that develop and commercialize medical products (in this case, our Biotech company). Note that we include distributors because they usually participate in the commercialization process, or have you forgotten about them? After all, they have their margins, right?

Payers/Regulators: These are the most critical stakeholders nowadays because 1) they are the ones paying for your product (not the patient!); 2) they are hardly ever considered in health care business strategies; 3) finally, they may block access to your product which, in this case, will turn any great marketing strategy in dust. We’ll see more of them in this post.

Providers: The physical location where a medical professional will deliver care to the patient. Hospitals represent only one side of providers (although the most expensive side). There are business strategies focused solely on changing the provider channel, which may significantly reduce the cost of your product. Will your Biotech compound cost the same if applied in an ambulatory site of care versus a hospital? Imagine which one of these two providers has the most expensive cost structure.

Medical professionals: Note that I’m not using the word physicians. There is a type of professional that stays much closer to patients and delivers much more care than doctors: we need to recognize the importance of nurses to the system. And, of course, nurse assistants and medical staff.

Patients: Last, but not least. Great health care planning considers Patients as the final clients, and therefore, deals with all other 4 stakeholders groups in a way to maximize value (medical outcomes per $ spent) to patients. Yes, that is the same thought described by Prof. Michael Porter in his book “Redefining Health Care”. I absolutely recommend it!

And that is our health care market scenario. Does your business strategy reflect it?

Implications for business

OK, now that we understood who the health care stakeholders are (or participants, or actors), let’s focus on the purpose of this blog. What are the implications for business?

Two paragraphs above, I asked if your business strategy reflects the market, so let’s start there. Why do we need to consider all stakeholders in our strategy?

Remember Marketing 101: Segment, Target and Position your product. Divide the market into similar groups (Segment); Identify those groups most likely use your product (Target); Develop a message that will differentiate you from other competitors in the target customers’ minds (Positioning). How does it apply to the health care market?

Segment: See the image above again, your segmentation is there. Remember, patients are final clients, not the only clients. Segments: Payer, Provider, Medical Professionals, Patients. These are all your clients.

Target: Not much to do here, but consider all of them. Why? Because as opposed to other industries, if one stakeholder decides to block your product all the others may not have access to it. For instance, if a health plan does not recognize the value of your Biotech compound and doesn’t pay for it, neither patients will use it nor medical professionals will prescribe the product.

Positioning: Remember this: Each stakeholder has a different value proposition.

If stakeholders don’t understand the benefits of your product, they will block it. Read this January 9 article about the Pharmaceutical industry research drought in the US.

One product: different value propositions

Remember that your medical product represent different things to each stakeholder. Let’s use again the example of a Biotech compound, but remember that it perfectly applies to any other medical product (i.e. device or pharmaceutical).

For a moment, imagine that the product has FDA approval and is about to enter the market. You know it will significantly improve patients’ quality of life by minimizing certain disease symptoms and pain. However, not everyone wants that.

Manufacturers: They want ROI at the end of the day. And there is nothing wrong with that! On the contrary, they are in business for it and will reinvest a portion of profits to develop even better products.

Payers/Regulators: Minimize risks and costs. Risks: do they know that your product may lead to (expensive) complications? Are medical professionals adequately trained to use the product? Are outcomes sustainable? Are there evidences that demonstrate that the product works in real conditions (effectiveness)? Costs: if I pay for this compound, I need to stop paying for something else; after all, I don’t have budget to pay for everything. What technology does this Biotech compound substitute? Am I going to have a return on this investment based on either lower patient’s complications or less use of medical products in the future?

Providers: Do I need to train my staff? What minimal infrastructure is required for the product (i.e. at a certain temperature)? Do I need to make capital investments?

Medical Professionals: Are there clinical and economic evidence demonstrating the real benefits of the compound? Is it quick to deliver, or am I going to spend a lot of time with just one patient?

Patients: Does it improve my condition? Do I have private or public coverage to pay for this product? Does my family need to pay out-of-the-pocket, deductibles or any other expenses?

Recently I had the pleasure to join what I consider as the best health care business meeting I’ve ever had the chance to participate. The company I worked for was developing a certain product and invited not only medical professionals and patient groups to attend the occasion but also health plans representatives, distributors and providers administrators. At the end, we all gathered invaluable feedback that could be combined and translated into a superb marketing strategy addressing several value propositions. But what made it a brilliant meeting was not only the result, but the timing. The company decided to listen to all stakeholders before finalizing the product itself.

The earlier you decide to listen to your stakeholders, the more you can tailor your product to everyone’s concerns (or fears).

Imagine these two situations:

Situation one: You release an expensive product and months later receive communication stating that health plans are not paying for it. You decide to meet with several of them to see what is going on; after all, that was such as good product!

Situation two: Before the launch happens, you invite several stakeholders to introduce the product and hear their feedback. You realize that unless you demonstrate its long-term benefits (reducing others costs), health plans and government won’t pay for it. You do your homework and develop real-world analysis to demonstrate the cost-savings of using the product versus alternatives. You include it into your marketing message and launch the product.

In your opinion, which situation is more likely to lead to success?

Wrapping up

Lesson #1: Recognize the different groups and actors in the health care market.
Lesson #2:
Each stakeholder has a different value proposition.
Lesson #3
: Address all value propositions with your Marketing strategy.

Final lesson: The earlier you do it, the higher your returns will be. And don’t worry, (really) good products can generate value for all stakeholders.

But what if you have already launched the product and are currently facing issues with stakeholders? Well, either you don’t have a good product or you may need to change your Marketing strategy. This is certainly a topic for the future.

In the next post I intend to focus on Employers, the real payers of health care. Let's understand the Marketing implications for us.

Send me your comments!

Ernesto M. Nogueira

Friday, January 4, 2008

Why this Blog and why it now?

The health care system has been facing a notorious rise in costs for the past decades, and the last years have pointed to an approaching failure of the system. In very few words, there is not enough money to fund health care for all individuals. The problem has many facets, and the simpler one is the fact that medical costs have risen more than inflation and overall salaries.

This is not a problem of a single country; instead, it’s a general aspect that affects all health care systems around the globe. Nevertheless, this shouldn’t be news to any one, as the Media has brought many articles around the theme. For instance, read this article posted by the Ny Times on January 2nd about the current U.S. Presidential race.

Why this Blog?

If we get already enough updated information around the discussions and decisions made on health care, what is the purpose of another source of information?

Although I have no problems to find the latest news on health, I cannot find enough sources describing and analyzing the impacts to health care business. If you consider that as secondary, think again. Science has evolved in a radical pace and we have new promises for treatments and diagnostics that may considerably increase our standards of life. If you’re healthy, you’ll find advanced genetic tests that may predict your chances of having a heart failure, for instance. On the other hand, if you have a chronic disease such as Diabetes, new devices may help you keep you blood glucose under control. And the list goes on…

But again, there is not enough money to pay for everyone’s access to health care. If neither governments nor health plans want to pay for a specific treatment or product, why should we continue to invest in Science? If we want to increase quality of life in the future, with more access to health care, we better start considering the business impact of health care costs for all stakeholders: patients, health care professionals, governments, providers, companies, health plans and employers. One day, we all need access to care.

And this is the reason I’m starting this blog: as an attempt to bring discussion to the business level, hopefully with the help of other professionals such as you! Let’s analyze the impact of the increasing health care costs to marketing strategy, product positioning, segmentation and message, among other topics. We can improve health care business; and by doing so, improve the overall system.

Why it now?

After nine years looking at the health care market from the perspective of NGOs, government and companies at three continents, I felt it was time to start sharing my thoughts and absorbing others’ opinions and experiences.

We should all be unsatisfied with health care. Note that I’m using “should” because a few ones are not. Although some of us either don’t have health problems (therefore, don’t use the system) or don’t have problems to pay for medical treatment (thus, don’t have problems to gain access to adequate care), I guarantee that all of us pay taxes. Not getting into the details of how much tax we pay, I believe we all would like to see our tax money being used in a proper and efficient way. In other words, I believe no one likes to pay taxes for nothing, but for improvements. After all, paying more does not mean getting better treatment: the U.S. has the highest health care expenditures in the world, but much less life expectancy rates than several other countries paying much less for their medical care.

This is definitely not a critic to any government! By the way, I’m tired of listening to one stakeholder blaming another for the rise in medical costs, decreasing standards of care, etc. As mentioned by Professor Michael E. Porter in the (brilliant) book “Redefining Health care”, all stakeholders (or participants) must take action to improve the system. Having said that,
I don’t intend to, and will not attack any stakeholder in particular because 1) this is a waste of our time and intelligence; 2) after having worked with different stakeholders, I found no one more responsible than the other for the situation we currently face.

With politicians intensively discussing health care in their agendas, companies looking for ways to improve access to products and individuals (patients) getting more knowledgeable and demanding about treatments, this is the perfect time to start this blog as an initiative to stimulate discussions on how we can improve health care business. This means getting more and better competition around things that really matter as outcomes, instead of focusing on sharing risks or denying access to adequate care.

Again, health care business is everyone’s matter, and all stakeholders should act in conjunction to improve the system. This blog will mainly focus on the role of Life Science companies, but I also intend to explore (and welcome comments) about other sides.

One final note

Finally, I believe it would be good to have a certain consistency to my posts to this blog. I intend to post at least one comment per week, but won’t choose a specific date.

Enjoy the blog. Participate and post your comments.

Ernesto M. Nogueira

Tuesday, January 1, 2008


Welcome to my personal blog!

I'm Ernesto Nogueira and this personal blog was created in January 1st, 2008 as one of my first decisions this year. The idea is to share my passion for Global Health Care business with any one interested.

You'll find more info about me in the specific section, but just for a quick intro, I have been working in Health Care Marketing and Strategy for the past 9 years. Throughout this period I have worked in the W.H.O., International Public Health Agencies and Top Global Pharmaceutical Companies (I currently work in one of them).

My two goals here are: 1) to share my thoughts about Global Health Care business aspects and, even more important, 2) to establish a channel where other professionals can share their thoughts as well.

Hope you enjoy the topics and take part in the discussions. BTW, feel free to reach out to me anytime. Critics and feedbacks are constantly welcomed.

Stay tuned and Happy New Year!

Ernesto M. Nogueira