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

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