The traditional approach to selling in pharma is challenged – extended-care models increase value creation Choosing an extended-care model – business challenges/opportunities and need-to-address stakeholders Clear value is created for key stakeholders – however, the standard treatment model is interrupted Different levels of business model innovation are required – involving delicate trade-off between risks and benefits
Extended-care models New ways of supporting and selling in pharma
Changes in the macro and micro environment are challenging pharma companies' traditional sales methods • For years, pharma companies have focused on selling their products, primarily through HCPs. This traditionally involves sales forces that visit the medical practitioners to show the products and discuss advantages, participation in congresses to promote and discuss different drugs and be involved of KOL boards in the development of new drugs • However, changes in the macro- and micro environment are challenging pharma companies: increased out-of-pocket spending will increase patient influence on treatment and realised efficacy levels in trials are unlikely to trigger desired reimbursement levels for the new drug. Moreover, standard distribution chain through HCPs is unlikely to realise compliance with special/detailed treatment schemes • In response to this, leading pharma companies have started to look into different ways of supporting and selling their products. One initiatives has been to use extended-care models. These increase the value creation for key stakeholders by taking more responsibility for realising outcomes through execution of new activities, extending the traditional pharma value chain • Our learning from working with pharma companies seeking to use extended care models is that they traditionally take their point of departure in five key considerations – The choice of extended-care model should be guided by the types of business challenges/opportunities and stakeholders that must be addressed – Extended-care models entail a clear hierarchy of value creation for stakeholders; however, with a corresponding degree of change required by stakeholders – For pharma, extended-care models require different levels of business model innovation – Establishing an extended-care model involves a delicate trade-off between risks and benefits – Choosing extended-care models for the right reasons and mitigating risks is key to driving value
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What are extended-care models?
In our definition, extended-care models • Increase value creation for key stakeholders … • … by taking more responsibility for realising outcomes … • … through execution of new activities extending the traditional pharma value chain
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Extended-care models can potentially be leveraged to address various macro and micro-level challenges
Macro level
Increased marketing spend
Reduced leverage with regard to choice of treatment and drug among HCPs
Increased pressure on price and focus on cost containment from payers
Realised efficacy levels in trials are unlikely to trigger desired reimbursement levels
Increased demand for reimbursement documentation from payers Low molecule efficacy
High level of positive non-health economic effects
Micro level
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Increasing out-of-pocket spending will increase patient influence on treatment Growing patient influence Devolution of treatment in primary care
Could creating extended-care models potentially be (part of) the answer to key pharma industry challenges?
Undeveloped market place
End users not prone to accept treatment
Enhanced focus on pharma companies' societal value creation New treatment procedures required Lack of differentiation from competitor drug
High compliance demands
Standard distribution chain through HCPs is unlikely to realise compliance with special/detailed treatment schemes
Extended-care models
Extended-care models Increase value creation for key stakeholders …
Key considerations 1
The choice of extended-care model should be guided by the type of business challenges/opportunities and stakeholders that must be addressed
2
Extended-care models entail a clear hierarchy of value creation for stakeholders; however, with a corresponding degree of change required by stakeholders
3
For pharma, extended-care models require different levels of business model innovation
4
Establishing an extended-care model involves a delicate trade-off between risks and benefits
5
Choosing extended-care models for the right reasons and mitigating risks is key to driving value
… by taking more responsibility for realising outcomes … … through execution of new activities extending the traditional pharma value chain
5
1
The choice of extended-care model should be guided by the type of business challenges/opportunities and stakeholders that must be addressed Examples of business challenges*
Information supply
Value-adding services
Outcome guarantees
Care management
• Limited knowledge or acceptance of condition and/or poor recognition of treatment benefits
• Low ability/motivation among HCPs/patients to perform disciplined treatment to realise outcomes
• Questionable perceived efficacy threatening reimbursement levels
• Lack of competences and/or systems in place to realise desired treatment outcomes
Payers and policy makers
Primary stakeholders addressed
HCPs
Patients
Examples
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• Educational materials for HCPs and patients with regard to benefits and treatment procedures
• Development/operation of compliance programme • Monitoring of treatment outcomes and identification of improvement potential
• Refund of treatment costs upon unsuccessful outcomes • Alliance with stakeholders around a "medical ambition" with associated responsibilities and rewards
• Operate clinics to treat diagnosed patients, finance treatment, including complications, and receive value-added grant per patient
NOT EXHAUSTIVE
1
Pharma companies are slowly beginning to use extended-care management models
Cases
Information supply
Value-adding services
Outcome guarantees
• Novo Nordisk: Changing Diabetes Barometer tracking and publishing patient outcome
• Biogen Idec: Supply of online/offline tools to help HCPs overcome psychosocial barriers of treatment and assess and handle patientspecific risks
• Chantix: Refund of treatment costs if antismoking drug proves unsuccessful
• Novo Nordisk: Diabetes Nurse Education + Diabetes screening programmes
Characteristics
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• Increased value for stakeholders through generation and sharing of cutting-edge knowledge
• Continuous active/operational support to stakeholders in extracting maximum value from product
• Novartis: Guarantee of treatment outcome for osteoporosis patients or treatment costs will be refunded
• Sharing of treatment risk between payers and pharma through a direct link from patient outcomes to payment
Care management
? • Provide management of care process and take over budget responsibility
2
The extended-care models entail a clear hierarchy of value creation for stakeholders, however, they also contain corresponding interruption of the standard treatment model Information supply
Value-adding services
Outcome guarantees
Care management P&Ps
Value creation for primary stakeholder
P&Ps
P&Ps, HCPs, patients • Better outcomes HCPs and patients • More knowledge on treatment potential and how to realise outcomes
Interruption of standard treatment model
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• Establishment of (branded) communication between pharma, HCPs and payers
• Outsourcing of some care expenses to pharma
• Containment of treatment costs through establishment of clear incentives for pharma to "cure patients" instead of "selling drugs"
• Budget certainty, containment of treatment costs and outsourcing of care activities
• Support in performing treatment and ensuring compliance
• Ongoing "operation" of treatment, with pharma on the side as a service provider
• Establishment of new payment model, including new requirements to adhere to treatment standards and outcome reporting
• Establishment of new parallel care system "competing" with standard care system
3
For pharma, the extended-care models require different levels of business model innovation ‌ Information supply Degree of change Low
Operating model
Value proposition
Description
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Value proposition paradigm
Disease treatment vs e.g. disease prevention
Product/service offering
For example drug vs new value-adding offering
Revenue model
Value chain
Cost model
Organisation
Upfront pay vs other pay schemes
Pharma business system and processes
Cost types and composition
Capabilities, structures and processes required
Value-adding services High Low
Outcome guarantees
High Low
Care management
High Low
High
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… and involve a delicate trade-off between risks and benefits Risks
Outcome guarantees
Care management
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High
• Increased awareness regarding benefits and treatment potential among HCPs and patients
Information supply
Value-adding services
Benefits
• Establishment of new business processes and competences to "operate" treatment support
• "Supportive" relationship with HCPs and patients • Improvement of compliance
• Lower predictability of revenue stream
• Partner relationship with P&Ps → business volume
• Complex new business model requiring a total new set of capabilities • Significant upfront investments in networks of facilities and staff
• Partner relationship with P&Ps → business volume
Care management
Outcome guarantees
Risk
Value-adding services
Information supply Low Low
High Benefit
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Defining what extended care model to pursue should be based on thorough investigations of the challenges/needs addressed and the risk/benefit underlying the prioritisation of a specific model Macro-level challenges
1
Phase 1 Assess industry trends and stakeholder needs and the rationale to address these
2
Micro-level challenges
What key trends and stakeholder needs is the drug/ company affected by?
What is the rationale for your company to address these trends and needs?
Payers
Policy makers
GPs and specialists
Opportunities
Opportunities
Opportunities
Risks
Risks
Risks
Information supply
Phase 2 Develop gross list of possible extended care concepts and prioritise concepts
•
What concepts/concept elements can accommodate the rationale?
Gross list
Concept no. 3
4 Which concepts are relevant to pursue?
Concept no. 2 Concept no. 1 Purpose Benefit Cost
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Educational materials for HCPs and patients
• •
Monitoring of treatment outcomes Supply of online/ offline tools
High
Risks
Outcome guarantees •
Care management
Refund of treatment costs
• •
Prioritise Attractiveness
3
Value-adding services
Patients Opportunities
Employer programmes Operate clinics
Recommendations C1 C..
Medium
Low
C..
C2
C..
Low
• Investigate further
C3
C..
Medium Feasibility
High
• Required analysis • Plan for detailing and • evaluating prioritised concepts