ims asia-pacific insight magazine 2015

Inside this issue• Calculating risk and reward: Understanding and optimizing risk-sharing agreements in Asia Paci�c

• Re-evaluating our relationship with data: Real-world evidence as a catalyst for success in Australia’s oncology market

• New market, new rules: Decoding China’s county hospital market

• Achieving excellence by re-engineering the hospital supply chain in India

2,000c o u n t i e s i n

Chinac o v e r M o r e t h a n

70% o f t h et o t a l p o p u l a t i o n- a r o u n d

900million people

In the next5 years,10 morec o m p a n i e s w i l l e n t e rAustralia'so n c o l o g y m a r k e t

Up to 40%of

h o s p i t a l c o s t sr e l a t e t oi n v e n t o r y and supply chain p r o c e s s i n

India

IMS Asia-Paci�cInsight

Issue 5 | 2015

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Welcome letter ................................................................................................................................................................................. 3

Calculating risk and reward Understanding and optimizing risk-sharing agreements in Asia Pacific ........................................................................5

Increasingly, these stakeholders and governments are faced with the dual (and sometimes contradictory) challenge of ensuring financial sustainability and expanding access. This article reviews the types of risk-sharing agreements emerging in APAC, and discusses the importance of developing a strong healthcare economic model to enable win-win schemes for manufacturers and payers alike.

Re-evaluating our relationship with data Real-world evidence as a catalyst for success in Australia’s oncology market ..................................................11

In a mature oncology market,opportunities to provide cancer patients with optimal health outcomes and cost efficient therapies are challenging. This article will explore two drivers to improving efficiency in oncology treatment today – biosimilars and targeted therapies – and the role credible real-world evidence can play in extracting value for the patient.

New market, new rules Decoding China’s county hospital market ..............................................................................................................................................17

Following several years of tremendous expansion, the Chinese pharma market is now experiencing slower growth due to increasing cost-containment measures, restrictions on antibiotics usage and maturing core markets. However, a closer look reveals that while this is the case in top-tier cities, there remains significant opportunity for growth in the broader, county-level market segment.

Achieving excellence by re-engineering the hospital supply chain in India ............................23

Across the globe, healthcare spending accounts for an ever-increasing portion of countries’ GDPs. This sector is therefore challenged to manage costs and simultaneously improve patient outcomes. This is particularly true in hospitals, as they often represent the largest component of national healthcare expenditure. To manage costs better, many hospitals are taking a new look at their supply chain, which can account for 35-40% of their overall costs.

Contents

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Welcome letter

Driven by strong healthcare investments and socio-economic growth, Asia Pacific is the single largest contributor to global pharmaceutical market growth and has become the priority playing field for healthcare companies worldwide. Similar trends emerge across the region, including cost-containment policies, a dominance of generics, and expansion in Tier 2 cities. Yet, each country has distinct distribution channels, pricing and reimbursement structures, and fast-evolving patient-provider dynamics that vary greatly from one another.

At IMS Health, we are dedicated to unraveling these complex environments to help companies run smarter, through connecting industry stakeholders across the entire healthcare continuum and equipping companies with the insights and technology to succeed.

In the pages to follow, you will find analyses on the hot topics and hurdles that many companies are facing, ranging from discovering new opportunities when growth is stabilizing, to managing the mounting burden of operational costs and patient access to innovative drugs.

Combining a wealth of data, technology solutions and our best-in-class local and regional expertise, we hope to bring you fresh perspectives to navigate through the challenges and opportunities in this dynamic region.

In this issue, you will find:

• A discussion on how healthcare economic modeling can help manufacturers and payers in Asia Pacific achieve win-win situations in the crisis of patient access to innovative drugs

• A roadmap to successful launches, maximized revenues and sustainable engagement in the context of the slowing Australian healthcare environment

• An exploration of China’s county markets as a significant growth opportunity

• Recommendations on managing hospital supply chain costs in large markets like India

Moving forward with great investments in technology and service delivery, we are committed to partnering with our clients to help them achieve success and improve healthcare outcomes across the region.

Sincerely,

Robert ChuPresident Asia Pacific & China

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While health technology assessments and economic evaluations are helpful in calculating the value of new drug therapies in relation to their costs, the allocation of appropriate financial resources for manufacturers and payers is a real issue. Increasingly, these stakeholders are faced with the dual (and sometimes contradictory) challenge of ensuring financial sustainability and expanding access. This is particularly true in low- and middle-income countries where spending is constrained and cost-effective reimbursement schemes are necessary to alleviate the often-prohibitive cost of innovative treatments.

To address these challenges, stakeholders are exploring risk-sharing agreements, or ‘pay-for-performance’ agreements, that link reimbursements directly to the patient population, with either financial- or outcomes-based conditions. But entering into such agreements has its own risks for manufacturers and payers alike, and evaluating the potential financial impact is key to choosing a successful, sustainable model.

Calculating risk and reward Understanding and optimizing risk-sharing agreements in Asia Pacific

A crisis of access Asia Pacific, like other low- and middle-income countries, is struggling to reconcile rising healthcare standards and patient expectations with reliable, affordable access to necessary, often life-saving, treatments. Here, disease categories that are considered high cost, and high risk, pose significant challenges for manufacturers and payers who are searching for cost-effective ways to improve patient care in the region. Such categories include:1

•High unmet needs (e.g. Hepatitis, oncology, rheumatoid arthritis, multiple sclerosis) •Small populations (e.g. Acute lymphoblastic leukemia, hemophilia, Kawasaki disease) •Uncertain evidence bases (e.g. Drotecogin alpha, Bosentan) More often than not, patients facing these illnesses also face significant barriers to the innovative, but expensive, medicines they need. Research conducted at the Southeast Asian Cancer Care Access Network in 2011, for example, revealed that only 15% of patients in the region had access to the basic standard of cancer care.2

Unfortunately, in markets that are characterized by limited funds and even scarcer resources, increasing access can

come at a high price. Risk-sharing agreements, while new and largely untested in Asia Pacific, may offer decision makers the structure they need to minimize financial uncertainty and maximize healthcare outcomes.

Risk-sharing basics The concept of risk-sharing agreements (RSAs) is rooted in the need to create an accessible, sustainable cost structure for manufacturers and payers as they launch innovative medicines.

Unfortunately, the very nature of the diseases that require high cost medical innovations means that outcomes are uncertain. As a result, bottom line value is hard to guarantee for both manufacturers, who must demand a profitable initial list price, and payers, who must strategically direct resources to those treatments that deliver the greatest value to the overall health system. Nevertheless, attempting to value a drug’s clinical and economic effectiveness is becoming a major factor in both launch and reimbursement decisions.

In effect, RSAs are alternative pricing schemes that use patient population and outcome data (clinical or financial) to reduce the cost of treatment without affecting the list

1. Coulton, Lisbet, et. al. Outcomes-based Risk-sharing Schemes: Is There a Potential Role in the Asia-Pacific Markets? Health Outcomes Research in Medicine, Vol. 3, Issue 4, Nov. 2012, Pages e205-e2192. Lopes, Gilberto de Lima, “Issues in Access to Cancer Medications in Low- and Middle-Income Countries,” Cancer Control, 2013.

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CAlCUlATING RISK AND RewARD: UNDeRSTANDING AND oPTIMIzING RISK-SHARING AGReeMeNTS IN ASIA PACIFIC

price – increasing access for patients while decreasing the burden on manufacturers and payers.

• Forpatients, RSAs reduce the cost burden of co-payments and increase access to the newest therapeutic advances, thereby improving overall health outcomes.

• Formanufacturers,RSAs preserve the list price of drugs, avoiding any negative ripple affects when lower, market- specific prices are referenced by other countries. They also help “build trust and good faith in products with payers by providing their therapeutic value via real- world evidence collections.” 3

• Forpayers,RSAs are intended to “diminish the impact on the payer’s budget…brought about by either the uncertainty of the value of the medicine and/or the need to work within finite budgets.” 4

Although there is still some uncertainty or variation in definition, there are fundamentally three types of risk-sharing agreements:

• Finance-based:Such agreements base the conditions for reimbursement on an overall patient or disease population, and can include caps on per-patient costs, sales volumes, or dual-price deals.

•Outcomes-based:These are referred to as pay-for-outcome or performance-based agreements, and set conditions on a pre-determined outcome or response to treatment. Here, the manufacturer guarantees a certain level of performance and reimbursement is handled on a per-patient basis.

• Coveragewithevidencedevelopment:Here, access is granted on a conditional basis while evidence is gathered over a defined period. Such an agreement enables payers to simultaneously increase the availability of a treatment, while gathering real-world data on its effectiveness.

while RSAs are still relatively new, they are proving to be a viable option for both payers and MNC manufacturers, both of whom are keen to play a role in improving patients’ access to medicines. According to the International Society for Pharmacoeconomics and outcomes Research (ISPoR), outcomes-based agreements in particular “are increasingly part of pricing models for the development of new molecules.”

But how can stakeholders avoid entering into agreements that could be financially non-viable, or unsustainable in the long-term?

The budget-impact modelAgain, the irony of risk-sharing agreements is that they are designed to mitigate uncertainty for therapies (such as oncology) where outcomes are, in fact, the most uncertain. This dynamic is further complicated by the fact that outcomes will vary by product, indication and, sometimes, patient populations. Arriving at a ‘win-win’ arrangement for manufacturers and payers, therefore, requires developing a model that analyzes a range of unique variables to quantify the impact of a given agreement on revenue, cost and profitability. with this information, stakeholders can then settle on a proposed scheme that has the best likelihood of meeting the desired business outcomes.

The backbone of a budget-impact model (BIM) is an intricate web of variables, including local demographic, epidemiologic and market data, taking into account local clinical practices and relevant healthcare financing features. of course the features of the potential agreement schemes must also be included to ensure relevant and focused analysis. The key is to ensure that the BIM is flexible enough to allow the interplay of all input values.

“Payers and manufacturers are both invested in improving patients’ access to innovative therapies,” explains Seng Chuen Tan, Director, HeoR and Real-world evidence at IMS Health Asia Pacific. “But by necessity they want to minimize the risk of financing treatments with uncertain value. Risk-sharing schemes offer a good option, but all the pricing and budget parameters of any given formulae must be carefully assessed.”

3. Hunter, Glasspool, et. al “A Literature Review of Risk-sharing Agreements” J. Korean Academy of Managed Care Pharmacy Vol. 2, No. 14. Adamski, Jakub, et al., “Risk sharing arrangements for pharmaceuticals: potential considerations and recommendations for European payers,” BioMed Central, 2010.

Example: In 2014, South Korea’s Ministry of Health and Welfare (MOHW) began piloting risk-sharing schemes with manufacturers in order to improve access to innovative medicines that fulfill the criteria for “semi-essential drugs.” The MOHW has laid out four finance-based risk-sharing options available to manufacturers: expenditure capping, utilization capping, dual price, and outcome-based cost sharing.

Example: In 2000 AIFA (Italian Medicines Agency) launched the CRONOS project to evaluate the real-life effectiveness of Alzheimer’s disease drugs. Their methodology included collecting and analyzing well-defined health outcomes from a cohort of patients. In the study, the public insurer reimbursed the cost of medication only for those patients who had responded after 4 months of treatment (the cost of for non-responders was covered by manufacturers)

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Narrowing a list of potential RSAs to evaluate is a key priority, and usually requires deep discussion between experts in Health economics and outcomes Research, Medical Affairs, Clinical Research, and Commercial. once a short list of RSA structures are selected, the model can be built to accept the specific features of the deals under evaluation, such as:

• Thenumberoftreatmentcyclestobecoveredbyeachparty

• Thesequenceoftreatmentprotocols

• Thepointatwhichoutcomeswillbemeasuredfora performance-based structure

Using baseline costs as a starting point, a well-constructed BIM will be able to estimate projected costs that account for a myriad of input values. Then, by looking at the difference between baseline and projected costs, the net budget impact can be determined (See Fig. 1).

Keys to successof course the best BIMs are tailored to the proposed agreement and the intricacies of the treatment in question. However, in some cases it is possible to use an existing model that has been built around similar (though not identical) parameters.

To ensure any model delivers the best possible results, though, the following principles must be in play:

1. It must be designed specifically to accommodate the treatment indication in question

2. It must be designed to reflect local clinical practice and any unique features of the healthcare delivery system

3. The perspective of one party in the proposed arrangement (meaning the manufacturer, payer, or patient) must be clearly articulated

4. All inputs must be evidence-based, supported by a Randomized Clinical Trial (RCT), scientific publication, or established data source, as examples

5. The basic design elements must include the time horizon of the scenario and the desired model results (e.g. total costs or cost breakdown between drug costs and safety monitoring)

6. when modeling performance-based schemes, the desired performance must be both defined and quantifiable

But regardless of the source, designing a feasible scheme means looking at all the angles. “The most meaningful risk sharing schemes are ultimately the ones where all possible uncertain factors are evaluated, and the model is supported by the best available evidence,” concludes Mr. Tan.

Fig. 1: The structure and outcome of the budget impact model

Baseline Costs

ProductVariables

Number of eligible patientsDrug adoption rate

Number of treatment cyclesTreatment delays

Dropout ratesResponder rates

Costs incurred if no coverage or no

risk-sharing agreement

Budget Impact ModelNet Budget Impact

Projected CostsCosts arising from covering the product

Baseline CostsCosts incurred if no coverage or no risk-sharing agreement

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CAlCUlATING RISK AND RewARD: UNDeRSTANDING AND oPTIMIzING RISK-SHARING AGReeMeNTS IN ASIA PACIFIC

SUMMARYAcross Asia Pacific, developing creative, alternative pricing schemes across the value chain, from manufacturers to payers is essential to ensuring patients across the region receive affordable, sustainable access to even the most innovative treatments.

Risk-sharing agreements provide a unique and powerful vehicle to achieve these goals, delivering ‘win win’ outcomes for all stakeholders. However, finding the best scheme often means weighing a multitude of variables to ensure that the final agreement is both financially viable and sustainable, and ultimately able to deliver reliable benefits to the patient. A well-designed budget impact model enables an objective, informed perspective on the impact of various schemes in advance of proposals between payers and manufacturers, and ultimately becomes a key tool in the ability of stakeholdersin the region to increase both access and affordability.

To continue the conversation, please contactSeng Chuen Tan, Director, HEOR and Real-World Evidence, IMS Health Asia Pacific at [email protected] and Joe Caputo, Regional Principal, HEOR and Real-World Evidence, IMS Health Asia Pacific at [email protected]

In this scenario, a scheme was designed using the best available clinical evidence. A win-win situation was achieved by improving access for more patients, which also meant stronger uptake and revenue for the manufacturer.

2014

2015

2016

2017

2018

¥ 20,000,000 ¥ 40,000,000 ¥ 60,000,000 ¥ 80,000,000 ¥ 100,000,000 ¥ 120,000,000 ¥ 140,000,000

Sample business impact model results

Base case

Scenario 1

Revenue

@IMSHealthAPAC

IMS Health Asia Pacific


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IMS Real-World Evidence Solutions & HEOR is ascientifically credible partner to pursue more impactfulHEOR and increase the reach of your insights.

IMS Health is committed to helping you succeed

• Largest global team with HEOR, epidemiology, drug safety and RWE expertise based across 18 countries

• Strong scientific voice reflected in over 2,500 publications

• Market leadership in developing and adapting robust economic models

• Established success in generating and communicating RWE to advance stakeholder engagement, including guideline development, compliance program management and managed entry agreements

• Most advanced RWE capabilities and technology driving powerful scientific and commercial insights, including data sourcing, warehousing, integration, curation and protection

• Broadest and deepest collection of scientifically validated, anonymous patient-level data assets, enabling therapy area, market-specific and global insights

RWE is ready to unleash the power of HEOR

Europe +44 (0) 20 3075 4800USA +1 (703) 837 5150Asia Pacific +65 6412 7365Latin America +52 55 5089 5205

[email protected]/rwe

IMS REAL-WORLD EVIDENCE SOLUTIONS & HEOR210 PENTONVILLE ROAD, LONDON N1 9JY, UK© 2015 IMS Health Incorporated and its affiliates. All rights reserved. Trademarks are registered in the United States and in various other countries.

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SERVICES AND ENGAGEMENT

11

From almost any angle, the Australian oncology market is robust. Currently the 10th largest oncology market worldwide, annual sales for the sector totaled AU$1.5 billion in 2014. 1 Such figures are especially significant when considered in the context of the larger Australian prescription market, which has been experiencing slowing growth over the past 5 years (see Fig. 1).

In Australia, growth in oncology is largely driven by the high market need for activity and progress in R&D and treatments; 1 in 2 Australian men and 1 in 3 women will develop some form of cancer (malignant or benign) in their lifetime, and 1 in 4 men and 1 in 6 women will die of cancer before the age of 85. 2

Many pharma companies have already identified potential gaps in treatment options, and have committed to providing oncology patients in Australia with better value: 43 companies have active operations, with a total of 93 molecules on the market. In the next 5 years, 10 more companies are poised to enter, and 72 molecules will be submitted for reimbursement. 3

However, though opportunities to capture market share may seem abundant, an increasingly difficult regulatory environment and an even more complex patient landscape is creating a gauntlet for companies who want to build or expand their oncology portfolio in Australia. Here, as in the rest of the world, scrutiny of both products and patients is intensifying, driving the need for credible, long-term data into the spotlight.

An evidence-based strategy for oncologyThe value of real-world evidence (Rwe), or patient-level data, to inform clinical and commercial decision making is increasingly being recognized across healthcare, and particularly in oncology. It has proven to be a key ingredient in driving successful strategies across the product lifecycle: • Pre-market – enabling more focused, informed R&D and clinical trial design

• Post-market – enhancing pharmacovigilance, epidemiology, patient compliance and other treatment insights (see Fig. 2).

Source: IMS MIDAS, Dec 2013. Pharmerging includes retail only for Brazil and Mexico. Oncology includes therapeutic treatments as well as supportive care, radiotherapy, and immunotherapies

Fig. 1: Evolution of Australian total prescription market vs. oncology market

02010 2011 2012 2013 2014

4

2

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8

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14 9%

6%

3%

0%

-3%

-6%

-9%

-12%

Sales AU$B Growth

1.2

3.0%

6.7%

8.4%

6.8%

0.3%

4.2%

-1.2% -0.9%

1.3 1.4 1.51.1

oncology market growth Total prescription markets

Total prescription market growth oncology market

Source: IMS MIDAS (based on actual ex wholesale transaction price), MAT Dec 2014

In an ever evolving oncology market, with mature categories like alkylating agents and cytotoxic antibiotics coupled with innovative targeted therapies like Keytruda and Opdivo coming to market, the need for sound economic arguments is critical for success. In the global oncology market, the application of real-world evidence (RWE) can help life science companies not only achieve launch success but maintain ifferentiated positions in their market. Nowhere is this more evident than Australia.

This article will explore two drivers to improving efficiency in oncology treatment today – biosimilars and targeted therapies – and the role credible RWE can play extracting value for the healthcare stakeholders. The end result could include better market access, more directed patient engagement strategies, and ultimately a more valued healthcare provider in Australia’s complex oncology landscape.

Re-evaluating our relationship with data Real-world evidence as a catalyst for success in Australia’s oncology market

1. IMS MIDAS, MAT December 2014 (Ex-Manufacturer Price). 2. http://canceraustralia.gov.au/affected-cancer/what-cancer/cancer-australia-statistics. 3. Medicines Australia Oncology industry taskforce report, “Access to Cancer medicines in Australia,” July 2013;

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Re-evAlUATING oUR RelATIoNSHIP wITH DATA ReAl-woRlD evIDeNCe AS A CATAlYST FoR SUCCeSS IN AUSTRAlIA’S oNColoGY MARKeT

From an even broader perspective, Rwe is helping tochart the path toward value-based medicine. In this model, patients become more than just the sum of doctor visits; each patient is a unique mix of personalized experiences, behaviors and preferences. Rwe not only helps to elevate an understanding of end-users, but also enables a more effective use of resources that efficiently and proactively caters to the needs of these individuals.

Rwe’s future, however, is not without challenges. Australia, like other countries, has had to confront a number of ancillary concerns around the collection and use of Rwe, including privacy, consistency and objectivity. Generating and collecting credible data, in particular, has proven to be challenging, with many pharma companies in Australia mainly relying on clinical trials and basic primary market research. As a result, Rwe has not been widely applied by Australian commercial decision makers to date, even though a range of formalized, sophisticated data is available (see Fig. 3).

But when the game changes, so too must its players. As the types and prevalence of cancers rise in Australia, and the market continues to fragment, opportunities emerge to target specific markets to generate value. Certainly for niche or less common cancers, where the patient population is too small for controlled evaluations, Rwe can compliment clinical trial data to critically expand the universe of information available.

Furthermore, when sourced and used appropriately, Rwe can enable “a move from effectiveness projection to effectiveness measurement” 4 – a significant benefit especially in markets such as Australia where the regulatory and stakeholder landscape is placing a high premium on pharmacoeconomics.

And so identifying, evaluating and capturing new market segments may require a new approach to information – where it comes from, how it is used (both pre and post launch), and how it can bridge the gap between the patient and pharmaceutical companies.

4 IMS Health AccessPoint: Volume 4 Issue 8, p. 7.


Fig. 2: Applications of real-world evidence in oncology

Fig. 3: Heterogeneity of RWE across the Asia-Pacific region: Illustrative drivers and market comparison

Research and Scientific Commercial Application

Clinical outcomes Measurement Access and Pricing

Treatment Pattern Understanding

Clinical Pathway Understanding

Safety and value Demonstration launch

Patient Identification

Marketing Campaigns, ongoing Commercial Activities

Comparator Selection Partnering and value-Added Services

Use of RWE in oncology

Source: IMS AccessPoint, Oncology Special Edition, May 2014 Not a complete list of Rwe applications

India

China

Japan

Australia

Taiwan

South Korea

Formalized evidence in access

Accessibility of sufficient data

value with commercial decision makers

Standards, methods, legal structures in place

Compelling market fundamentals

low

low

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low High

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Source: IMS Health AccessPoint, Volume 5, Issue 9

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Biosimilars in Australia: Data-driven access Globally, as an increasing number of biologic oncology drugs approach patent expiry, the market value of biosimilars is set to soar, reaching US$12 billion by 2020.5 In Australia, biosimilars will play an increasingly important role in the market as a way to mitigate rising healthcare costs. especially in the oncology market, biosimilars can also offer an opportunity for pharma companies to broaden their portfolios and ensure continued growth in the face of increasing market fragmentation.

However for most mature markets, including Australia, there are significant barriers to entry, including: • Higher development costs, as compared to generics • High regulatory hurdles • Brand recognition of original biologics • low price differentials from biologics (largely the result of price negotiations undertaken by the biologic manufacturer with hospitals as patent cliffs approach) • Competition with generics

Australia’s access pathway for biosimilars is particularly complex and highly regulated, with the Therapeutic Goods Association (TGA) relying heavily on clinical proof in approval decisions. The process can also be quite lengthy, especially for oncology, with most products requiring two or more submissions, price reductions and even risk-sharing agreements (see Fig. 4). For biosimilars, the process is often duplicative, demanding thorough, case-by-case-assessments for entities that are often already approved by other regulatory bodies, such as europe’s eMA.6 In other words, each biosimilar product introduced in Australia represents a brand new challenge, despite its approval history worldwide; registration in europe does not necessarily guarantee registration in Australia, despite nearly identical legislation.

Unfortunately, in oncology where treatments are time-sensitive and often have uncertain prognoses, navigating these prolonged legislative and regulatory requirements can prove to be a prohibitively high barrier.

But the right data can drive much-needed expediency and more successful outcomes. In fact, so critical is data to Australia’s process that manufacturers are encouraged to have a pre-submission meeting with the TGA to fully understand the scope of data requirements.8

The market for biosimilars is also challenging at the other end of the value chain. Because bioequivalence cannot truly be shown, patient safety concerns – especially immunoreactivity – are high, resulting in reluctance from both doctors and patients. Also impacting uptake is a limited awareness and understanding of variations in sensitivity, cost and medical risk beyond clinical trials and other controlled environments.

5 IMS Institute for Healthcare Informatics, May 2014, Global oncology trend report, p39 (note: assumes a developed US market). 6 Sanson, Lloyd, et. al “Review of Medicines and Medical Device Regulation”, Discussion Paper, November 2014. 7 http://medicinesaustralia.com.au/files/2013/07/140323_OIT_Wonder-Report_FINAL.pdf.

“As the sales of cancer treatments rise to $100bn annually, more intensive scrutiny of this market can be expected and a deeper understanding of global oncology trends will be required by all stakeholders.”

IMS Institute for Healthcare Informatics, May 2014,Global Oncology Trend Report

Source: Reimbursement success rates and timelines for new medicines for cancer; An international comparison, February 2014 7

Fig. 4: Australia’s submission requirements for oncology products

Subsequent PBS listingNumber of submissions required

Number of submissions1 2 3 4 8

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Re-evAlUATING oUR RelATIoNSHIP wITH DATA ReAl-woRlD evIDeNCe AS A CATAlYST FoR SUCCeSS IN AUSTRAlIA’S oNColoGY MARKeT

Here, credible patient-level data can alleviate concerns over the unknown by delivering real world outcomes rather than trial-based hypotheses. Such information also provides a strong foundation for ongoing education and awareness campaigns that, over time, can address incorrect or misinformed assumptions about biosimilars.

And so, Rwe will prove to be a windfall for those who are able to generate and/or access it, enabling

a more complete assessment of biosimilarity

a thorough review of safety, quality and efficacy in real-world settings

enhanced post-market pharmacovigilance

Targeted therapiesJust as biosimilars offer opportunities for cost reduction,targeted therapies offer specific patients improved outcomes. For pharma companies, targeted therapies also offer an opportunity to achieve a greater penetration in these patient segments and a more focused approach in supporting their treatment needs.

extracting the optimal value of targeted therapies is inextricably linked to understanding patient pathways through disease and treatment. Traditional research into the “patient journey” is now being recognized as incomplete, focusing only on the physician and bypassing key moments and behaviors for the patient, pre- and post-visit. Building a better picture of the patient has thus become a key application of Rwe around the world, driving more relevant launch strategies, marketing campaigns and commercial planning.

In Australia, just as Rwe can provide a foundation for successfully navigating the regulatory environment, it can also deliver a better, fuller understanding of the patient experience. Such insights, gathered and linked from multiple sources of information, can support significantly more

focused, more patient-centric engagement strategies. Unfortunately, the ability (and willingness) to find credible, anonymized, longitudinal patient data outside traditional outlets has, to date, been limited.

But doing so could have considerable payoffs across the value chain: • enabling pharma companies to realize unmet needs and growth opportunities in the oncology market

• empowering stakeholders across the journey (clinicians, pharmacists, advocacy groups)

In the state of victoria, such efforts are in fact underway with the development of Patient Management Frameworks (PMFs), which have been developed to encourage a statewide approach to comprehensive care management. These PMFs are tumor -specific and are designed to describe, manage and support care across the patient journey. To succeed, then, will ultimately mean embracing creative, innovative approaches to unlocking insights from multiple channels and stakeholders, two of which are described here:

Personal Electronic Health Records In 2012, the Australian government launched the Personally Controlled electronic Health Record (PCeHR) system, marking the beginning of a new source of patient and disease insight. who, when, where and how are all dynamics of healthcare delivery that are increasingly being stored in shared electronic health records. As a result, these records are becoming a veritable treasure trove of longitudinal patient data and insights into real-time treatment pathways.

with appropriate levels of privacy/access, patients and providers alike have the opportunity to make more efficient, more informed decisions about the trajectory of care. Such data also provides pharma companies with a unique opportunity to understand disease populations from the patient’s perspective, uncovering latent behaviors, preferences and unmet needs.

Patient Apps The mobile healthcare app model is still in its nascent stages, both in Australia and worldwide—though the volume of apps available is high, functionality and uptake is low. For those that are successful, the focus is primarily on prevention and wellness, rather than on specific therapy areas (though there is certainly a cluster of disease-specific apps, especially for chronic conditions).

“Lessons learned from bio-pharma oncology commercials teams indicate that winners will leverage RWE in areas such as key opinion leader and patient advocacy engagement, messaging…and physician and patient segmentation.”

Chirag Ghai, Director Real World Evidence Solutions & HEOR, IMS Health [IMS Health AccessPoint, May 2014; Vol 4, Issue 8]

8 Journal and Proceedings of the Royal Society of New South Wales, “An overview of biosimilars” vol. 147, nos. 451 & 452, pp. 77-83

15

The future opportunity, however, is anything but limited. As the model matures, and hurdles such as privacy, reliability and standardization are addressed, healthcare apps are poised to become a systemic part of healthcare management and clinical evidence. Already in Australia

apps such as Bowel Cancer, ClinTrialRefer and other disease-specific apps are in place, offering the potential for – at the very least – closer, more knowledgeable relationships between pharma companies and the end users of their product.

To continue the conversation, please contactChris King, Head of Oncology, IMS Health Asia Pacific & China at [email protected]

or Sashindran Anantham, Analyst, IMS Consulting Group at [email protected]

SUMMARYThe oncology market in Australia is full of possibilities. New products, new policies and a newly visible and authoritative patient population are all generating significant openings for pharma companies to generate meaningful value and a competitive edge. Biosimilars represent a significant inroad to this new world, as does the development and understanding of the patient pathway. Both offer access to the cutting edge of healthcare strategy, opening the door to previously untapped segments and generating wholly new sales and marketing opportunities.

But capturing these opportunities might mean re-evaluating long-held hesitations about the value and use of real-world evidence. Such data might need to be elevated beyond superfluous and understood as a necessary prerequisite to play. even a cursory look at Australia’s current market, regulatory and stakeholder intricacies makes clear that companies across the healthcare value chain must find and embrace credible data to support their biosimilar and patient engagement strategies – or risk losing out to better-equipped, better-informed competitors.

@IMSHealthAPAC



17

Shifting focus The Chinese pharma market is undoubtedly still expanding. But rather than a simple upwards trajectory, the trend is instead evolving and restructuring. As the economy grows, and as healthcare reform initiatives place more emphasis on providing access to quality care in lower tier cities and county areas, it is clear that Tier 1 and 2 cities are no longer the only (or perhaps even the best) sources for capturing market share and bottom line growth. Indeed, the entire structure of the Chinese pharma market is expected to shift over the next five years, with the county hospital market growing both in size and strategic importance (see Fig. 1).

“County hospitals” are defined as those that are located either in county cities or in counties outside of the urban boundary of the prefecture city (most falling within the designation of Tier 3-5 cities). These facilities are primarily level II hospitals with an average size of 300 beds. with nearly 2,000 counties in China, this market covers approximately 900 million people — more than 70% of the total population.

But it is more than sheer volume that makes this market attractive. Today it is estimated that county hospitals account for about 20% (~200 billion RMB, at retail price) of the total China pharmaceutical market value. And although a preliminary IMS Health study estimates that the average county spends approximately 73 million RMB on drugs annually, counties are rapidly evolving and hospitals are upgrading; some counties have level III hospitals with more than 800 beds and such a county could spend more than 300 million RMB on drugs.

The shift in attention and investment from urban to county markets is apparent when looking at changes in MNC behavior; since 2009, MNC market share in county hospitals has increased from 13% to 15%, and in some of the more economically developed provinces, such as zhejiang, it has already reached 27% (see Fig. 2). Significantly this increase has happened in tandem with a decrease in market share of MNCs in urban hospitals from 35% in 2009 to 33% in 2014.

For the majority of these companies, the move to the county market currently means relinquishing market position. Pfizer

Following several years of tremendous expansion, the Chinese pharma market has slowed to a growth rate of 12-14%, due in large part to increasing cost-containment measures, restrictions on antibiotics usage and maturing core markets. However, a closer look reveals that although this is the case in top-tier cities, there still remains significant opportunity for growth in the broader, county-level market segment.

For most MNCs, reaching this segment will require a significant strategic pivot. County-level markets exhibit different dynamics than the core markets, driven by factors such as government policies, physician and patient characteristics, and sales and distribution models. In order to succeed in this new and rapidly evolving segment, companies will need to invest in understanding the distinct characteristics of this segment and adjust their business model – and they will need to do it quickly.

New market, new rulesDecoding China’s county hospital market

Fig. 1: Estimated market share changes within the hospital segment 2014 vs. 2020

Urban hospitals

County hospitals

20140%

30%

30%

60%

10%

40%

40%

70% 70% 60%

90%

20%

50%

80%

100%

2020

Source: IMS Health analysis

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Fig. 2: Share of MNCs vs. local companies in county hospitals in selected provinces

New MARKeT, New RUleS DeCoDING CHINA’S CoUNTY HoSPITAl MARKeT

and Astrazeneca, for example, occupy the top two positions in the overall hospital market in the top 6 provinces. However, looking only at the county hospital market in these regions reveals that they are not even in top 5 positions (see Fig. 3).

And while there are some exceptions – notably Novo Nordisk – MNCs will need to make an effort to understand how, and where to play in this new market to maintain or grow their position.

Zhejiang

Sichuan

Jiangsu

Henan

Guangdong

13%

Fig. 3: Top 15 corporations in county hospital in 6 provinces*

Source: IMS County Hospital Audit 2014. * The 6 provinces include Guangdong, Henan, Jiangsu, Shandong, Sichuan and Zhejiang

Rank — County Hospitals Rank — All HospitalsTop 20 Corporations

Ke lUN GRoUP 1 5 JS. YANGzIJIANG FTY 2 3 SHANDoNG RUIYANG 3 13 C.T-TIANQING GP. 4 8 QIlU PHARM GRoUP 5 4 ASTRAZENECA GROUP 6 2 PFIZER GROUP 7 1 GUANGXI wUzHoU FTY 8 19 SHANDoNG lUoXIN PH 9 24 JS. l. Y. G. HeNGRUI 10 6 SANOFI GROUP 11 7 SD. lUKANG GRoUP 12 23 NOVO NORDISK GROUP 13 25 SIHUAN GRoUP 14 16 SHANGHAI FoSUN PH 15 18

Source: IMS Hospital Audit (>=100 beds), IMS County Hospital Audit (>=100 beds), 2Q2014

Shandong

27%

16%

7%

8%

14%

loCAlMNC

19

New market, new rules while the county market undoubtedly presents an attractive opportunity, it also comes with significant complexities. Pharma companies interested in moving into this segment should be aware of four key characteristics that set it apart from core urban markets:

1. Access and health reform policiesMany of the recent healthcare reforms in China have been directed at improving the overall standards and quality of healthcare in counties and county-level cities. Nevertheless, current access policies still present considerable challenges for pharma companies:

•Lowerreimbursementcoverage Today, more than 60% of patients in this market are covered by the New Rural Co-operative Medical Scheme (NRCMS). However, this scheme offers significantly lower reimbursement coverage than its urban counterpart, especially for severe diseases. very expensive drugs, therefore, will not fit in this market.

•Hospitaldrugexpenditurecapping In the county hospital market, the government has put a monetary cap on insurance payments granted to each hospital. As a result, if the total volume of sales for a product is too high in any one hospital, that product will be removed and future entries delayed. Pharma companies should thus consider marketing a broader portfolio rather than relying heavily on one or two products.

•Outsourcingofthehospitalpharmacy County hospitals are increasingly obliged to adopt a zero markup for the drugs they dispense. To compensate for the resulting profit loss, many county hospitals have outsourced the procurement of drugs to two or three distributors who will provide guaranteed rebates for the hospital. Thus, distributors have become critical stakeholders, and engaging with the right ones early is critical for achieving a better position.

2. PhysicianneedsAs with any market, strong physician relationships and communications are vital to ensuring the successful adoption of products and therapy regimens. However, pharma companies will quickly discover that the needs of county-level physicians vary significantly from those of their urban peers.

•Education&communication County physicians are less well-trained and often lag behind the core market in terms of awareness of the

latest disease diagnosis and management, new products, and treatment options. Therefore, they rely heavily on sales reps for information and support regarding disease management and optimal drug usage.

This reliance on sales reps naturally leads county physicians to place enormous value on the development of long-term, stable local relationships with their suppliers, a demand pharma companies must consider when developing their sales and marketing strategies.

•Academicpromotion Academic activity is currently lacking in this market, but is essential to building the skills, product knowledge and disease awareness of physicians in this market. Here, such activity needs to be adopted at a local level, ensuring maximum relevance and resonance with the physician audience.

Being able to support and improve the capabilities of rural physicians will become even more important in the next five years. Not only will patient demands continue to push for better diagnostic skills, healthcare reform plans will be pushing for better capabilities of physicians, upgrading county hospitals to treat a wide variety of diseases and become better linked through telecommunications to urban level III hospitals for consultation and support.

3. FragmentationUnlike top-tier cities, where sales reps can approach multiple major hospitals and a range of outlets easily, the county market is geographically dispersed and fragmented.

•Chinahasalmost2,000countiesandcountycities,and within each county there is only one major People’s hospital and one TCM hospital.

•Acrossthe1,800+counties,only7%ofcountieshave drug sales exceeding 200 million RMB while 55% of counties have sales of <50 million RMB (see Fig. 4).

Such an environment requires a markedly different approach for companies, who may need to embrace a variety of new sales strategies in order to cover such a large surface area and to compensate for low spending to meet their targets. Here, the traditional product-focused sales rep will be both less effective and less efficient in capturing the value and volume necessary to succeed.

4. Portfolio demandsIn serving rural populations, county hospitals face different, but rapidly changing characteristics that require a modified portfolio of products versus their urban counterparts (see Fig. 5).

20

New MARKeT, New RUleS. DeCoDING CHINA’S CoUNTY HoSPITAl MARKeT

First, county hospitals have less division of specialties. Departments such as endocrinology or nephrology are grouped into internal medicine or cardiology, and rarely are there oncology or neurology specialists. Patients with these diseases are likely referred to the level III hospitals in big urban centers.

Second, lower incomes and lower disease awareness among rural patients combine to drive demand for simple treatments, focused primarily on TCM, cheaper antibiotics and local generics. This population is less likely to request sophisticated, branded drugs – especially those that require a complicated treatment regimen. However, as county hospitals are upgraded to provide more comprehensive medical services, this drug usage pattern is likely to change and get closer to that of urban hospitals.

Finally, from a disease pattern perspective, diseases such as hypertension, diabetes, coronary heart diseases and respiratory infections are becoming more prevalent in rural areas, driving a greater need for associated therapies.

To respond to these unique market characteristics of this segment proactively, and to ensure that investments deliver the necessary returns, MNCs will need to address three key questions:

•Portfolioselection: what is the right portfolio for the county market, considering lower affordability, changing disease patterns, limited types of specialists and a widely dispersed hospital environment?

•Salescoverage: what is the best sales coverage model in the county hospital segment, considering the fragmented market, physicians’ needs and pharmacies’ practice of outsourcing? How might strategies such as e-detailing and social media be leveraged to improve sales coverage?

•Commercialmodels: what type of commercial model will be the best fit for a given portfolio, taking into account distributor dynamics, internal sales capabilities, RoI requirements and appetite for risk?

of course such strategic decisions must also be complemented by a thoughtful, detailed implementation roadmap that prioritizes provinces and counties for entry. Such an evaluation should consider factors such as the current state of county hospital reforms, the progress of the medical insurance system, and the extent of control over drug usage.

By adopting this comprehensive approach, companies will be able to deliver a relevant, responsive and sustainable strategy for entering and thriving in China’s county hospital market.

Fig. 5: Leading therapy areas in county vs. urban hospitals in 2014

Source: IMS County Hospital AuditSource: IMS Analysis

VariousMainly TCM

21.8%20.5%

13.1%12.4%

9.7%8.4% 7.4%

7.5%9.6%

5.1% 4.4% 5.0%

11.1%

3.7% 3.6% 2.5% 2.6%

9.6%

17.5% 17.2%

HospitalSolutions

Digestiveand Metabolism

Blood & Blood-forming Organs

RespiratorySystem

Anti-Infective

Central Nervous System

Cardiovascular

Oncologic &Immunology

Musculoskeletal System

Market share in county hospital

Market share in urban hospital

Fig. 4: Distribution of market size of counties

2013

Est

imat

ed M

arke

t Siz

e **

(RM

B)

55%

# of Counties

<50 mil

0 400 1000200 800600 1200

201-500 mil

101-200 mil

50-100 mil

>500 mil

25%

13%

6%

1%

*Include county and county city; **More than 100 beds hospital market size;

21

Tocontinuetheconversation,pleasecontactMandy Chui, Head of Thought Leadership and Pharma Insights, IMS Health China at [email protected]

and Hua Su, Principal, IMS Health China at [email protected]

SUMMARYChina’s county hospital market presents significant and exciting opportunities for pharma companies who recognize that they are approaching a critical saturation point in the large hospitals and large cities. Indeed, entering this market is quickly becoming a “must win” rather than a “nice to have” if MNCs wish to maintain their leading position in the China pharma market.

But winning in this segment will undoubtedly requires a different, or at the very least a shifting business model. Identifying the right portfolio, sales coverage and commercial model are critical success factors.

And while there is no formula for guaranteed success, those MNCs that are able to act quickly, prepare for change and remain flexible, will be well-positioned to take leadership positions in the county hospital segment.

@IMSHealthAPAC



Special thanks to Jordan Liu (Sr Consultant, IMS Health China), Race Shen (Sr Manager, Product Management & CS, IMS Health China) and Joey Wang(Manager, Product Management, IMS Health China) for their contribution to this article.

23

Across the globe, healthcare spending accounts for an ever-increasing portion of countries’ GDPs. This sector is therefore challenged to simultaneously manage costs and improve patient outcomes. This is particularly true in hospitals, as they often represent the largest component of national healthcare expenditure.

To manage costs better, many hospitals are taking a new look at their supply chain, which can account for 35-40% of their overall costs. In fact, today it is usually the second largest expense on the balance sheet after labor, and may even take the top slot by 2020. An optimal supply chain management (SCM) system can improve a hospital’s bottom line dramatically and create a competitive edge by improving operational efficiency, reducing costs, and ultimately improving stakeholder satisfaction. Such solutions are particularly relevant for countries such as India, where intensifying competition, low margins and increasing pressure from payers have created an urgent need for better cost-management strategies.

Achieving excellence by re-engineeringthe hospital supply chain in India

Rising costs, rising expectations Mature and developing markets alike share a common challenge: the cost of healthcare is climbing rapidly. In 2013, U.S. healthcare spending accounted for 18% of the GDP, up 9% since 1980 and on track to reach 20% by the end of the decade.1 In the Middle east and North Africa region, healthcare spending as a portion of GDP has been growing at an average annual rate of 15%.2 And in India, 4% of the GDP is spent on healthcare, with an astonishing 60% of expenditures coming out-of-pocket (among the highest in the world).3

This escalating trend is the result of multiple factors, from increasingly expensive technologies and drug development initiatives, to rising insurance claims and reimbursement burdens.

In any country, hospitals are at the core of the healthcare system, and universally they are seeing costs skyrocket and revenue growth slow down. At the same time, they face growing pressure to meet patients’ expectations around cost and care. These trajectories collide at a crossroads where simultaneously optimizing spending and visibly improving operations is a matter of survival.

The hospital supply chain…a possible solution? Historically, hospitals considered supply chain management (SCM) an operational function. It focuses on securing a product or service for patient care, and by necessity encompasses planning, procurement, contracting and capital management. As a result, it is the one area of the hospital where responsibilities for finances and care delivery are inextricably linked. It is also the source of most hospital costs: up to 40% of hospital costs can come from to inventory and/or supply chain processes.

But when it comes to embracing SCM as a critical component of managing a balance sheet, hospitals are a bit late to the game. Across almost all other industries, world-class companies have recognized how crucial SCM is to healthy financial management and sustainable outcomes. Companies such as Dell, walmart and Toyota have, in fact, developed world-renowned processes that have dramatically reduced costs and increased profits, all while significantly improving customer satisfaction and loyalty rates. For these companies, SCM isn’t a minor operational function — it is a critical strategic function that deserves, and receives, immense focus from top management.

1. http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS. 2. http://kff.org/health-costs/issue-brief/snapshots-health-care-spending-in-the-united-states-selected-oecd-countries/3. http://forbesindia.com/article/world-watch/what-govts-spend-on-health-care/36443/1

24

ACHIevING eXCelleNCe BY Re-eNGINeeRING THe HoSPITAl SUPPlY CHAIN IN INDIA

Hospitals have the opportunity to achieve similar results. with large amounts of cash tied up in inventory, and supplies acting as the closest link to both staff and patient experiences, an improved SCM system would not only help release much-needed capital, it would also invariably support better relationships with internal and external stakeholders.

And so hospitals must now must begin building this function and investing the resources, time and money to upgrade their supply chain systems and processes.

However, according to Shamik Chokshi, Supply Chain Specialist at IMS Health India, due to the diverse nature of hospitals and the complexities present in different regional infrastructures, there is no one-size-fits-all approach. “To be sustainable and successful, hospitals must take a customized approach,” he explains. “organizations need to look at their unique root causes of supply chain issues and develop targeted, relevant and actionable solutions.”

Making the case in IndiaFor India, managing hospitals' costs is a very public issue. Here, hospital margins hover around 8-12% (compared to 30-35% in best-in-class hospitals elsewhere), and insurance coverage is incredibly low — only 9-11% of Indians are currently insured. As a result, any increases in hospital costs are passed either directly to patients, who are burdened with paying those expenses out of pocket, or to the hospital's bottom line.

Revolutionizing SCM represents a unique opportunity to address these challenges. But to succeed the process must take a multi-pronged approach, addressing and innovating in four critical areas: Planning, procurement and contracting, working capital/inventory management, and warehouse management.

PlanningGood inventory and procurement planning is vital to ensuring that clinicians have the drugs and tools they need at the right place and the right time. Ideally, procurement planners and clinicians develop plans collaboratively, with each side understanding the necessary processes and desired outcomes. Such collaboration can increase on-time deliveries, decrease order errors and significantly help to lower costs, especially for oral drugs and surgical consumables.

Fig. 1: What SCM industry experts believe

Source: Industry week 2007

66%70%

50%

30%

10%

60%

40%

20%

0%Reduction in

operatingcosts

Top business objectives achieved

Improvment in timely delivery

Reduction in inventory

Improvment in availability

% of respondents

52%

41%39%

48%

45%

39%

29%

Top improvement initiatives

% of respondents

Develop lean supply chains,eliminating waste and unnecessary steps

Identify operational improvement programs --obtaining visibility into supplychain information by replacingmanual processes with automation

Leverage economies of scaleacross multiple operating units

Improve trading partnerintegration by migrating from legacy systems to sophisticated IT tools

Action

25

Currently in most Indian hospitals, however, supply planning is considered the purview of nurses, rather than top management. Furthermore, as physicians and other clinicians prefer to have a certain level of autonomy in choice, management teams often encounter high resistance to any significant change in the planning process, regardless of cost necessity. As a result, there is often an overall lack of coordinated planning.

Procurement and contractingProcurement and contracting activities are common sources of unnecessarily high costs in India, and a close analysis of purchasing and vendor selection processes can often yield significant savings. Common issues include: • Multiple suppliers, resulting in a lack of bargaining power at the time of rate negotiations • lack of visibility into vendor contracts and other levers that could improve cash flow

As a result, hospitals typically stock multiple brands and work with multiple vendor sources. It is in this area that industries outside healthcare can provide relevant, successful contracting models that could be replicated within hospitals.

Working capital/inventory managementClosely related to procurement strategies – and at the hub of most supply chains – is how hospitals manage their inventory, their biggest source of working capital. optimizing the inventory mix and ensuring that inventory policies are designed based on a strategic review of multiple parameters like SKU volume and demand variability can ensure that SKUs are not over- or under-stocked across the hospital.

while Indian hospitals have certainly embraced technology in inventory management, unfortunately the focus has been limited to data capture. only a small group of hospitals have actually been able to convert this data into insights for strategic decision making. As a result, many supply orders are still based on “gut feel” and experience, which often leads to either large amounts of excess inventory or stock outs.

Warehouse management Thinking through where and how inventory is stored can be a key component in optimizing the overall flow and operational efficiency of the hospital, alleviating a number of unnecessary costs. eliminating duplicate storage areas can not only inject speed and flexibility into the clinical staff’s routine, it can also help eliminate unnecessary, duplicative stock.

Fig. 2: 3 key performance areas driving better outcomes

Cost

Quality

Time

ensure quality delivery to satisfy both internal and external stakeholders:

- Internal: Clinicians, nurses - external: Patients, relatives, vendors

ensure timely service delivery by developing lean processes

ensure delivery at optimal cost by managing inventory and stocking locations

26

Better business and healthcare outcomesImprovements in SCM can have a direct impact on a hospital’s core business objectives – improving eBITA and operational efficiency. But it doesn’t stop there. According to Mr. Chokshi, “we’ve seen that the effects of an agile SCM can actually reach across the hospital’s value chain, producing better outcomes not only on the balance sheet, but also in human resources, investor relations and patient experiences” (see Fig. 2).

Amit Mookim, Country Principal, IMS Health South Asia, agrees, cautioning that managing costs and ensuring excellence in healthcare outcomes is a balancing act. “If current practices and processes are not improved, medical supplies will surpass labor as the biggest expense for the hospital ecosystem,” he maintains. “But we can never sacrifice quality for cost, especially if the higher-cost item is associated with better outcomes.”

Financial impactThe financial impact of addressing procurement and operational issues cannot be overstated. Across theorganization, a strategic approach to the supply chain can affect both expenses and revenue, driving an overall improvement in eBITDA:

Reducing inventory and pilferage expenses

optimizing the utilization of space, freeing up areas to be used for additional revenue-generating activities

Anticipating future supply needs and reducing unplanned expenses

Stakeholder impactThe potential operational benefits of investing in better SCM can be felt across a number of stakeholders, from internal staff to external partners and patients.

Developing lean processes through standardization and automation helps reduce repetitive tasks and creates replicable, sustainable systems that are easy for staff to understand and follow

Understanding real-time needs and rationalizing vendor selections ultimately yields better, more reliable relationships with suppliers

Improving inventory management reduces the risk of expired items reaching patients, improving the overall level of care

Furthermore, well-managed supply chains ultimately use staff more efficiently, ensuring that departments are given

the opportunity to collaborate, rather than compete, with each other. Nurses, for example, often find themselves involved in materials management, where subjective judgments can be at odds with doctors’ demands. Separating and formalizing the SCM function helps give internal stakeholders – particularly the clinical staff – a better experience of working in a cohesive, well-run organization where each function focuses on its primary areas of responsibility.

Finally, but perhaps most critically, rising levels of education, awareness and choice are causing patients to look for – and expect – best-in-class service from providers. Reductions in stock-outs, quick turnaround times for receiving care, and more satisfied clinicians are all key patient-facing improvements that contribute to a better, differentiated customer experience.

ACHIevING eXCelleNCe BY Re-eNGINeeRING THe HoSPITAl SUPPlY CHAIN IN INDIA

A Case Study

A 120-bed, multi-specialty hospital in Mumbai was facing significant challenges with its procurement and supply chain management process. Without a proper and efficient system in place, medical stock levels were not aligned with demand, leading to frequent complaints of stock-outs and increased manual intervention from nurses and clinicians.

By using IMS Health’s “3D” (Diagnostic, Design & Deploy) model, critical insights were uncovered into spending, inventory levels and end-user behavior. These insights in turn informed recommendations for realizing significant bottom-line savings without impacting service delivery. They also helped to reduce working capital requirements significantly, and the IMS Health team was able to set up robust processes to ensure sustenance of initiatives.

Impact:

~25-30% improvement in working capital

~ 10-12% reduction in spend base

SUMMARYAddressing the rising cost of healthcare is a mandate felt across the industry, on both a macroscopic policy level and, as discussed here, on a more microscopic institutional level. learning from other industries such as FMCG, retail and automotive, updating and streamlining the supply chain can have far-reaching benefits for stakeholders across the hospital value chain.

Such an undertaking, however, is not small. establishing a transformative supply chain involves setting up a holistic governance system, implementing robust processes, and leveraging integrated IT systems. “For providers, Supply Chain Management can no longer be conducted in silos,” concludes Mr. Chokshi. “It’s time that hospitals treat this as a strategic function just as other industries do.”

Therefore, both in India and across the world, hospitals that are eager to transform their SCM will have to embark on a capabilities building mission, ensuring that workers have strategic SCM skill sets, creating a strong governance model, integrating processes, and ensuring availability and robustness of data to perform analytics.

To continue the conversation, please contact:Shamik Chokshi, Senior Consultant, IMS Health India at [email protected]

@IMSHealthAPAC



©2014 IMS Health Incorporated and its affiliates. All rights reserved. Trademarks are registered in the United States and in various other countries.

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