reshaping commercial models to serve acos, idns & emerging provider networks

Reshaping Commercial Models to Serve ACOs, IDNs & Emerging Provider Networks

Strategic Analysis

Copyright © Best Practices , LLC

IDN

ACO

IDN

ACO

HEOR

Table of Contents

EXECUTIVE SUMMARY

Research Overview ………………………………………………………………………….....4

Six Key Steps for Biopharmaceutical Companies .….……………………………….....9

Key Findings & Insights…………………………………………………………………..…..11

DETAILED RESEARCH FINDINGS

1. Stakeholder Preparation………………………………………………………………........21

ACO/IDN Outlook………………………………………………………………………….22

Change Management ……….........................……………………………………….…..31

2. Resources & Organization……………………………………………………………….....36

3. Sales Model Evolution…………………………………………………………...…....…….42

4. Commercial Capabilities ……………………………………………………………….....46

5. Service Strategies………………………………………...……………………………….....53

Key Services & Activities…………………………………………………………………. 54

Expanding Customer Access……………………………………………..…………...…. 63

6. Outcomes Approach …………………………………………………………………….….73

7. Current & Future Trends …………………………………………………………………....78

8. Lessons Learned …………………………………………………………………………...83

9. About the Benchmark Class ……………………………………………………………...86

2


One impact of the Affordable Care Act on the U.S. healthcare industry has been the rapid development

of influential provider networks—Accountable Care Organizations and Integrated Delivery Networks.

Background: ACOs & IDNs Are Rapidly Changing Healthcare Market

Savvy biopharma companies are studying ACO/IDN requirements

and developing new customer support strategies. Some are farther along

than others, creating dedicated ACO/IDN groups, adding resources, and

adapting sales models.

Biopharma Is

Adapting to Rapid

Market Change

ACOs & IDNs Are

Gaining Influence in

Pharma Market

Regulatory actions are driving rapid change in the U.S. healthcare

market. One impact has been consolidation of small medical practices

into large healthcare networks, represented primarily by ACOs and IDNs,

which account for a fast-rising share of total pharma business.

Network Standardization

Will Further Reduce

Physician Influence

Treatment protocols will be developed and standardized at the top

level in ACO/IDN networks, and cascaded to practitioners within. This

practice reduces physicians’ treatment options and potentially prevents

patient access to effective pharma products.

For many, future success or failure will depend upon understanding

how to access, influence and support this rising customer segment.

New Biopharma

Strategies for Powerful

ACO/IDN Segment

Are a Must

3


ACO/IDN Benchmark Research: Objectives, Methodology & Topics

Best Practices, LLC undertook this benchmarking field study to assist biopharmaceutical companies

in developing an effective strategy for serving Accountable Care Organizations and Integrated Delivery

Networks in the fast-changing U.S. healthcare marketplace.

Resource deployment

Change management activities

Sales force structure

Coordination and knowledge sharing

Customer targeting and segmentation

Understanding care delivery models

Identifying decision makers

Strategies to improve performance

Employing health outcomes

Lessons learned and trends

Topics Covered

Research

Methodology

Research

Overview

This study assesses relative impact and

priority of key practices and failure points

that influence overall ACO/IDN/Large

Hospital Network service performance.

The study also distills insights on how

successful Sales leaders segment and

target customer groups, staff and develop

sales executives, and employ different

engagement instruments over products

lifecycles.

Best Practices, LLC engaged 36 leaders at 31

pharma and medical device companies

through a benchmarking survey. Analysts also

conducted in-depth executive interviews to

develop qualitative findings and insights.

4


Benchmark Class:

Large Companies

(Revenue > $10 Billion US in 2013)

Small & Medium Companies

(Under $10 Billion US in 2013)

Participating companies included large pharmaceutical firms, small and medium pharmas, biotechs,

and medical device organizations. Two thirds of participants hold titles of director or above. More than

half represent Sales or Commercial functions.

Universe of Learning: 31 Companies Participated in Study

5


To help distill the most precise and relevant insights, several data segments were used in this study.

Definitions of these data segments, as well as other research terms and acronyms used throughout

this research, are provided below.

Large Companies –

Healthcare organizations with

annual revenue above $10 billion

(US) in 2013

Small & Medium Companies –

Healthcare organizations with

annual revenue below $10 billion

(US) in 2013

Data Segmentation & Acronyms Used in this Study

Segments Analyzed:

ACO – Accountable Care Organization

HOL – Health Outcomes Liaison

IDN – Integrated Delivery Network

KAM – Key Account Manager

MCL – Managed Care Liaison

MSL – Medical Science Liaison

S/M – Small & Mid-Revenue Companies

Abbreviations Used:

6


Our field analysis uncovered six focus areas for fine-turning commercial functions to better serve

ACOs/IDNs and other structured customer groups that strategically align with their portfolios.

Competing in

A World Where

ACOs & IDNs Are

A Dominant Force

1. Prepare Internal Stakeholders

for Growing ACO/IDN Dominance

2. Align Resources to Match

Expanding ACO/IDN Segment

4. Build Commercial

Capabilities to Support Specific

ACO/IDN Needs

3. Evolve Traditional Selling

System into Consultative

B2B Model

5. Develop Individualized

ACO/IDN Service Strategies

6. Tie Outcomes to

ACO/IDN Goals

Key Steps to Build an Effective ACO/IDN Strategy

7


This benchmarking study identifies key challenges the biopharma industry faces in working with ACOs and IDNs, as well as the vision needed and successful tactics employed to engage these customers.

8

Vision & Tactics Needed to Meet Challenges of Engaging ACOs/IDNs

Developing new capabilities

for staff working with

ACO/IDN customers

Ensuring resources levels are

aligned to rapid ACO/IDN

growth

Understanding what industry

services are most valued by

specific ACOs/IDNs

Developing a tightly focused

service strategy

Challenges

Using seasoned field

personnel and executives for

best access to key ACO/IDN

leaders

Identifying specific needs

of ACOs/IDNs before

approaching them

Providing services aimed at

helping ACOs/IDNs cut costs

and improve quality of care to

meet reimbursement goals

Tactics

Recognizing ACOs/IDNs are

driven increasingly by cost of

care under the new system

Realizing the traditional rep to

doctor sales model will not

transfer well to serving

ACOs/IDNs

Investing now to build staff

capabilities will help

companies be in the forefront

when the healthcare industry

completes its transition

Vision

Key Findings & Insights

The following key findings and insights emerged from this field study and benchmarking analysis.

The volume of business flowing through ACOs/IDNs is increasing sharply:

Sales through ACOs/IDNs are expected to increase by 50% for large companies and 136%

for small and medium sized (S/M) companies by 2016.

Nearly half the large companies and one-quarter of S/M expect ACOs/IDNs to account for

61%-100% of their business by 2016.

Internal communication and education on ACO/IDN segment is critical:

Timely communicating to internal stakeholders the significance of ACO/IDN rise is critical for

biopharma success.

Depending on the importance of information, all communication channels employed for product

launch can be used to communicate changes on ACOs/IDNs.

Top rated ACO/IDN services:

Medical education is the service bio-pharmas provide that ACOs and IDNs value most.

Typically, educators are nurses, clinical educators, MSLs and field trainers on product use.

9


Key Findings & Insights

The following key findings and insights emerged from this field study and benchmarking analysis.

Companies are building new commercial capabilities to effectively serve networks:

Three-quarters of the larger companies are providing special training to Key Account Managers

(KAMs) to prepare them to serve the ACO/IDN segment.

Outcomes data rates as most valued material pharmas provide:

Participants rated outcomes data and disease state education as the most valued materials provided to

network members.

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Drivers of Market Change Are Relentless & Require Pharma Action

Understand impact

of new ACO/IDN model

Employ staff dedicated to

communication

Use national and local

communication levels

Identify ACO/IDN issues

Segment customers

Align with customer needs

Deliver valued services

Restructure sales team

Transform to a B2B sales

model

Internally communicate

the changes

Adjust strategy

Response

High cost of

developing new

drugs

Generic

competition for

off-patent drugs

Public pressure

around high prices

for new medicines

Healthcare reform

Exchanges

Sunshine Act

ACA

Regulatory Drivers

Industry Disruption

Internal Pressures Customer

consolidation

Providers absorbed

into ACO/IDN networks

Pay-for-service to pay-

for-performance shift

Quality metrics govern

reimbursement

Outcomes focus

Value message critical

`

Biopharmaceutical companies are adjusting strategies to adapt to consolidations of individual customers into large ACO and IDN networks.

11


Q. Estimate the percentage of your overall business that flows through ACOs/IDNs.

(n=12)

Large companies in this study are currently channeling at least 20% of sales through ACOs/IDNs. Within two years, a majority expects to see a sharp increase in the amount of business flowing through these organizations, with nearly half predicting 61-100% of business to emerge from ACOs and IDNs.

2718%

0%

36% 36%

18%

36%

0% 9%

Within next 12-24 months Current

0 - 20% 21 - 40% 41 - 60% 61 - 80% 81 - 100%

Large Company Segment:

Percentage of Total Sales Coming from ACOs/IDNs

19% 27% % R

es

po

nse

s

46%

Amount of Business

Large Company Business Is Increasingly Flowing through ACO/IDNs

Business is being

driven both by an

increasing number

of companies

turning into ACOs

and by increased

outreach to these

organizations.

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Q. Networks Classification: Indicate the types of delivery networks that you currently serve, plan to serve within 12-24

months and don't serve.

Among Delivery Networks, ACOs Are Top Area for Customer Growth

Registered and unregistered ACOs are the key types of delivery networks where benchmark participants expect to grow their client base. More than 40% plan expansion into the ACO market. ACOs are currently underserved relative to other types of delivery networks.

71%

37% 30%

68% 62% 67% 64%

78%

25%

48%

44%

29%

24% 22%

18%

19%

4% 15%

26%

4% 14% 11%

18%

4%

IDN ACO (Registered withCMS)

ACO (Not registeredwith CMS but

outcomes focused)

Multi-site HealthSystems

Elite NationalTeaching

Hospitals/MedicalCenters

Large MedicalGroups

Local or StateTeaching

Hospitals/MedicalCenters

Health MaintenanceOrganization

(Combines payer &delivery)

% o

f C

om

pa

nie

s

Type of Delivery Networks Served

Serve Plan to Serve Don't Serve

(n=28)

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Potential cost savings through headcount reduction

Larger sales amounts per contract due to customer consolidation

Fewer accounts to manage providing opportunity to focus on customer-specific needs

Interacting with customers through educators and personnel with medical backgrounds rather than traditional sales reps

Easier to align centralized sales strategy with ACO/IDN needs

Better opportunity to customize support services

Increase in customer bargaining power due to customer consolidation

Increased pricing transparency

Financial costs

Investment in building new skills

Cost of developing outcomes data

Challenges in change management

Potentially spotty contract implementation and compliance on the provider side

Low morale due to change

Reduced contact with physicians

Must invest in communication to keep internal stakeholders informed

Quantifiable Non-quantifiable

Impacts of New Business Model on Pharma: Pros & Cons of Change

The following pros and cons of change were gleaned from benchmark participant interviews.

14


Q. What preparation and training do you provide to KAMs supporting your ACO/IDN clients?

(n=25)

At least three-quarters of large companies in this study are providing training to Key Account Managers who support ACO/IDN clients. Classroom training and CBT modules are the most common methods. Fewer than half the smaller firms provide training to KAMs, with one exception: 65% of the S/M segment prepares KAMs through background reading.

Companies Prepare KAMs with Multiple Types of Training

75%

75%

63%

50%

50%

13%

0%

47%

35%

29%

65%

47%

24%

18%

Classroom training courses in ACO/IDNs

Training modules (online/CBT)

Account call shadowings/introductions

Background readings

Briefings

No specialized training or support

Other (Specify)

Preparation and Training Provided to KAMs

Large Cos SM Cos

% Responses

“Capabilities for this role are very different than

our current sales capabilities.”

-- Interviewed Team Lead, Big Pharma

“A major session at our next national meeting will be training to teach reps how to get to that higher level people and how to make

more red carpet level calls.” -- Interviewed VP, Medical Device

15


16

Q. Material Support: Rank the importance of the types of data and materials that your

ACO/IDN specialists are using in the field.

(n=18)

Disease state education materials and health outcomes data are ranked the most important support tools for field specialists working with ACOs and IDNs. Note that while disease education was ranked among the top three services by the greatest number—82%—health outcomes data was the support tool most often ranked #1.

Disease State Education & Outcomes Data Highest-Ranked Materials

Category Overall

Rank *Top 3 #1 #2 #3 #4 #5 #6

Disease state education 1 82% 19% 44% 19% 0% 13% 6%

Health outcomes data 2 65% 53% 12% 0% 12% 6% 18%

Journal reprints & articles 3 63% 19% 19% 25% 6% 6% 25%

Patient case studies 4 50% 6% 19% 25% 25% 13% 13%

Pipeline info and reviews 5 38% 13% 6% 19% 31% 31% 0%

Upcoming clinical trials info 6 26% 0% 13% 13% 27% 20% 27%

Note:

* Top 3 - percentage of respondents that ranked each service among their top 3

* #1 to #6 - percentage of respondents giving rank of 1-6 to each service


Large Company ACO/IDN Support Staff Focuses on Primary Care

Within the large company segment, primary care is the major focus area for the ACO/IDN support function, while more than half the small and medium companies in the study have their major focus on specialty care.

17

Primary Care 45%

Specialty Care 34%

Over the Counter

17%

Other 4%

Large Companies

Primary Care 31%

Specialty Care 54%

Over the Counter

8%

Other 7%

Small & Medium Companies

(n=34)

Q. Therapeutic Areas: What primary therapeutic areas is your ACO/IDN-focused function responsible for?

Therapeutic Areas:


About Best Practices, LLC

Best Practices, LLC is a research and consulting firm that conducts work based on the simple yet profound principle that organizations can chart a course to superior economic performance by studying the best business practices, operating tactics, and winning strategies of world-class companies.

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Best Practices, LLC

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919.403.0251

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