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
ExpandingACO/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.
10

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.
27 18%
0%
36%36%
18%
36%
0%9%
Within next 12-24 monthsCurrent
0 - 20% 21 - 40% 41 - 60% 61 - 80% 81 - 100%
Large Company Segment:
Percentage of Total Sales Coming from ACOs/IDNs
19%27%
%Responses
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.
12

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 with
CMS)
ACO (Not registered
with CMS but
outcomes focused)
Multi-site Health
Systems
Elite National
Teaching
Hospitals/Medical
Centers
Large Medical
Groups
Local or State
Teaching
Hospitals/Medical
Centers
Health Maintenance
Organization
(Combines payer &
delivery)
%ofCompanies
Type of Delivery Networks Served
Serve Plan to Serve Don't Serve
(n=28)
13

 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.
18
Best Practices, LLC
6350 Quadrangle Drive, Suite 200
919.403.0251
www.best-in-class.com

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

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