The Future of Global Healthcare Marketing

by Dirk Huisman , Chairman SKIM Group
Article originally published in ESOMAR's Research World, ISSN 1567 -3073, December 2001.

Disruptive and structural changes are forcing suppliers, funders and providers in the health care sector to rethink their business models. Because of the complexity of health care markets and the range of disruptive forces, this is a giant task compared to other markets. Research World asked Dirk Huisman, programme committee chairman of ESOMAR's Global Healthcare 2 Conference for his views on the future of global health care marketing.

Health care marketing is a fascinating area as it touches on the most basic as well as the highest human needs, emotions and responses, added to which are a whole range of technical and analytical challenges. As a provider of insight into the drivers and behaviour of markets, professionals and consumers, the marketing intelligence officer has a key role to play in the rethinking process and in redefining related business models.

The health care sector and its complexities
Why is the health care sector so complex and why is marketing in health care more complicated than for any other sector? One reason is that there are so many different players at different layers. Furthermore, in no other markets are needs so obviously situation bound and subject to constant change. Predicting market behaviour is further complicated by the fact that economic mechanisms in health care are imperfect and can even be reversed. For instance, technological improvements and increased productivity do not always macro economically result in cost reduction, they can result in higher total costs. Imperfections of market mechanisms can be attributed to the fact that health care needs are unlimited and decisions are taken without cohesion by a set of decision makers whose members (prescribers, funders, formulary committees) take decisions independently of each other and also independently of the end beneficiary.

What are the trends?
A number of trends at the macro level, at the industry (or meso) level and at the micro level can be detected. An ageing population and increased life expectation in the western world, new products and inflation have resulted in a 2% annual increase in health care costs in the past decades. To cope with these structural cost increases at the macro level, health care policies are characterised by cost containment policies, centrally defined "health objectives" to be realised by decentralised and small scale delivery of care and by an increased personal responsibility for one's own health and health-related costs. Furthermore, in the western world there is a convergence of health care systems within Europe and between Europe and the United States.

At the meso level, the care process will be restructured into different types of care delivery centres. At the top are the high tech, capital intensive "intervention centres" surrounded by "care hotels" providing follow-up and intermediate care and by "long term care" and "terminal care" centres. Often these centres will be part of integrated care chains and care networks. As in the USA, managed care organisations in Europe and elsewhere will play a central role and disease management and evidence-based medicine will lead most decisions of health care providers.

The industries supplying the care organisations and patients are a couple of steps higher in the value chain. Trends in these industries are also classified at meso level. The dominant trend in the health care supply industries is towards concentration and consolidation: to cope with the increased R&D costs and the short period during which they can capitalise on R&D investments on a global scale - consolidation and horizontal integration is reshaping the industry. This consolidation trend is also fuelled by the need to refill the pipelines. The third consolidation trend is a fundamental shift in research from chemical screening to an understanding of the pathogenetic pathways of disease. This trend results in upstream integration and consolidation.

At the micro level, the organisational focus in care providing organisations is changing from a physician centric focus to a patient centric focus. At the same time the relationship between the primary care physician and the patient is evolving to increase interaction. Augmenting the personal responsibility of the patient results in a greater level of patient involvement and in pro-active and preventive behaviour on the patient's part.

What are the disruptive forces?
Interpreting and implementing the results of these trends produces a gradual adaptation of business models and market structures. If anticipated and well absorbed, disruptive forces can transform into trends. If not anticipated or absorbed, disruptive forces can produce an "earthquake" in business models and a drastic restructuring of the industry. The following forces might have a disruptive impact on the health care industry in the coming decades: Genetics, Information technology and Consumer empowerment 3.

Genetics: understanding the pathogenetic pathways of disease will result in new tailored drugs and completely new treatment methods which will wipe out billion dollar markets of drugs aimed at treating symptoms but not providing a cure. One example is the Rheumatoid Arthritis re-implantation of manipulated genes in a patient in a trial setting that provided a cure. The consequence is that the capitalised cost savings of future treatment costs only may exceed 100.000 dollars per patient. If implemented large scale the RA drug market might shrink a few billion dollars each year.

Information technologies: these can have a disruptive impact on the business model at all levels of the value chain. For instance, combining an understanding of the pathogenetic pathways of disease with the possibilities to store and process information, results in new diagnostics and in options to create unique electronic DNA passports for each individual. The business model is disrupted because of the restructuring of processes and because a new "player' is providing unique value in the value chain, thereby redefining the role of previous industry leaders. As was shown at last years ESOMAR Global Health conference, IT will result in tailored diagnostics and treatments. It enables tele-monitoring of patients resulting in prevention and direct intervention when needed. And last but not least, as in other markets, IT facilitates a fast diffusion of information and in tailored information delivery. One result is that specialist-patients can be very knowledgeable about their diseases and out pace primary care physicians particularly in areas that are lagging behind in development.

Consumer empowerment: patients will increasingly be held responsible for their personal health and related health costs. Apart from the obvious vested interest in one's own health there will be financial stimuli as well. In the past, the patient was dependent and not held responsible for their condition. In the future, patients will be given responsibility and will have access to the same information as the physician.

This will result in the patient's active participation in decision making and in initiating treatments as well as unhealthy "health behaviour", which can mean consumers doing and consuming everything to be healthy. Although consumers might have access to the same information, they can often lack the framework in which to interpret the information. One consequence might be a divide in society between empowered patients who know what to do, which information to acquire and which information not to divulge in order to keep costs under control and acquire the desired level of care, whilst on the other end of the scale, non-empowered patients will consume health products but be condemned to minimal care.

Changing the marketing arena
Business models will change, new players with different strengths will enter the markets and IT will impact the way in which various players in the value chain function and interact. The IT impact is summarised by the label "e-health". Limiting ourselves to pharmaceuticals and related markets, one can detect a number of marketing arenas. And in every arena the rules for winning the game will differ. The arenas range from markets for consumer products with a health claim to markets for high-tech intervention products. The traditional "pharma" marketing arena is right in the middle. By definition this is the arena where new entrants from the left and the right who play according to different rules will be driven, either by the high margins or by the high volumes. The "e-health" empowered consumer will try to influence the rules as well from another angle. It is the challenging task for marketing intelligence to prepare the organisation for victory in their arena.

Notes
1 The end "beneficiary" ie the patient and family, usually do not make decisions about the product or the acceptability of the price. Decisions to accept or reject prices are made by funders whose choices are budget driven since budgets are primarily spent on the intervention and care process. Budget decisions are taken in isolation without a clear trade-off or link to the direct benefit of the patient. Prescribers often select the product, but this selection process is conditioned by formularies, by the prescribers' awareness and perception of the alternatives and by their perception of the patient.

2 Françoise Simon, Reshaping Health Care, Biomedical Frontiers Vol. 8, Issue 1, Winter/spring 2001.

3 Françoise Simon and Lothar Krinke (editors), The future health care consumer, Colombia University.