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. Disruptive and structural changes are forcing key players in the health care sector to rethink their business models. This is a giant task compared to other markets because of the complexity of health care markets and the range of disruptive forces. . As a provider of insight into the drivers and behavior of markets, professionals and consumers, the marketing team has a key role to play in the rethinking process and in redefining related business models.
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. 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 (sellers/pharmacos, deciders/doctors and buyers/patients) take decisions independently of each other and sometimes independently of the end beneficiary (the patient).
What are the key trends in healthcare marketing? An ageing population and increased life, new products and inflation have resulted in an 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 characterized by cost containment policies, centrally defined “health objectives” to be realized by decentralized and small scale delivery of care and by an increased personal responsibility for one’s own health and health-related costs. This explains why more and more corporate houses engage in employee wellness programs. This is an area of great scope for disease management (DM) programs.
There is consolidation amongst healthcare providers (read hospital groups) to achieve scale and therefore the resultant cost efficiencies that allow for low cost, high-quality healthcare delivery. At the top are the high tech, capital intensive “intervention centers” surrounded by “care hotels” providing follow-up and intermediate care, long term care and terminal care centers. Often these centers will be part of integrated care chains and care networks. As in the USA, managed care organizations 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.
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 capitalize 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.
Another 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 organizational focus in care providing organizations 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 in taking care of his own health, results in a greater level of patient involvement and in pro-active and preventive behavior on the patient’s part.
Management thinkers and gurus such as Tom Peters and Clayton Christensen always talk of disruptive forces within an industry that come into play to disrupt existing business models and build newer ones that take the industry into the next orbit. What are the disruptive forces in healthcare marketing? 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.
1) Genetics: Understanding the pathogenetic pathways of disease will result in new tailored drugs (pharmacogenomics) 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 capitalized 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.
2) Information technology: This can have a disruptive impact on the business model at all levels of the value chain. IT will result in tailored diagnostics and treatments. It enables tele-monitoring of patients resulting in prevention and direct intervention when needed. 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. More importantly, from a short-term perspective, IT facilitates 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.
3) 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 through the advent of IT. This will result in the patient’s active participation in decision making and in initiating treatments as well as unhealthy “health behavior”, 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.
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 summarized 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 organization for victory in their arena.