MANAGEMENT INNOVATIONS IN HEALTHCARE

Contributors: Dr. Suleika Bort, University of Mannheim, Business School; Professor Ana Malik, FGV – EAESP; Professor Michael Woywode, University of Mannheim, Business School; Dr. Jianwei Xuan, Adjunct Professor, School of Public Health, Fudan University, China.

In recent years biotechnology has grown as a field, bringing with it new technology, know-how, and skills. A number of countries have attempted to develop national biotechnology industries to ensure that collaborative efforts are successful.

 

Collaboration and inter-linkage between the various players in the industry are of great importance, both in terms of knowledge-sharing and in terms of financing research. International cooperation is also essential. At the same time, the pharmaceutical industry has also undergone major changes with, in particular, a trend towards more stringent assessment of healthcare technologies, cost-efficient research, a greater need for world value evidence, and better customer and patient focus.

The Context

Council Community on healthcareAs defined by the Organization for Economic Cooperation and Development (OECD), biotechnology is “the application of science and technology to living organisms, as well as parts, products and models thereof, to alter living or non-living materials for the production of knowledge, goods and services.” The main industry players are research institutions, small biotechnology companies, large pharmaceutical companies, and venture capital. Inter-linkage between the various actors is essential for the industry to function properly. The biotechnology industry is characterized by an emphasis on research and development, high capital intensity, long product development cycles, and high levels of technological and market risk. In light of this, there is a high failure rate, pointing to the urgent need to develop, maintain, and manage inter-firm collaboration and strategic alliances.

The context can be viewed as the types of research institutes and policies that have historically existed in a certain country. Specifically, these pertain to the level of linkage with foreign research institutions and the commercial orientation of domestic institutions, as well as funding for basic research and the direction of scientific education. The national institutional context consists of labor mobility, the venture capital market, the government role in technology diffusion, and technological accumulation in related sectors in a particular country’s industry. Institutionalized patterns of corporate behavior pertains to the level with which firms collaborate with research institutions and other firms, as well as the degree of foreign technology utilization. Overall these factors determine the stock of knowledge in research institutions and in the industry. In addition, they influence the extent to which knowledge flows between institutions and industry, as well as the inflow of foreign knowledge into the two.

There is no one single prescription for developing a successful and competitive biotech industry. A study looking at the respective industries in the US, Germany, and India suggests that success depends on a combination of various cultural, political, and financial factors. Above all, alignment of these various factors is of particular importance. For example, in terms of policy there needs to be alignment at the local, national, and (in the case of Germany) the broader regional level. Furthermore, public funding is needed to support the development of the industry, but public funding alone does not necessarily produce the desired outcomes. Firstly, researchers themselves need to be incentivized in order to translate scientific advances into commercial opportunities. In addition, investment is also required from venture capital and the pharmaceutical industry. Next, collaboration among firms and research organizations, both domestically and internationally is key: in particular, an international focus should be encouraged and international cooperation supported. Finally, entrepreneurial orientation is greatly beneficial, if not indispensable.

Recent trends in healthcare systems

University of Mannheim, Business SchoolIn recent years there has been a significant rise in healthcare spending, both as a percentage and in absolute terms, particularly in the BRIC countries. In light of this, those who pay for healthcare technology need tools to determine the value of innovations and reimburse the innovations accordingly. They need to consider clinical and patient benefits, their own budgets, and value for money. Consequently, the development of formal health technology assessment systems and other cost-control strategies have grown in prevalence.

New business models have emerged in the pharmaceutical industry in response to changes in the healthcare field. Pharmaceutical firms have had to adapt to the growth in health technology assessment use, which has brought with it a trend towards decision-making at the institutional level rather than the physician level, and also a focus on real-world value evidence to differentiate products and justify price. As a result, firms have had to restructure commercially and hire a more educated sales force. In terms of R&D, firms have had to increase research efficiency, conduct more focused research, and reduce costs. Furthermore there has been increased investment in conducting trials in developing countries, where development phases are faster and there is an opportunity to capture the population of a growing market. There has also been medical organization restructuring, with greater emphasis being placed on customer-oriented medical research, real-world value evidence, and proactive safety research to pre-emptively detect issues.

The future of healthcare

Collaboration in healthcareIn the future, there will have to be greater collaboration and negotiation among payers, industry, and patients to facilitate the pricing of goods and services, risk sharing, performance guarantees, and better access. The development of innovative access programs, for example, would make it possible to reach a broader section of the population, who would in turn be more productive citizens. This could include the provision of targeted supplementary health insurance programs, or paying for upstream diagnosis costs to identify the right patients for personalized medicines. Lastly, greater external collaboration can strengthen value-based approaches involving value evidence generation and packaging and communication, which can help differentiate products and technologies from those of competitors and better justify formulary coverage.

Contributors:

Dr. Suleika Bort, University of Mannheim, Business School; Professor Ana Malik, FGV – EAESP; Professor Michael Woywode, University of Mannheim, Business School; Dr. Jianwei Xuan, Adjunct Professor, School of Public Health, Fudan University, China.

Collated at the 2014 Tokyo Forum and edited by Prof. Edward Yagi.

The Council on Business & Society Global Alliance is an ongoing international dialogue between six of the world’s leading business schools and an organiser of Forums focusing on issues at the crossroads of business and society – The Council Community helps bring together business leaders, academics, students and journalists from around the world. #CouncilonBusinessandSociety

 

 

 

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