Time for services: Latin America’s enviable position and an opportunity for pharma
Latin America provides pharma with a unique opportunity to get involved with building the healthcare system of the future from the ground up. Soeren Mattke discusses why this is the right time for service-based models and how to make the most of modern technologies in the process.
Latin American countries are in an enviable position. Unlike Europe or the U.S., they don’t have a highly developed, entrenched, and oversupplied healthcare delivery system, which means there are fewer existing stakeholders that might resist disruptive innovation in healthcare. For example, Brazil has 1.8 physicians per 1,000 people, while France has twice that number, even though Brazil has a higher burden of chronic disease. “While this looks like a disadvantage, it puts them in a position to build the healthcare system of the future from the ground up,” said Soeren Mattke, M.D., D.Sc., Senior Scientist and Managing Director, RAND Health Advisory Services, ahead of his presentation at eyeforpharma Latin America.
Building a specialty healthcare system
What patients and policy makers alike want is not pills. They want disease control. They want extended life expectancy and increased quality of life. They want to grow old with their children, so if you can approach stakeholders with a proposition that answers those desires, you’re in a good position"
It’s not easy to build a system to develop complex specialty care from scratch, and insights into disease control are necessary for success. A unique opportunity for pharma comes here with their extensive knowledge of various illnesses and a potential to introduce services that offer management of disorders. “What patients and policy makers alike want is not pills. They want disease control. They want extended life expectancy and increased quality of life. They want to grow old with their children, so if you can approach stakeholders with a proposition that answers those desires, you’re in a good position,” Mattke explained.
Emerging economies do reasonably well with acute care, e.g. delivering babies, curing infections, and taking care of injuries. The success of primary care is owing to the fact that it relies on relatively few M.D.s, it doesn’t require specialists, and it allows delegating many tasks to nurses and health workers, who need much less training than physicians. Acute care is also by definition encounter-based and does not require managing patients between visits. Problems arise when chronic conditions begin to be more prevalent. Unlike acute care, chronic syndromes require long-term management and knowledge on how to tailor treatments to diverse patient needs.
“While specialists are always in short supply, pharma companies know more about chronic diseases than anyone else. If you look at a typical medical centre, there are 2-3 people who know everything about, for example, chronic pulmonary disease, but if you look at companies like GlaxoSmithKline, they probably have 100 scientists who live and breathe the disease. There is a lot of capability embedded in multinational pharma that never makes it to product development, but could be leveraged to design tools and solutions to help expand specialty capacity in emerging markets”, according to Mattke.
Push and pull
Successful transplanting of knowledge from pharma to a developing country depends on a mix of push and pull. “It will not be possible for a pharma company to just go there, create a service model and market it. But at the same time it can’t be just a local government or an insurance company trying to pull companies in. It has to be a high-level discussion between the company, payers and local community, the providers and other stakeholders to agree that this is a viable plan,” Mattke stressed.
Presenting a solid business case is key. You need to show that poor disease control is costing money not only from the social welfare perspective, but also in terms of healthcare spending. “Well-controlled diabetics might spend more on drugs but cost less in hospital care and emergency care. You can demonstrate to payers that you cannot just improve social welfare, but you can also help them use limited resources more efficiently. Then you need to have an honest conversation about the value your model will create, and a debate about how to monetize that value and share the gains between the company and the payers.”
Internal resistance
Pharma companies are product companies. They are familiar with the drug development and marketing process, and post-marketing surveillance. They know and can manage associated risks, but becoming a service provider makes alarm bells go off. Potential liability and trust issues faced by the industry are valid concerns that need to be addressed. “Overcoming trust issues takes patience,” Mattke admitted.
An example of how to combine products and services successfully is Fresenius, which started out as a small German company manufacturing intravenous solutions. When dialysis became available in the 1960s, they began producing fluids needed for dialysis, followed by filters and dialysis machines for purification of blood. In 1996, Fresenius merged its dialysis assets with an American dialysis chain, forming Frensius Medical Care, which today is an integrated provider serving 200,000 patients. “The story is remarkable for two reasons,” Mattke began. “First, it shows that it’s a very successful business strategy. Second, it shows that you can deal with all the concerns about conflicts of interest, that you can deal with the distrust. People get reliable dialysis at a good price, and nobody finds fault in that. So if you create value and communicate that value based on objective parameters, you are able to market it without being afraid of anybody accusing you of a conflict of interest. There isn’t a comparable model in the pharma world, but there is no reason there shouldn’t be.”
The role of technology
Modern technology solutions will facilitate some of those disease management models. “The very idea is that we use as little highly-skilled human labour as possible on a daily basis,” Mattke explained. “We try to extract their knowledge into algorithms, tools, sensors that allow lower skilled workers to manage chronic disease. Technology is absolutely the way to do this.”
Examples include sensors for remote monitoring of blood pressure, weight, etc. Vital signs are taken remotely and algorithms screen incoming signals and can detect problems. Ideally those sensors can detect early warning signs before symptoms manifest in a patient, because the presence of symptoms often means the window of opportunity for simple interventions has closed and you need to hospitalize the patient. “A French company, for example, has a device to detect early diabetic nerve damage by measuring the function of sweat glands,” Mattke said. “You can use it to identify patients on a path to losing diabetes control and intervene early.”
Moving toward service-based models might be an inevitable route for pharma. “In every mature product market, services become the way to make money. Healthcare is very unusual because gross margins on drugs and devices are as high as 80%. You can’t reach that with services. But as margins for products come under pressure, services are looking increasingly attractive,” Mattke concluded.
This is the right time to introduce service-based models in Latin America where the healthcare system of the future can be built from the ground up. Pharma is presented with a unique opportunity to leverage their disease expertise and develop disorder management models that benefit all stakeholders. With the use of technologies, patient needs can be attended to effectively and at low cost, making service-based models a natural next step in the evolution of the industry.
Soeren Mattke will be speaking at eyeforpharma Latin America in May. For more information on his presentation, click here.