5 Medical Distribution Strategies Doomed to Fail in 2012

5 Medical Distribution Strategies Doomed

to Fail in 2012

Gunter Wessels, Ph.D., MBAPartner, Practice Principal, TIGI

gunter@mytigi.net@gunterwessels

Sam O’Rear, M.A. BASenior Partner, Founder, TIGI

sam@mytigi.net@TIGI_Inc

www.tigi.net

Help you make good decisions in an uncertain time.

How? →Discuss some observed mis-steps and best practices

Resulting in?→Actionable implications for your business

Objective

What is failure?• Sluggish Growth

• Marketshare Decline

• Price/Margin Erosion

• Commoditization

• Diminished Profitability

• Increased Uncertainty

Failure Defined

Major Changes in Healthcare:• Accountable Care Organizations

• Value Based Purchasing

• IT Integration and Health IT Incentives

• Reimbursement Declines

• Readmission Penalties

• Bundled Payments

The New Normal

Top 10 Concerns of Distributors

Acquiring brands that open doors to parts of their portfolio

Obtaining product lines that turn over quickly

Maintaining focus within market segment

Supporting manufacturers while staying true to their own mission.

Finding products with low acquisition cost, high margin, high volume

Top Concerns of Distributors

678910

Top Concerns of Distributors

Managing GPO Contracts

Backorders, support issues & customer service from manufacturers

Field support from manufacturers, and training

Avoiding/Mitigating channel conflict

Managing lead and referral processes and programs

The Big Five

Portfolio Expansion

Focus on High Volume SKUs

Manufacturer and Product Focus

Private Label Products

Feature-Advantage-Benefit Sales and Marketing

Priority: Acquire OEM Brands that “open doors”

Portfolio Expansion1

Portfolio Expansion Remedy

• Recognize that it’s your brand that opens doors

• Maintain Focus on your area of expertise and value-add

Priority: Acquire High Volume, High Margin, or Low-Cost products

Focus on High-Volume SKUs2

- High volume is correlated with increased price sensitivity, switching, and cost of sales

- Manufacturers control much of this market

- Exclusivity is rare in high volume

- Primary lines can unbalance the portfolio

- GPO contracts drive margins down in high volume SKUs

Competing in Healthcare in 2012

Maximize

Minimize

Focus on High-Volume SKUs - Remedy

• Look for areas where you can add stability to your transaction volume; high, medium, and low frequency purchases

• Recognize that high volume is not always associated with high value

• Look for gaps and hard-to-find products and consider specializing there

• Add complimentary products that relate to your focus and expertise

Priority: Increase the value of your business with alignment in a category

Manufacturer and Product Focus3

Service Lines Dominate HealthcareA Service Line is: - A Center of Excellence- Focused on a patient population with a range of conditions and

symptoms.- Engaged in meeting providers’ and patients’ needs for:

• Quality• Access• Convenience

Service Lines are comprehensive, “product lines” including:

Screening & Prevention Diagnosis Treatment Aftercare support

Manufacturer & Product Focus Remedy

• Consider the VAR industry and adapt your business model to selling services and value-adds- Look at your portfolio and examine it for solutions- Sell implementation services and value-adds

• Consider where your infrastructure provides unique advantage for customers and manufacturers- e.g. Logistics, inventory management, service

and support, education

Priority: Source un-branded products to substitute or bundle in sets or kits

Private Label Products4

• Risks:

- Backorders

- Support

- Quality

- Regulatory review

- Liability

Private Label Products - Remedy

- Focus your core business on service lines

- Sell services that solve the business problem associated with your lines

- Consider a spin-off of packaging business

- If you’re in this business, bulk up compliance and risk management

Feature-Advantage-Benefit5

A Balanced Approach

What are the Hurts?

ClinicalUtility

OperationalEfficiency

FinancialPerformance

Department

Allocated Revenues and

Expenses

Equipment, Facilities,

Technology

Evidence-Based Medicine

Service Line

Favorable Market Conditions

Community Outreach and

Marketing

Definition of Services

Facility

Adequate EBITDA Margin

Staffing Skill-Mix Required MD/RN/

Growing or Reducing

Services Offered

Capitalization, Debt Service,

Leverage, Acquisitions

Resource Coordination

Care Coordination and

Service Line Portfolios

IDN/System

Market Power Aggregation with

Suppliers and Payers

Shared Services and Process Outsourcing

Population Management

and Cooperation

ACO/Network

• Sell Services: Create Solutions, Sell Related Services, Augment Core Product Lines

• Focus on Service Lines: Service Line Managers, Continuum of Care, Non-Acute and Acute Care

• Brand Building: Leverage Your Personal Brand, Brand the Company, Carefully Consider Private Branded Goods

• Upgrade skills: Business Acumen, Evidence-Based Medicine, Salesmanship, RFP Strategy

• Update the playbook: Corporate Accounts, GPO Contracts, Coverage Models

• Assess and Develop Talent: Specialists, Generalists, Managers, and Support

What to Do?

Questions?

www.tigi.net

Upcoming EventsWebinars:

June: How Healthcare Reform Impacts Your Business Today

July: 5 More Medical Device Strategies Doomed to Fail in 2012

To Register: http://www.tigi.net/webinar-calendar

Open Enrollment, 1 Day Workshop:

TIGI and MassDevice Present, TIGI Bootcamp 2012The Changing Healthcare Buying Environment: Adapting to the New Normal, August 13 in Boston & August 20 in the Midwest (location TBD).

To Register: http://www.tigi.net/the-changing-healthcare-buying-environment/

Thank You

Gunter Wessels, Ph.D., MBAPartner, Practice Principal, TIGI

gunter@mytigi.net@gunterwessels

Sam O’Rear, M.A. BASenior Partner, Founder, TIGI

sam@mytigi.net@TIGI_Inc

www.tigi.net

5 Medical Distribution Strategies Doomed to Fail in 2012

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Transcript of 5 Medical Distribution Strategies Doomed to Fail in 2012

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