How stakeholder tensions influence the
utilization of critical success factors
A case study on joint purchasing of expensive medicines
Master Thesis Supply Chain ManagementUniversity of Groningen, Faculty of Economics and Business January 28th, 2019 Ruben Quak S3023087 r.quak@student.rug.nl Supervisor: Bart Noort, MSc. Co-assessors: Prof. dr. ir. C.T.B. Ahaus
Prof. dr. E. Buskens Word Count: 9.353
Acknowledgement: I would like to express my gratitude to my supervisor Bart Noort for his
ABSTRACT
A possible solution in order to tackle high healthcare costs of expensive medicines is joint purchasing. However, it is difficult to achieve it properly, due to the different objectives of stakeholders such as hospitals, insurers, and pharmaceutical companies. The critical success factors (CSFs) for joint purchasing are known, but how to achieve them is still difficult. This study investigates which tensions there are between stakeholders and how these tensions make it difficult to pursue successful joint purchasing. Tensions are mapped using the paper of Boonstra, van Offenbeek, & Vos (2017) and linked to the CSFs formulated by Bentahar (2018) by use of a single case study. Instead of observing that more tensions leaded to less utilization of CSFs, we found that a balance shift towards one part of a tension enables a specific CSF. The lack of autonomy, difficulty in scaling-up, existing agreements, low savings- and high dependency were seen as the major causes of tensions.
Key words: critical success factors, expensive medicines, joint purchasing, joint purchasing
TABLE OF CONTENTS
1. INTRODUCTION... 5
2. THEORETICAL BACKGROUND ... 7
2.1 Expensive Medicines ... 7
2.2 Joint Purchasing in healthcare ... 8
2.3 Stakeholder Theory ... 10
2.3.1 Introduction ... 10
2.3.2 Tensions between stakeholders ... 11
2.4 Contributions of this study ... 12
2.5 Conceptual framework ... 13 3. METHODOLOGY ... 14 3.1 Study Context... 14 3.2 Research Design ... 14 3.3 Case selection... 15 3.4 Data collection ... 15 3.5 Data analysis ... 17 4. RESULTS ... 18 4.1 Overview ... 18 4.2 Mechanisms ... 20
4.2.1 Standardization versus Customization ... 20
4.2.2 Large- versus small scope ... 22
4.2.3 Low- and High integration ... 23
4.2.4 High influence of the pharmaceutical companies ... 25
5. DISCUSSION ... 27
5.1 Standardization and Customization... 27
5.2 Large- and small scope ... 27
5.3 Low- and High Integration ... 28
5.4 High influence of the pharmaceutical companies ... 28
5.5 Joint Purchasing Organization ... 29
5.6 Theoretical contributions ... 29
5.7 Managerial implications ... 30
6. CONCLUSION ... 31
REFERENCES ... 32
APPENDICES ... 37
Appendix A: Interview Protocol ... 37
Appendix B: Consent Form ... 39
Appendix C: Coding Trees ... 40
Appendix D: Overview CSFs per interviewee ... 54
Appendix E: Examples of quotes per critical success factors ... 55
1. INTRODUCTION
In the healthcare sector the expenses for medicines are rising. This increase is mainly caused by the arrival of new, expensive medicines, for example to treat specific types of cancer (’t Hoen, 2014; NZa, 2017b). These are medicines which cost 50k Euros per treatment per year or more than 40mln yearly (Rijksoverheid, 2018). In the Netherlands, these expenses went in 2016 to 2Bln. Euros, which was a rise of 6,7% with a total health care budget of 96BLn. Euros (CBS, 2017; NZa, 2017a). The pharmaceutical companies have a strong market position due to the patents on the medicines (’t Hoen, 2014). It is very difficult for hospitals and insurers to enforce lower medicine prices. One of the mentioned possible solutions is joint purchasing which aims for pooling and sharing volume of medicines by different care providers (Rego, Claro, & Pinho de Sousa, 2014, see also Gobbi & Hsuan, 2010; Nollet, Beaulieu, & Fabbe-Costes, 2017). This can help to achieve buying power against the pharmaceutical companies (e.g. NRC, 2017). Although a lot is known about joint purchasing, it is difficult to achieve it in practice as involved stakeholders often face at least partly conflicting objectives. We investigate which tensions there are between stakeholders and how these tensions make it difficult to pursue successful joint purchasing. This study focuses on joint purchasing of oligopolistic medicines between insurers and hospitals within the Netherlands. Tensions between the stakeholders will be investigated and how these tensions explain if CSFs can be utilized.
Boonstra, van Offenbeek, & Vos (2017) distinguish “what- and how-tensions, which can be used to clarify the tensions between stakeholders. A dichotomy can also be made within joint purchasing. When we understand the tensions, we can better understand how CSFs can be utilized. What-tensions are related to the project content, for example standardized versus customized agreements. Joint Purchasing implies an agreed medicine at lower price, whereas the medical specialist want to retain his freedom which medicine to prescribe (Montgomery & Schneller, 2007). How-tensions relate towards the process, for example a tension between differentiation and integration: how joint purchasing needs to be structured in order to achieve cost savings. By making both the what- and how tensions insightful, we get a better understanding of joint purchasing. We will first look at the tensions between hospitals and insurers.
This paper addresses the question: “How do the tensions between stakeholders enable or limit
the utilization of critical success factors of joint purchasing of expensive medicines? The
2. THEORETICAL BACKGROUND
In this chapter, the theoretical background will be elaborated. At first, the expensive medicines will be explained because these types of medicines are placed central in the research setting. Secondly, joint purchasing will be explained in order to provide the necessary knowledge of the pilot project. In the third paragraph, the stakeholder theory with what-and how tensions will be explained in order to explain the problems within joint purchasing. Lastly, the conceptual framework of this study will be provided.
2.1 Expensive Medicines
Expensive medicines are medicines for which the costs are very high, caused by patents and high R&D-costs. This can be medication for rare illnesses like specific types of cancer. The ministry of Health of the Netherlands sees medicines as expensive when it costs more than 50k Euros per treatment per year or more than 40mln yearly (Rijksoverheid, 2018). An example of an expensive medicine is “Glivec” (Imatinib) used for leukemia, which costs 36mln. Euros/year (Tax & van der Hoeven, 2014; WHO, 2017). The maximum compensation for these sort medicines is determined by the Dutch Healthcare Authority (NZa). A large part of the healthcare expenses goes to the expensive medicines. In the Netherlands, these expenses went in 2016 to 2bln Euros and rose with 6,7% (NZa, 2017a). The price of the expensive medicines rose by 300% in ten years’ time. (NRC, 2017).
The healthcare sector is a sector characterized by high R&D costs, which implies a high R&D-intensity (Hernández et al., 2017). The patents help the pharmaceutical companies compensate for their R&D costs and achieve profits, which means they can ask high prices (’t Hoen, 2014). This means that pharmaceutical companies have a strong market position. From a market perspective, three main types of expensive medicines can be distinguished. The first type is monopolistic medicines in where there is only one pharmaceutical company and where no substitute is available, which implies a high power for the pharmaceutical companies. Oligopolistic medicines are medicines in where there are a number of pharmaceutical manufacturers available. The last type are medicines with no patents, which can be produced without a license.
2.2 Joint Purchasing in healthcare
Joint Purchasing is the cooperation in the purchasing process between two or more organizations where methods like pooling or sharing of volumes, information, and resources are used. It is also known as group purchasing, collaborative/cooperative purchasing or purchasing groups (Rego et al., 2014 see also Gobbi & Hsuan, 2010; Nollet et al., 2017). Joint purchasing can be seen as a form of strategic/supply chain cooperation (see Cao, Vonderembse, Zhang, & Ragu-Nathan, 2010). The responsibilities between stakeholders must be clear, as it improves the collaborative understanding (Exworthy & Peckham, 1998). Joint Purchasing as concept has become popular in recent times, because there is a common environment, procedures, and similar needs for cost reduction (see Schotanus & Telgen, 2005; Tella & Virolainen, 2005; Walker, Essig, Schotanus, & Kivisto, 2007).
In 2017 a pilot of joint purchasing in the Netherlands was conducted for oligopolistic cancer medicines (chronical myeloid leukemia / CML). In this situation, the hospital buys the medication from the pharmaceutical company, the medical specialist prescribes this medicine. The hospital pharmacist interacts with the specialist, checks the recipe and defines the doses. The hospital makes with the insurer contractual agreements about the financial compensation; an invoice will be sent to the health insurer (NZa, 2017b; WHO, 1994). Further background of the pilot is provided in the study context.
Joint Purchasing has advantages, but also disadvantages. By combining the volume, more power can be negotiated, which can lead to closer collaboration (Gobbi & Hsuan, 2010). Joint Purchasing can also lead to lower purchasing costs and the development of expertise. However, joint purchasing is also characterized by uncertainty, the high coordination costs for the collaboration and the fact that strong suppliers may resist participation (Gobbi & Hsuan, 2010; Walker, Schotanus, Bakker, & Harland, 2013). In our case, this can mean that pharmaceutical companies can resist the joint purchasing initiative. This problem needs to be prevented.
Table 2.1: Critical Success Factors. Adapted from “Key success factors for implementing purchasing groups in the healthcare sector”, by O. Bentahar, 2018, Supply Chain Forum: An International Journal,
19(1), 90–100.
Critical Success Factors Explantion
Project Manager Skills Project Manager skills for Management of Change Purchaser Training Acquiring new skills purchaser
Top Management Support The top management and stakeholders need to support the project Managing resistance Every change causes resistance which need to be managed. Communication Effective communication / coordination
Cooperation Pursuing common objectives. Relationships based on trust, mutual dependences. Expected benefits Cost reductions or savings as a result of joint purchasing
Fair distribution of savings Contributing the savings in a fair and equitable manner between its members Performance indicators and
measures
Removing ambiguity. Incentive to commitment.
The CSFs can be measured by the utilization of CSFs, the number of critical success factors used. It would be interesting to know which of these success factors are of high importance for joint purchasing. This is one of the aims of this study.
Joint Purchasing itself can be structured in a formal and informal way (Gobbi & Hsuan, 2010). Nollet & Beaulieu (2003) argue that joint purchasing requires a formal structure, because this enables more inter-organizational cooperation (e.g. Nollet & Beaulieu, 2005; Schotanus, Telgen, & Boer, 2010). Formal structures also help in improving the decision-making (Page, 2004).
collaboration can also be done e.g. on European level with countries like Germany (Walker et al., 2007).
What makes the realization of commitment difficult is that even within a formal structure, there is no guarantee that the contract prices are the lowest as possibly can, caused by other stakes (Hu & Schwarz, 2011). Hu & Schwartz took a quantitative and mathematical approach to come to this conclusion. Tadepalli (1991), as cited by Nollet et al. (2017) tells that inter-organizational dynamics are linked to the perceptions and opinions of stakeholders. These dynamics can change over time and depend on the parties involved. Why joint purchasing is not succeeding is unanswered yet. What we do know is that there are conflicts of interests between the stakeholders. These tensions can be studied from the stakeholder theory. This will now be explained.
2.3 Stakeholder Theory
The Healthcare sector is a complex market with many stakeholders, types/clusters of medicines, and governmental legislation & regulations. In this paragraph the relations between stakeholders will be elaborated. After a short introduction, a framework will be introduced which supports the mapping of the several tensions between stakeholders within joint purchasing.
2.3.1 Introduction
The stakeholder theory is the theory which addresses that stakeholders are “any group or individual who can affect or is affected by the achievement of the organization’s objectives” (Freeman, 1984, p. 46). Typical stakeholders for an organization are employees, customers, legislators, financial funders etc. When people or organizations want to collaborate with one another they become stakeholders. Between stakeholders the stakes play an important role (T. Donaldson & Preston, 1995; Freeman, Phillips, & Sisodia, 2018).
expensive medicines. As can be seen, each stakeholder has its own objectives. When these objectives contradict with each other (e.g. costs of expensive medicines), tensions between stakeholders will emerge.
2.3.2 Tensions between stakeholders
Figure 2.1: What- and How Tensions. Reprinted from “Tension Awareness of stakeholders in large technology projects: a duality perspective”, by A. Boonstra, M.A.G. van Offenbeek, J.F.J. Vos, 2017,
Project Management Journal, 48 (1), p. 23. Copyright 2017 by Project Management Journal.
Such tensions are also expected within joint purchasing. We can take the tension between standardization and customization as an example. This is about having an agreed medicine at a low price, whereas medical specialists want freedom in medication prescription. We are wondering which other tensions we can identify which have a connection with the content (what) and process (how). Primary, for this study will look at the tensions between hospital-insurer, in where the pharmaceutical companies will react. An important side note Nollet et al. (2017) make is that tensions within a group do not necessarily mean that it is non-functional, but under-utilized potential. This assumes that tensions are not uncommon and that it can be solved, and so that tensions can be an explanation for the fact that the potential of CSFs are not achieved.
Summarized, there are various tensions within joint purchasing. Success factors are needed in order to get a more “mature” collaboration. Bridging this gap can improve our understanding how to manage joint purchasing.
2.4 Contributions of this study
mechanisms according to the links between tensions and CSFs and make clear which tension is the most important to overcome to improve joint purchasing. We know that there are CSFs for joint purchasing, but why it is difficult to utilize these is unanswered. We also want to understand which CSFs will be utilized.
2.5 Conceptual framework
A better understanding how the what-and how tensions are related towards CSF are needed. This all will lead to the following framework (2.2). Due to tensions, a negative link between the what/how tensions and the utilization of CSF (i.e. the higher the tensions, the lower the utilization of CSFs) is assumed. We know from Bentahar (2018) that CSFs are crucial for joint purchasing. Therefore, it is assumed that there is a positive link from the CSF to joint purchasing (and vice versa). After this link, we can get a deeper understanding of the various tensions and the playing field of stakeholders of joint purchasing. Also, it becomes clear which tension of joint purchasing is the most important to overcome to improve joint purchasing. In order to scale up, a JPO can be considered in the future, while considering the CSFs.
3. METHODOLOGY 3.1 Study Context
In 2017, a pilot was initiated which aimed at the joint purchasing of expensive medicines, in this case for leukemia (CML-cluster) (Benraad, 2017; NOS, 2017; NZa, 2017b). This initiative is setup as a collaboration between insurers and hospitals. The pilot is seen as informal, because this project is not scaled-up and is according to the umbrella organization of insurers seen as a “one-off collaboration” (Benraad, 2017). All academic hospitals, around 40 other hospitals and all insurers have joined the pilot, which is about 85% of the hospital market (Benraad, 2017). This study focuses on joint purchasing of oligopolistic medicine, which means that there are several providers for the medicine. The pilot itself consisted of three medicines for which the medical specialist can choose from (NOS, 2017). The pharmaceutical companies will offer this medicine at an agreed price. The medical specialist however will still keep his medication freedom. The medicine of choice needs to be prescribed in 70-75% of the case. When a higher percentage of these medicines is prescribed, the hospitals will get a discount.
This means that hospitals also have a joint purchasing process, besides their standard purchasing process, these two processes need to be integrated (Benraad, 2017). The pharmaceutical companies are not happy with the joint purchasing initiative, since it will reduce their power in the market. This could lead to stronger approaches by the pharmaceutical companies towards the hospital, in particular the medical specialist. This is an example which shows the influence that parties have on each other (e.g. Brooks, Dor, & Wong, 1997), because we also want to understand the power of the pharmaceutical companies on the hospital-insurer relationship. This can (again) lead to tensions between hospitals and insurers. Primary, we will look at the tensions between hospital-insurer.
3.2 Research Design
1989). Lastly, a case study helps because there are prior developments and propositions (Yin, 2014); earlier research already showed that joint purchasing can be seen as a solution to reduce medicine prices. Therefore, a single case study will be used, so the situation can be explored more in-depth (Karlsson, 2016).
3.3 Case selection
The explained pilot project of joint purchasing will be studied, this is a pilot which was only initiated a year ago and is still in the scaling-up phase. Because this pilot is in an early stage, tensions are easily visible. The unit of analysis is the joint purchasing project in the Netherlands. We will take the hospital-insurer relationship as starting point because these two parties have already as sort of participation, which means that tensions are easily visible. In order to obtain a representative sample of stakeholders, the case will be selected based on size of the insurer and the fact if a hospital is academic or non-academic. For this research an insurer with more than 500.000 insured people will be seen as large. This means a market share of about over 3% (based on Vektis, 2018). A middle-large insurer will be seen as an insurer with less than 500.000 people insured. Their market share is below 3% (Vektis, 2018). Expected was that both middle-large and large insurers are willing to talk about the tensions. The pharmaceutical companies were not be researched in this paper. This is because pharmaceutical companies are no supporter of the joint purchasing initiative, since it will improve the buying power of the insurer and hospital.
3.4 Data collection
The data has been retrieved by conducting semi-structured interviews. This method gives the possibility to ask in-depth questions. Each interview was conducted by two interviewers, where one person had the leading role (interviewing), the other person checked if all the questions are sufficiently answered and when needed also asks questions. The interviews were conducted in Dutch. The questionnaire (appendix A) was sent to the interviewees a few days in advance in order to provide preparation time. Before the interview itself, the interviewee signed a consent form in which the objective of the interview was explained and the anonymity of personal data was secured (appendix B). The interviews itself were recorded and were between 45-60 minutes. After each interview, transcriptions were made in Dutch.
companies and the collaboration in general. A hospital manager, hospital pharmacist, and seller also provided this information, but also talked more in-depth about the tensions regarding e.g. objectives and procedures. A lawyer / external senior researcher who is connected to an academic hospital was also interviewed, which provided in particular insights about the influence of pharmaceutical companies. From the insurer side, various roles were interviewed such as policy developers and an advisor, which provided their tensions. A total of 12 interviews were conducted, with 8 interviewees from the hospitals, 5 interviewees from insurers, and 1 interviewee from an external party. This means that there are multiple sources of evidence within the case (see Yin, 2014). Table 3.1 provides an overview of the data collection.
Table 3.1: Overview interviews
In order to achieve triangulation, secondary data was used to support/supplement the collected interview data (Eisenhardt, 1989). Examples are annual reports or earlier interviews. The interview questions can be found in appendix B. Sub-questions that will be answered are:
• What are the experiences with joint purchasing? • What are the tensions?
• What are the important success factors?
• How do the tensions and success factors relate to each other?
External Hospital side
Selection n/a General Academic Non-academic
Role
Sen. Researcher / Lawyer
Assoc. med.
spec. (2p.) Care Seller
Medical Specialist Hospital Manager Hospital Pharmacist Date 09/11/2018 22/11/2018 02/11/2018 30/10/2018 05/12/2018 01/11/2018 02/11/2018 15/11/2018 Duration 35 minutes 59 minutes 50 minutes 59 minutes
50 minutes 48 minutes
56 minutes 58 minutes Insurer side
Selection Large Middle-large
Role
Policy Developer (2p.)
Data
Analyst Purchaser Medical Advisor Date 19/11/2018 14/11/2018 21/11/2018 15/11/2018
3.5 Data analysis
After the transcripts are made, the data which relates to the tensions and critical success factors was coded using Excel 2016 (appendix C). The data was coded in various stages, starting from broad towards narrow. A combination of deductive and inductive coding was used, because the expectation was that we also find new tensions and CSFs. The expectation was that all 7 tensions will be found. The tensions identified in the interview data will get first order codes (open coding) in where the data will get labels. After that, second order codes (axial coding) was used based on the what- and how tensions of Boonstra et al. (2017) in order to regroup the tensions (e.g. standardization/integration). Other tensions came also visible here. Last, third order / selective coding was used in order to link these categories to the critical success factors of Bentahar (2018). This last step has provided patterns how the tensions have an influence on the utilization of the CSFs (Voss, Tsikriktsis, & Frohlich, 2002). The newly defined tensions and CSFs were inventoried, where overlaps were defined in order to find themes. After this, a selection was made of the most important tensions in where mechanisms were identified.
4. RESULTS 4.1 Overview
The data made clear that joint purchasing can be seen as a solution to tackle the high healthcare costs. The project has helped the stakeholders to better know each other’s interests, which leaded to more mutual understanding. Still, both the insurer and hospital made clear that better results need to be achieved in the future. The government itself has stayed on the background during the project, but the study made clear that policies and laws by government are needed to achieve better collaboration. Joint purchasing was done for a cluster of leukemia medicines (CML) for which agreements were made. The hospitals made clear that you then have agreements for one group of medicines, but they also got offers for other medicines which made the process complicated. They saw joint purchasing as an initiative with low savings. The insurers also acknowledged the low savings but made also clear that they wanted more information exchange between insurer and hospitals regarding the purchasing prices. The pilot itself was by both parties seen as quite complex, caused by existing (financial) agreements and market forces, since parties need to compete. Another point of complexity was the fact that you are a partner within joint purchasing, but outside joint purchasing you are not a partner since you also have the annual care negotiations between hospitals and insurers, leads to conflicting situations: “…quite strange to collaborate
with someone, which you also face every year.” – Hospital Manager. At this moment, there
are no plans for future clusters.
Table 4.1: The linking CSFs
Additional tensions besides Boonstra et al. (2017) were also found. A total overview of the links between tensions and CSFs was made, which made clear that the CSFs cooperation, communication, and expected benefits have the most links with the tensions. The tension low- versus high integration was seen as most critical, since this tension is about the degree of collaboration. See appendix C-F for the complete overview of the analysis process. At the end, we got four tensions were seen as relevant for this pilot. These tensions which provided interesting mechanisms:
1. Standardization versus Customization 2. Large versus Small Scope
3. Low- versus High integration
4. High Influence of pharmaceutical companies
For these tensions, interesting mechanisms where found, i.e. for each part of the tension a corresponding CSF could be identified. This all leads to the following table (4.2). The grey
CSF Bentahar (2018) Explanation
Managing resistance Every change causes resistance which need to be managed.
Cooperation Pursuing common objectives. Relationships based on trust,
mutual dependences.
Top Management Support The top management and stakeholders need to support the project
Communication Effective communication / coordination
Fair distribution of savings Distribution the savings in a fair and equitable manner between members
Expected benefits Cost reductions or savings as a result of joint purchasing
CSF (Additional) Elaboration
Involvement Medical Specialist
The extent in which the medical specialist is involved in the process
Patient Satisfaction Take the patient into account
Lessons Learned Experiences distilled from earlier project(s) for improving the next phase
Transparency procedures Clear and transparent procedures
Use real world data Collect real world data before making a decision. Handling of the product Product must fit in the existing workflow
Relationship Management Engagement / good relationships with stakeholders in order keep collaboration going
areas are interesting additional CSFs found, compared to what was discussed based on the literature.
Table 4.2: Founded links with mechanisms Theme Leadership &
Management Communi-cation & Coordination Performance & Benefits Stakeholder
focus Process Relations CSF à Tension â C oope ra ti on ( com m on obj ec tiv es ) C om m uni cat ion (e ffe ct iv e com m uni cat ion & c oor di nat ion) E xp . B ene fi ts ( cos t r ed. /s av ings ) Inv ol ve m ent M edi ca l Sp ec ial is t Le ss ons L ear ne d R el at ions hi p M anage m ent B e obj ec tiv e Standardization / Customization
¥
¥
Large- / Small Scope¥
¥
Low- / High Integration (level of collaboration)¥
¥
High Influence pharmaceutical industry¥ ¥
¥ :
Links with important mechanismsWhat can be derived from the table is that for the four tensions, links with seven CSFs were found, where expected benefits in particular seems to be important. The mechanisms itself will be explained in the next section.
4.2 Mechanisms
In this section, the four tensions and corresponding mechanism will be elaborated. This will be visualized, after which a proposition is formulated.
4.2.1 Standardization versus Customization
agreement of prescribing the medicine of choice in 70-75% of the cases or giving medical specialists freedom to prescribe a different medicine.
The biggest problem within this tension is the possibility of the reduced autonomy for a medical specialist. The association of medical specialists sees the reduced autonomy as the biggest fear: "…the danger in these kinds of trajectories, lies in the fact that you eventually
start "nibbling" on the autonomy of the prescriber”. This was also mentioned in their Vision
Document for Medical Specialist (secondary data). Medical specialists wonder if the preferred medicine as agreed in the joint purchasing pilot actually is the best one. On the other hand, both insurers and hospitals agree that joint purchasing can help to achieve lower medicines prices, where agreements need to be made by professional groups of medical specialists, e.g.:
“…you need to come well prepared if you want to choose a different medicine, a clear consideration has been made.” – Medical Specialist. This shows that there is a lack of
consensus between the stakeholders about the route to follow. Also, hospital management is pushing the medical specialists by checking if the percentage of the preferred medicine is achieved in order to get the discount. In this case, the medical specialist can be put under extreme pressure, which could even lead to resignation. This shows that there are also internal tensions between the medical specialist and hospital management.
Figure 4.1: Mechanism - Autonomy medical specialist
Based on these results, this leads to the following proposition:
P1: Standardization enables the cooperative part of joint purchasing. Customization enables the involvement of the medical specialist, meaning that the medical specialist will play a central role.
4.2.2 Large- versus small scope
A second tension which was found is the tension between large- versus small scope: the size of the project. Problems were found in scaling-up the joint purchasing project, e.g.:
“…because if you do it with a larger group, the different stakes of stakeholders become [more problematic], you will suffer too much from that.” – Purchaser Large Insurer and: “Look, if you draw it wider than the CML-cluster, then we are also looking to see if we can extend this form of cooperation to other clusters and that it is still very difficult.” – Data Analyst Large Insurer. This shows that the larger the scope of the project, the bigger the problems will be.
On the other hand, stakeholders also know that a larger scope can mean more buying power, thereby showing a paradox: "…the greater your purchasing power, the better it is, the better
you can make agreements for medicines…” – Care Seller Academic Hospital. This can have
the advantage that pharmaceutical companies cannot give discounts outside the pilot. The insurers were more positive about a larger scope, by having more clusters (medicine groups) which can be jointly purchased.
achieved, linking to the CSF of expected benefits (savings). These savings can benefit both the insurer and hospital, since less discounts outside the pilot will be given. However, this is difficult to realize due to the higher complexity of stakes. Figure 4.2 provides a visual representation of the mechanism:
Figure 4.2: Mechanism – Scaling up the joint purchasing project
Based on these results, this leads to the following proposition:
P2: A small scope enables lessons learned, but will lead to lower savings. A larger scope enables expected benefits (savings), but will provide less opportunities for lessons learned.
4.2.3 Low- and High integration
Integration can be seen as the activity of combining actions in order to increase collaboration to achieve common benefits. Both parties acknowledge that a high degree of integration will provide the best results. This means that when stakeholders collaborate, they will stick more closely to the joint agreements made, resulting in more benefits and better agreements for both parties. In our case of joint purchasing, a high integration lead to better agreements with pharmaceutical companies, so no discounts outside the joint purchasing are needed. Both the hospital and insurer can achieve maximum savings.
On the other hand, the pilot has also showed problems, and therefore limitations in the collaboration between hospital and insurer. Some insurers made clear that they want more transparency in the process, because they see large difference in the medicine prices when they conduct benchmarks between hospitals. However, this can imply that the pharmaceutical companies will be less positive about giving discounts on medicines: "…look at the
about the price." – Medical Advisor Insurer. The pilot was seen as a first step, it had not the
expected effect, e.g.: "…not every professional group is prepared to go that far, we see." –
Medical Advisor. This shows that not every stakeholder, such as the medical specialists, is
able to define new clusters for joint purchasing or to strengthen the relationship. This shows that the joint purchasing -as it is done now- is not used effectively since each stakeholder still has its own objectives, and can made agreements outside joint purchasing. The collaboration is characterized by a limited trust, and no good relationships. Hospitals are in general already part of a hospital purchasing group in where savings are achieved, which was also mentioned in annual reports. Insurers however are not able to form a comparable purchasing group, since insurers need to compete with each other. All this can be seen as a reflection of low integration. Low integration will mean that the relationships are more on-distance, and the collaboration is less intensive. Some stakeholders see benefits in low integration, because they want to be independent. When a joint purchasing project is executed, a minimum level of transparency and trust is required, next to common objectives and benefits. This can be covered within the CSF of effective communication and coordination, which must be utilized. Summarized, when the tension shifts to low integration, there will be more distance between the stakeholders, less dependency and less interference. When the tension shifts to the high integration, more expected benefits will be realized for both parties and better agreements with pharmaceutical companies can be made on joint purchasing. Figure 4.3 provides a visual representation of the mechanism:
Figure 4.3: Mechanism – Degree of collaboration
Based on these results, this leads to the following proposition:
4.2.4 High influence of the pharmaceutical companies
As mentioned above, pharmaceutical companies will be less willing to collaborate when a high transparency is needed. According to the interviewed external party, the government could take a more leading role in order to reduce the power of the pharmacists in general, e.g. by means of a compulsory license. Meaning that the government will then allow someone else to produce a patented medicine; this is seen as effective since the most pharmaceutical companies reacted by providing a voluntary license, meaning that other companies could also operate on the marker, or come up with a better market offer.
The pharmaceutical industry does not want to get transparent when it comes to medicine prices. From an earlier interview with a hospital pharmacist (secondary data) it became clear that transparency can therefore work market-disruptive. Within this pilot only a 2% discount was realized, which was seen as a symbolic percentage. The pharmaceutical industry is trying to “play out” the insurer and hospitals by giving a lower price to individual hospitals. This can make the hospital decide not to participate in joint purchasing. “The pharmaceutical industry
is never a philanthropical institution”, as mentioned by the Medical Advisor Insurer. Less
dependency on the pharmaceutical industry is therefore favorable.
On the other hand, the data made clear that it is possible the pharmaceutical industry can “back out”, which means that they will not offer a particular medicine to a particular country any more when they think that the price is adjusted too much: "That can happen, at a given
moment" – Data Analyst Large Insurer. This is seen as a realistic possibility, since both the
hospitals as insurers acknowledge that the Netherlands is only a small market. Keeping good relationships with the pharmaceutical companies is therefore essential. Large problems are expected when the pharmaceutical industry will not supply a country, since you can still need them for medicines which are not joint purchased.
Figure 4.4 gives a visual presentation of this mechanism:
Figure 4.4: Mechanism – Influence of the pharmaceutical industry Based on these results, this leads to the following proposition:
P4: When you collaborate with the pharmaceutical industry, this will enable the utilization of relationship management, but will increase dependency. When you want to have less influence of the pharmaceutical industry, this will enable the success factor “be objective”, but can have a negative effect on the relationship.
5. DISCUSSION
Within this study, the question was asked how tensions can explain the utilization of CSFs. Instead that more tensions lead to less utilization of CSFs, we found that a balance shift towards one part of a tension enables a certain CSF. These tensions were: (1) customization versus standardization, (2) large versus small scope, (3) low- versus high integration, and (4) the high influence of pharmaceutical companies. On the tension between high- and low impact no suitable mechanisms could be found, since no clear CSF could be defined for the low impact side of the tension. The mechanisms found will now be discussed.
5.1 Standardization and Customization
The involvement of the medical specialist is seen as an important success factor when the focus is on customization-side of the tension, this was supported by both the insurer as the hospital. The role of the hospital management reached quite far and can even lead to interference with the prescription role of the medical specialist, a role for which the medical specialist is responsible. This interference of management leaded to internal tensions. The medical specialists can choose their own interests over the interests of hospital management, which make it less standardized, which was also made clear by Abdulsalam, Gopalakrishnan, Maltz, & Schneller (2018). Their influence affects the prices of the medicines (e.g. not obtaining the discount) and will therefore reduce the ability to standardize (Burns, Housman, Booth, & Koenig, 2018). The results show that the autonomy of the medical specialist must not be undervalued and is crucial for successful joint purchasing. However more consensus is needed in order to make agreements between stakeholders to push for the standardization within joint purchasing, such as the agreement of prescribing the medicine of preference in 70-75% of the cases. This supports Montgomery & Schneller (2007) in the way that there can be resistance against standardization, but the barriers between standardization and medical specialist can be overcome. We know that a balance is needed, the mechanism has explained why it is important to have cooperation and involvement of the medical specialist.
5.2 Large- and small scope
mentioned by Gobbi & Hsuan (2010), he also mentioned problems in terms of scope, but has not concluded this as a clear drawback of joint purchasing. What he did made clear is that joint purchasing will provide lessons to each other, which will improve the collaboration. A large scope will make the collaboration more mature and formal (Schotanus et al., 2011). When looking at the mechanism, expected benefits and the additional factor lessons learned are seen as the two linking success factors within this tension. A balance needs to be found between these two factors. However, a larger scope is at some time needed in order to achieve the benefits where this project is meant for.
5.3 Low- and High Integration
Instead of observing a how-tension between differentiation and integration, a tension was found on the degree of integration. This is a slight difference compared to Boonstra et al. (2017). The pilot was seen as first step, but lacked the required results, which had the hospitals realize they would be better off without joint purchasing. In high integration a link was found with the CSF of expected benefits, supporting Donaldson (2001) and Flynn, Huo, & Zhao (2010) which made clear that performance can be achieved via alignment of structures and processes. High integration means more inter-organizational cooperation, supporting Nollet & Beaulieu (2005); Schotanus et al. (2010). Low integration means more distance in agreements and less dependency, linking to Jayaram, Tan, & Nachiappan (2010) which made clear that integration and dependency are related and that a balance between formal and informal agreements must be used. Problems were also seen in the transparency of agreements. This was also made clear by Gobbi & Hsuan (2010) that transparency need to be promoted in joint purchasing. A balance is needs to be found between effective coordination and coordination and the expected benefits. In time, it is expected that the joint purchasing project will go to high integration in order to achieve more benefits. Commitment of both parties is needed in order to make it (more) integrated (see Doucette, 1997).
5.4 High influence of the pharmaceutical companies
strong suppliers can resist participation. The interviewees made clear that this is explicitly possible in a small market. The high influence of the pharmaceutical industry showed that relationship management must be considered, since you are dependent on getting the medicines. This links to Giannakis, Doran, & Chen (2012), which also identified dependency as barriers within collaborative purchasing and made clear that relationship management is essential. On the other hand, you must also not be too dependent, due to the high power of the industry. For a successful collaboration in joint purchasing, less dependence is needed on the pharmaceutical industry, without any decrease in relationship management. In practice, this means having good negotiations with the pharmaceutical companies without the fear that they will stop the collaboration.
5.5 Joint Purchasing Organization
Although there are different views if a joint purchasing organization (JPO) is feasible, in general, at this moment, it is not seen as a way forward, due to national policies and laws. One of the biggest problems which would then arise would be on the area of mandate. This means more complexity, since you need to align all the interests on a nation-wide scale. For a future structure, the government could take a direct role by facilitating an environment to conduct research and development together. The minister of Health came up with this type of idea: a national fund for medicine research during a debate (Tweede Kamer der Staten-Generaal, 2018). This means a lot of investments, but less dependency on the pharmaceutical industry. The question of the feasibility of a JPO has a link towards the tension of large- and small scope. A large scope will increase the savings, but also the complexity. The earlier elaborated mechanism can also be seen back here. More confidence was found in a European collaboration, leading to a bigger and stronger collaboration. Suitable countries were the BeNeLux, Austria and Ireland, having already an initiative to make new medicines faster available at an acceptable price (Tweede Kamer der Staten-Generaal, 2018). Cost savings and buying power can be achieved here, supporting Gobbi & Hsuan (2010), Jayaraman et al. (2014). However, interviews made clear that Germany and France will be less open to such an initiative due to their large pharmaceutical industry.
5.6 Theoretical contributions
important CSFs which need to be utilized. We also got a better understanding of the tensions and stakeholders and its mechanisms. Transparency of the process was (already) originally covered under the success factor “cooperation” of Bentahar (2018). Based on our results and the importance of transparency we can argue that transparency of procedures needs to be a separate factor. Secondly, this study has identified new CSFs, namely: lessons learned, be objective, and relationship management. Based on this study, these can be seen as important additional CSFs compared to Bentahar (2018)
5.7 Managerial implications
This study has provided a better insight in how stakeholders think about joint purchasing. It has provided how tensions enable the utilization of CSFs within joint purchasing. From a managerial perspective, the following key findings can be outlined.
• The medical specialist needs to play a more central role within joint purchasing; • A larger scope enables more expected benefits, but will increase the complexity of the
joint purchasing project because of larger becoming problems;
• A high integrated joint purchasing project will give the best benefits for both insurer and hospital;
• The realization of savings is seen as the most important aims of joint purchasing in order to improve the collaboration and trust.
• Due to the high influence of the pharmaceutical industry, less dependence is needed without interference in the relationships;
5.8 Limitations and future research
6. CONCLUSION
The hospitals and insurers made clear that joint purchasing is a solution to tackle the high medicines prices, even though there are difficulties in terms of tensions. The project has helped the stakeholders to get a better knowledge of each other’s stakes, leading to more mutual understanding. At this moment, there are no plans for future joint purchasing in other clusters. Most of the CSFs of Bentahar (2018) and all tensions of Boonstra et al. (2017) were found. Additional CSFs and (sub)-tensions were identified. Instead of that more tensions lead to less utilization of CSFs, we found that a balance shift towards one part of a tension enables a certain CSF. The tension on low- versus high integration was seen as the most critical tension, since this covers the degree of collaboration within joint purchasing. This study has helped to get a deeper understanding of the tensions and playing field of stakeholders.
The lack of autonomy, difficulty in scaling-up, existing agreements, low savings- and dependency were seen as the major causes of tensions. It is necessary to find a balance between these tensions and enabled CSFs. The role of the medical specialist needs to be placed more centrally, where balance must be found between cooperation and the involvement of the medical specialist. The study made clear that a larger scope is seen as preferable in order to achieve savings, but that it will also increase the complexity. The existence of other purchasing groups and agreements, and low savings has made the joint purchasing project less integrated. High integration leads to high dependency. The pharmaceutical industry plays out both the insurer and hospital, and can also back-out, which means that relationship management and less objectiveness are seen as the important factors. It is important for the whole joint purchasing project and the joint purchasing organization to first improve the overall alignment and reduce the power of the pharmaceutical industry. Lastly, a European collaboration seems to be a better option compared to national collaboration. A European collaboration will improve the buying power due to the large scope, with as a result more savings.
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APPENDICES Appendix A: Interview Protocol
Interviewers: Ruben Quak and/or Giulia Massaro
Contact: r.quak@student.rug.nl / g.massaro@student.rug.nl Contact: 06-13549529 / 06-20782102
The following information will be provided before the start of each interview to the interviewee.
- Introduction by interviewers (i.e. ourselves, joint purchasing, themes) - 60 minutes interview
- Interview is confidential (i.e. signing consent form)
General
1. Could you tell us something about yourself and your function? a. Name interviewee
b. Position / role of purchasing medicine c. Work experience in current position d. Name company
Joint purchasing
2. How would you describe your task/activity in JP? 3. What is your interest in the joint purchasing process?
4. To what extent does the joint purchasing process influence your function? 5. Which stakeholders are involved in joint purchasing?
6. To what extent do you think that other stakeholders have a good vision/idea of your interest and responsibilities in this process?
7. What are their stakes and how are they involved?
Relationships in Joint Purchasing
In this study, we investigate the feasibility of joint purchasing of expensive medicines. 8. In what way could joint purchasing help with improving the buying power of
insurer-hospital?
Several relationships between stakeholders in the joint purchasing process can be identified. 9. Between insurer and hospital
a. Good/bad relationships? Tensions? b. Why + consequences?
c. Improvements?
10. Between insurer and medical specialist a. Good/bad relationships? Tensions? b. Why + consequences?
11. Between insurer/hospital and pharmaceutical company a. Which tension?
b. Why + consequences? c. Improvements?
Success Factors
12. What are the most important success factors in joint purchasing when looking at the stakeholders?
a. Why? b. ….
13. Why can these success factors not be utilized successfully? 14. How do they relate to the tensions mentioned earlier?
Future perspective
15. Do you see a separate external (national?) Joint Purchasing Organization as a possible way forward? Why?
16. Do you think that a JPO for expensive medicines is in practice in the Netherlands in a few years’ time? Why?
Appendix B: Consent Form
Researcher’s name: Ruben Quak and Giulia Massaro Title: BBA / BSc Contact details of researcher:
Ruben Quak
Verlengde Nieuwstraat 24a 9724 HD Groningen r.quak@student.rug.nl
Contact details of researcher: Giulia Massaro
Turfstraat 9a 9712 JK Groningen g.massaro@student.rug.nl
Faculty/School/Department: University of Groningen, Faculty of Economics and Business, Department of Operations
Title of Study: Joint purchasing for Expensive Medicines To be completed by: The interviewee
Background of study:
This research investigates the relationship between hospitals and health insurers in the setting of joint purchasing of expensive medicine. What is the current state of this relationship and what are factors that influence this, thinking of pharmaceutical companies, miscommunication and differences in
perspectives. By mapping the interests between different stakeholders, a valuable advice can be given to improve the joint purchasing of expensive medicine.
By conducting a single case study, we aim to understand how hospital-insurer relationships develop and to get a better understanding of the mechanisms influencing joint purchasing. During this study, qualitative data will be gathered by conducting semi-structured interviews. The study will be conducted in the Netherlands. Interviewees will be asked to participate in an interview which will take 45-60 minutes and will be held in Dutch. During the interview, the participant will be asked about:
- The experience, responsibilities, and ideas of stakeholders in the joint purchasing process. How do they describe their own role in this process and the role of other stakeholders? Is there a strong relationship, or are there varying opinions about this?
- Which conflicts of interests (tensions) there are between stakeholders, and how these conflicts of interest stand in the way of the success factors.
If agreed by the interviewee, the interview will be audio recorded. After the interview, the researchers will write a transcript for own analysis. These transcripts will not be shared.
The transcripts of the interviews will be stored on the server of the University of Groningen. Data from the interviews will be anonymously published, in such way that the published information cannot be traced back to the interviewee. The interviewee can receive the theses when requested.
Consent statement:
Participation to this research is voluntary, and you can refuse to participate or withdraw your
participation at any point in time without consequences. Your responses will remain fully anonymous and cannot be traced back to you. The results of this study are intended to be published. With questions about this research you can contact the responsible researcher.
I hereby certify that I have read and understood the above; that I am at least 18 years old; and that I voluntarily agree to participate in this research.
□ I agree □ I disagree
