Master Thesis
Stakeholder prominence and stakeholder synergy in the joint purchasing of
expensive medicine: the disappointing reality
January 28th, 2019 Giulia Massaro
S3306763
g.massaro@student.rug.nl Master: Supply Chain Management
University of Groningen Supervisor: PhD Candidate, A.C. Noort
Co-assessors: Prof dr. ir. C.T.B. Ahaus
ABSTRACT
With the constant increase of costs of expensive medicine in the Dutch healthcare system, a pilot of joint purchasing of expensive medicines is introduced as a possible solution. However, successful joint purchasing practices ask for specific stakeholder roles and relationships and therefore this paper investigates the key stakeholders: medical specialists, hospitals, health insurers, and pharmaceutical companies. The medical specialist is taken as focal point since they prescribe and use expensive medicines on a daily basis. With a qualitative single-case study where multiple semi-structured interviews are conducted, an insight is provided on how prominent each stakeholder is present in joint purchasing and the level of synergy between two stakeholders. The results of this research show that that the current statuses of stakeholder prominence and stakeholder synergy in the pilot hinder successfulness of joint purchasing. Awareness of the current situation of stakeholders in joint purchasing can bring along improvement.
Key words: stakeholder theory; expensive medicine; joint purchasing; stakeholder prominence;
stakeholder synergy; medical specialist
ACKNOWLEDGEMENT
TABLE OF CONTENT
Introduction 6 Theoretical Background 8 2.1 Expensive medicine 8 2.2 Joint purchasing 8 2.3 Stakeholders 9 2.3.1 Stakeholder prominence 10 2.3.2 Stakeholder synergy 12 2.4 Conceptual framework 13 Methodology 14 3.1 Research context 14 3.2 Case selection 14 3.3 Data collection 15 3.4 Data analysis 17 Results 194.1 Success of joint purchasing 19
4.2 Stakeholder prominence 20
4.2.1 Legitimacy 20
4.2.2 Power 21
4.2.3 Urgency 22
4.3 Stakeholder synergy 24
4.3.1 Connection: necessary / contingent 24
4.3.2 Interests: compatible / incompatible 25
Discussion 28
5.1 Key insights 28
5.2 Theoretical contribution 30
5.3 Practical relevance and recommendations 31
5.4 Limitations and future research 31
Conclusion 32
Reference list 33
Appendices 40
Appendix A – Consent form 40
Appendix B – Interview guide 42
Appendix C – Terminology 43
INTRODUCTION
Tempers among stakeholders in The Netherlands are running high due to the progressive increase in expenses of expensive medicine (Van der Geest, 2018). With a constant rise in healthcare costs and 6.7% of additional financial resources needed in 2017 (Nederlandse Zorgautoriteit [NZa], 2017a) the question is raised how to control healthcare spending (Integraal Kanker centrum Nederland, 2015). A potential solution is joint purchasing, in which hospitals and health insurers cooperatively negotiate with pharmaceutical companies. The obtained bargaining power will aid to lower prices while maintaining accessibility of expensive medicine (Benraad, 2017b). Hence, budget is kept available to guarantee access and quality of other necessary care processes. To make this process successful a strong role should be fulfilled by and team spirit must be present between three key stakeholders: the medical specialist, hospital, and health insurer (Nederlandse Vereniging van Ziekenhuizen [NVZ], 2016). However, team related projects often appear to undermine medical specialists (Denis & Van Gestel, 2016). Despite the knowledge and skills that they can bring along, Denis & Van Gestel (2016) state that the teams medical specialists join are rather in state of separation than of integration. Reasons for this can be loss of autonomy for medical specialists (Federatie van Medisch Specialisten, 2018) or the experienced rise of administrative burden (Federatie van Medisch Specialisten, 2017). Therefore they are taken as main player and investigates this paper how prominent each stakeholder is present in and the level of synergy between medical specialists and the other three key stakeholders in the joint purchasing pilot of 2018.
Looking at the aforementioned challenges and necessities related to cooperative purchasing, a better understanding is needed of the role medical specialists and the other three key stakeholders play in the joint purchasing pilot as well as the state of their relationships. Therefore this paper will make use of well-known frameworks of the stakeholder literature that enable stakeholder mapping. The first framework provides an insight on how prominent a stakeholder is present in the pilot of joint purchasing and whether they obtained this from power, legitimacy, and/or urgency towards the project (Mitchell et al., 1997). The second measuring model will contribute with a deeper understanding of the synergy level between medical specialists and the other three stakeholders by measuring their experience around mutual connections and common interests (Archer, in Friedman & Miles, 2002). These analyses of the individual stakeholders and their link in the pilot, as well as an evaluation of the pilot itself will provide an answer to the following question: How does stakeholder prominence and stakeholder synergy between medical specialists and key stakeholders influence succeeding of joint purchasing?
THEORETICAL BACKGROUND
This section will give detailed clarification of the terms: expensive medicine, joint purchasing, and stakeholders, which are valuable to understand and to have knowledge on for further reading of this paper.
2.1 Expensive medicine
Expensive medicines are the main treatment types that medical specialists prescribe for rheumatism, chronic infections, and cancer (Zorgvisie, 2018). A medicine is considered ‘expensive’ when the total costs are at least 10.000 euros per patient a year (NZa, in Hilarius & Daniëls, 2016). With a rise of patients in need of treatment with an expensive medicine, expenses obviously increase (NZa, 2016). However, the pharmaceutical company also causes cost increase. The production exclusivity they receive from patent rights, and their continuous improvement and development of medicines enables them to ask exorbitant high prices (NVZ, 2017) and up following provides them supplier power (De Visser & Van der Geest, 2018). According to Vektis (2017), costs of expensive medicines in hospitals rose from 1.7 billion euro in 2014 to 2.0 billion euro in 2016 and the expectation is that expenses will rise up to 6.7% each year (NZa, 2017a). The segment of expensive medicines this paper focuses on is the oligopolistic type, where medicines are patented but have a therapeutic equivalent (NVZ, 2016). This type of medicine is selected since it is among the top three of medicine-groups that brings along most financial benefits when purchased collectively (NVZ, 2016). Also, the operational costs for purchasing expensive medicines weights relatively heavy since the share of expensive medicines is relatively small (NVZ, 2016). Lastly, medicines with an oligopolistic character have least restrictions to be organized in a joint way (Benraad, 2017a). Resuming this, there is evident need for action to lower costs for this specific group of medicines and joint purchasing is considered to be a promising means to achieve this goal.
2.2 Joint Purchasing
With collaborations like joint purchasing certain activities are transferred from the individual level to the team level to achieve value, such as: enrichment of knowledge due to collective information sharing, a stronger buying position by performing as a group, and economies of scale because of bigger volume purchases (Safaei et al., 2017). Overall, cooperation to control purchasing costs is seen as a fruitful strategy (Rego et al., 2014). However, possible disadvantages should also be taken into consideration. Partners with a stake in the process can experience loss of flexibility and control (Schotanus, 2005), as well as the feeling to be reliant on expertise and skills of other members in the joint purchasing process (Schotanus & Telgen, 2007).
This paper is based on the joint purchasing pilot that was initiated January 1st, 2018. After a year of negotiations between the umbrella organizations of generic hospitals (NVZ), academic hospitals (NFU), and insuring companies (ZN), a cluster of cancer medicines was chosen to be purchased cooperatively (Zorgverzekeraars Nederland, 2017). This cluster with therapeutic equivalents got mandated for its interchangeability with the original medicines because of its similar functioning in effectivity, safety, and side effects (Van Houdenhoven, 2018). The three umbrella entities took on the role of purchasing group by bringing together the individual requirements of stakeholders and performing selection, negotiation, and contracting activities (Gobbi & Hsuan, 2015). The aim of this purchasing pilot is to bundle forces to guarantee accessibility and affordability of expensive medicines for the long run whilst keeping quality of care the focal point (Benraad, 2017b). To achieve this common goal, all individual stakeholders have to agree on performing as an association by pooling resources whilst a cooperative structure is set up to make collective demand the main focus point (Essig, 2002). More than 70 hospitals, all university medical centers, and all health insurers agreed to make an exception on their individual and traditional medicine purchasing process to collectively buy this chosen medicine cluster (Kleijne, 2018b). In this paper, the success of joint purchasing is investigated by checking whether the above-mentioned goals are reached. By measuring how prominent a stakeholder is present in the project and what the current status of synergy in stakeholder relationships is, an insight can be provided of which factors either positively or negatively influence the successfulness of the pilot.
2.3 Stakeholders
Freeman (1984) defines a stakeholder as an individual or party that has an effective interest in or can easily be affected by the goals of the organization. The process of joint purchasing of expensive medicine in The Netherlands covers four key stakeholders with a relevant role and a (in)direct relationship with one another, which are: medical specialists, hospitals1, pharmaceutical companies,
and health insurers. A wide variety of articles and newspapers point towards these four stakeholders and their needs, wants, and expectations as being potentially influential on the process (Bruins, 2017; NVZ, 2016; Van der Erf et al., 2015; Wieringa et al., 1998). Van der Erf et al. (2015) performed a research on how to reinforce the purchasing process of oligopolistic medicines in The Netherlands. The findings showed that the umbrella organizations of hospitals, insurers, and medical specialists are the actual initiators of joint purchasing, but the individuals that form each stakeholder group are decisive on the successfulness of implementation. Therefore it is highly recommended to identify the needs, wants, and expectations of individual stakeholders in each stakeholder group to search for alignment (Marom, 2006).
Differences in interests and responsibilities among stakeholder do not have to be troublesome directly as long as aspects like communication and leadership are well organized (Bhakoo et al., 2012). However, the purchasing process in the Dutch healthcare system is challenged by finding conformity among stakeholders (Gelderman et al., 2018). This paper questions how prominent each stakeholder is present in the project and whether there is sufficient synergy in relationships to make joint purchasing successful
2.3.1 Stakeholder prominence
Within each project, an evaluation of the main stakeholders should be made to be able to prioritize one over the other when this brings better results to the project (Friedman & Miles, 2006). Dealing with all different needs, wants, and expectations simultaneously is not possible according to Fassin (2008) and therefore the question arises: where should most attention be paid to? (Friedman & Miles, 2006). When stakeholders have a more or less prominent role than useful, the chance of a successful project is diminished (Hinrichs et al., 2013).
legitimacy is of greatest importance. Furthermore, Mitchell et al (1997) state that the level of prominence of a stakeholder can be ranked according to the possession of only one attribute (i.e. low prominence), up to three attributes (i.e. high prominence). So, it can be interpreted in multiple ways. Power implies how much influence a stakeholder can have on others or on the process (Mitchell et al., 1997) and therefore it can be dangerous (Neville et al., 2011). For example, the hospital can have the power to make medical specialists prescribe a medicine. Etzioni (1964) presents three groups of power that a stakeholder can have with help from its resources: coercive (i.e. physical resources), utilitarian (i.e. material/financial resources), or normative power (symbolic resources). This three-element attribute is perceived as transparent and well differentiated, and therefore all elements are used to consider someone powerful. The more diverse resources a stakeholder has, with utilitarian seen as most valuable, the more powerful a stakeholder is (Etzioni, 1964).
A stakeholder with legitimacy is seen as a partner with real interest that should be considered seriously. In the setting of cooperative purchasing, the example can be taken that a hospital has legitimacy in joint purchasing because it aims for good care, whilst aiming for a decrease of financial burden. It is the content of the claim (i.e. good care, stop financial burden) that determines whether the legitimacy attribute is assigned to a stakeholder (Neville et al., 2011). According to Díez-Martín et al., (2013), legitimacy can go into three different directions: pragmatic, moral, and cognitive. However, only moral legitimacy is considered in this paper since doubts exist around the other two. Pragmatic legitimacy implies that a stakeholder is only perceived as interested by the project due to the project being dependent on them. This blurs the line with the power attribute (Suchman, 1995). Also cognitive legitimacy is ignored because this sort is only allocated because of lack of knowledge of the interest; the interest is ‘taken-for-granted’ (Aldrich & Fiol, 1994). For these reasons, only moral legitimacy counts as legitimacy “because the stakeholder’s claim has been evaluated as intrinsically right and proper” (Neville et al., 2011, p.9)
2.3.2 Stakeholder synergy
Relationships between stakeholders need to be built from a certain level of common interest in each other (Friedman & Miles, 2002). For years, stakeholder research only focused on the relationships between stakeholders. The setting where this relationship takes place, which is joint purchasing for this paper, was not taken into consideration (Frooman, 1999). However, Frooman (1999) argued that the environment is just as important since it all influences each other. In the Dutch healthcare system, joint purchasing will be introduced besides several other long-existing purchasing processes (Van der Erf et al., 2015) and therefore the existing relationships may change. This makes it a worthwhile investigation
Having a relationship is perceived as worthwhile when both individuals agree that their personal goals are easier achieved mutually than alone (Bosse & Coughlan, 2016). This is a measured value that can also be identified as ‘stakeholder synergy’ (Tantalo & Priem, 2016). Therefore, the successfulness of a project heavily depends on the relationship that exists between two key stakeholders. The model of Archer (in Friedman & Miles, 2002) enables the investigation of synergy between stakeholders in the dynamic environment of joint purchasing. The framework is based on two attributes: the mutual connection, and common interests. Firstly, the synergy of a relationship is determined by whether ideas and interests between stakeholders are compatible (i.e. similar) or incompatible (i.e. different). Secondly, the question is whether the connection between two stakeholders is experienced as necessary (i.e. positive) or contingent (i.e. negative) (Miles, 2017). By combining interests and connections, the following four levels of stakeholder synergy can be found (Archer, in Friedman & Miles, 2002).
1. In a necessary compatible relationship, high synergy exists since both stakeholders see positivity in the duration of the cooperation whilst holding similar interests. They will act accordingly to minimize losses and protect each other.
2. Necessary incompatible is a relationship that sees opportunities in creating strong synergy since the stakeholders can take advantage of the fact that they have different ideas and interests, but are willing to be open-minded and make choices due to the positive connection. 3. Contingent incompatible are attributes of weak synergy where both stakeholders have
complete different visions regarding ideas and interests, and will end up in competition because their connection is primarily a negative experience.
The rewards that joint purchasing can bring along are highly dependent on its stakeholders. When relationships do not live up to the needs of the project and no solutions are found, the outcome can be: less optimal, slowed down, or it can even end as a failure (Van Offenbeek & Vos, 2016).
For this research, the decision is made to investigate the relationship between medical specialists and the other key stakeholders. According to Schneller (2009), medical specialists are an influential stakeholder group and are asked to give approval for selection of suppliers (Chen et al., 2013), purchased materials and expensive products (Rego et al., 2014; Schneller, 2009). It is worthwhile the research to find out whether this is also the case for joint purchasing. The decision to make a medicine cluster the preferred medication directly influences the daily job activities of medical specialists, and therefore they are taken as focal point. The following relationships are considered:
1. Medical specialist - Health insurer 2. Medical specialist - Hospital
3. Medical specialist - Pharmaceutical company 2.4 Conceptual framework
By linking how prominent a stakeholder is present in joint purchasing and the level of synergy between stakeholders, comprehension is created on the status of the project. Meanwhile, an important lesson can be learned whether the system has to change or whether cooperation has to be altered. The conceptual framework, as displayed in figure 2.1, provides a summarized insight of this research.
Figure 2.1 - Conceptual framework including measuring tools
Stakeholder prominence - Power - Legitimacy - Urgency Stakeholder synergy - Connection - Interests
METHODOLOGY
3.1 Research context
This research studies the process of joint purchasing within the Dutch healthcare sector. As mentioned before, in 2018 a pilot has started to cooperatively purchase an expensive medicine that treats a type of cancer (Benraad, 2017b). After different attempts to purchase in a joint way between health insurers and hospitals, and the continuing failures in execution and lack of trust, it was time for collaboration on a next level. By signing a declaration of intention among the umbrella organizations to purchase expensive medicine collaboratively, the scope and structure of collaboration was made official. The creation of the joint purchasing group was seen as cooperation that is worthwhile ‘trying’ to practice the theory (Benraad, 2017b). During this practice, hospitals and insurers collaborate and negotiate with pharmaceutical companies to make two broad agreements. Firstly, they negotiate and agree upon which brand of expensive medicine will be seen as the ‘preferred’ medicine. Then, they agree that 80% of the patients that fit this treatment need to be treated with the preferred medicine before the discounted price on purchases will be provided by the manufacturer (Limburg, 2017). In the end, conforming these agreements should satisfy each stakeholder. The manufacturer receives overall more profit since a bigger volume is purchased, whilst the hospitals pay a lower price per purchased product. The price negotiations between the pharmaceutical company and hospital stays behind closed doors, though a trusted third party informs insurers on the amount to reimburse and so all parties should benefit (Kleijne, 2018b).
3.2 Case selection
This research is done by means of a case study. According to Cousin (2005), case study fits studies with the aim of exploring a specific setting and extending the understanding. Currently, the financial burden that expensive medicines bring along is a prominent media topic and therefore investigating this unique case enables us a detailed vision on how prominent each stakeholder is present and the synergy between them in joint purchasing (Karlsson, 2016). According to Dyer and Wilkins. (1991), a case study that focuses on one case very well suits questions where existing relationships are investigated to find points of improvement. The unit of analysis in this research is the medical specialist and its relationships with other key stakeholders, because the aim is to do analysis of each group of stakeholders on its own, and how strong the synergy is.
hospitals deal with much tougher conditions in employee shortage and patient-bounded costs (i.e. medicine costs) whereas academic hospitals appear to be in less financial distress because of the financial resources they receive from the government, education, and research (Kleijne, 2018a). Having all three types of hospitals as primary source provides a good reflection of the Dutch hospital scene. Regarding the health insuring companies, we chose both big and medium/small sized health insurers. An insurer is considered big when it is among the group of insurers with a total market share bigger than 85% (Vektis, 2018). All other insurers fall among the group of middle/small-sized companies. To prevent a situation where the own healthcare contributions of citizens have to rise because high expenses have to be passed on to the users of care, insurers see joint purchasing as the ultimate chance to lower costs (NZa, 2018). Lastly, no criteria are set for pharmaceutical businesses. Whether a company creates big or small volume does not directly matter for this stakeholder, since their overall goal is to make as much profit as possible. By providing a diverse set of interviewees, we aim to provide a full reflection of the Dutch healthcare system (See table 3.1).
Table 3.1 - Case selection criteria
Single Case = joint purchasing
↓Criteria
Interviewee
Academic hospital Medical specialist
Hospital pharmacist / purchaser / manager / etc.
Peripheral hospital Medical specialist
Hospital pharmacist / purchaser / manager / etc.
Top-clinical hospital Medical specialist
Hospital pharmacist / purchaser / manager / etc.
Insurer Big Care purchaser / policy maker / etc.
Insurer Medium/Small Care purchaser / policy maker / etc.
Pharmaceutical business Sales manager / Account manager / etc.
3.3 Data collection
on average 45 minutes, and were either face-to-face (10 interviews) or by phone (three interviews). An interview started with the signing of the consent form (see appendix A) where the interviewee gave its approval for the interview and for recording it. Beforehand, the decision was made to do the data collection in Dutch since this is the native tongue of both the interviewees and interviewers. Each interview was conducted by the researcher and a fellow colleague where one took the lead and the other could ask follow-up questions. Afterwards, each interview was transcribed within a week to get grip on whether information was missing or not (Karlsson, 2016). Also, secondary data in the form of publicly accessible documents (i.e. PowerPoint’s, newspaper articles, research reports) were used to expand the knowledge on the theme and stakeholders (Benraad, 2017b; Kleijne, 2017b; NVZ, 2017) Table 3.2 - Overview of primary sources from which data is gathered
Positions of interviewee(s) Criteria Duration of
interview (minutes) Medical specialist
1. Internist (endocrinologist) Peripheral hospital 58
2a. Senior policy maker (medicines)
2b. Senior advisor (medicines) External institution directly related to
medical specialists
55
3. Internist (gastroenterologist) Peripheral hospital 49
Hospital
4. Manager business operation Top-clinical hospital 48
5. Purchaser care (finances) Academic hospital 48
6. Hospital pharmacist Top-clinical hospital 55
7. Hospital pharmacist Peripheral hospital 56
Health insurer
8. Advising medical (policymaker) Medium/small insurer 48
9a. Policy Maker 9b Policy Maker
Big insurer 50
10. Senior purchaser Big insurer 45
11. Data analyst Big insurer 40
Pharmaceutical
company 12a. Field-market access manager 12b. Business unit lead Biotechnology company 36
13. Researcher (law and policy medicines) External party 35
exist. Since this paper investigates relationships between stakeholders and their prominence level in joint purchasing, it is valuable to keep in mind that the actions of one stakeholder can cause certain activity or behavior at another stakeholder. This can either positively or negatively influence the process of joint purchasing and therefore it is an important factor affecting success.
3.4 Data Analysis
The first step of the data analysis was transcribing the interviews from the records and up following the coding process could start. For this research the decision is made to make use of deductive coding, which means that codes are brought forward from the research question and conceptual framework (Miles et al., 1994). These prior codes are concepts that are perceived to have a direct link with ideas, words, sentences, or topics that regularly emerge in the data (Meta connects, 2018) and therefore fit the role of organizing the interview-data. When a certain concept seems to miss, a new code can be formed, which adds also inductive coding to this research (Karlsson, 2016).
At first, the coding tree was prepared in Microsoft Excel 2016 (see appendix D) with the two dimensions (i.e. stakeholder prominence and stakeholder synergy) and the corresponding second order codes: power, urgency, legitimacy, necessary, contingent, compatible, and incompatible. Success was not coded according to a prepared set of codes, but just dependent on whether a positive or negative element of joint purchasing was mentioned. Subsequently, the reading process started where each fragment of data got a ‘zero’ order code, which represented a short sentence or statement summarizing the fragment. This step is not a usual one in the coding process, but was added in this research to find a first order code that best fitted a (set of) fragment(s). These first order codes were immediately assigned to a second order code, which fastened the coding process. Obviously shifting first order codes, and its belonging zero codes, around in the coding tree happened frequently when it seemed to better fit another second order code. Table 3.3 with its description of each second order code was a helpful tool when doubts appeared.
Table 3.3 - Description second order codes (Adapted, but based on Mitchell et al., 1997; Archer, in Friedman & Miles, 2002)
Coding Category Description
Legitimacy Describes someone's interest in the project of joint purchasing
Power Describes the attributes that provides a stakeholder with power to influence another
stakeholder during the process of joint purchasing
Urgency Describes the feeling of urge of a stakeholder to become closely involved in the
process of joint purchasing
Necessary About the connection: The connection is seen as necessary for both stakeholders,
and is experienced positive
Contingent About the connection: The connection is seen as opposing to each other, and is
experienced negative
Compatible About common interests: The interests appear to be similar to each other
Incompatible About common interests: The interests appear to be the opposite of each other, or
RESULTS
4.1 Success of joint purchasing
"So that means that in the year of 2019, we will not buy any medicine nationwide". - Hospital. A clear statement is made, and whereas in the beginning of 2018 the potential of the joint purchasing pilot was widely and at foremost positively discussed in the media, at present it appears to fall short in its outcome according to the majority of the interviewees.
At first, both hospitals and health insurers gave it a fair try by letting the joint goal surpass individual interests. The cooperation was juridical approved by the Netherlands Authority for Consumers and Markets (ACM), and the Federation of Medical Specialists (FMS) gave its mandate for the interchangeability of the batch of medicines. Thus an answer was given on uncertainties around antitrust regulation and medicine interchangeability, making involvement in joint purchasing attractive. However, hospital respondents revealed that this cluster of medicines is purchased in very low volumes in most hospitals since the belonging cancer treatment is mostly performed in just a couple of hospitals. Hence, the risk for most hospitals was low and so their pledge for participation was easily given. So, misleading information on the project is spread to the outside world and prevents a realistic view on the actual status of joint purchasing to enter the media.
Both in the preparation phase and the execution process of joint purchasing, signs of sloppy work appeared. Aspects like criteria around purchasing procedures and the to follow timeline remained vague causing frustration and delays among all stakeholder groups. Also the lack of transparency formed an obstacle for each stakeholder to get an idea about anyone else his/her expectations of the joint purchasing project. Especially the market mechanism that is in place between hospitals and health insurers outside this joint project reinforced the closed attitude. During the traditional purchasing relationship both stakeholders try to get the financial advantage over the other. This rival relationship interferes directly with the cooperative relationship of joint purchasing causing a complex situation. Meanwhile, hospitals struggled with the high workload the project brought along. Both the preparation phase and execution phase asked extra effort from both internal and external partners, and was not perceived to be worthwhile: "2% discount nationwide. That has been the result [of the joint purchasing project] (...). Well... the hospitals all had about, if you ask them about the years before, on those products between 5 and 10 % discount". – Health insurer.
stakeholder prominence and stakeholder synergy to provide insights on where it went wrong. In the end we will answer our research question: How does stakeholder prominence and stakeholder synergy between medical specialists and key stakeholders influence succeeding of joint purchasing?
4.2 Stakeholder prominence
The prominence of a stakeholder in the 2018 pilot of joint purchasing of expensive medicine is explained according to the three attributes of power, legitimacy, and urgency (see figure 4.1).
Figure 4.1 – Stakeholder prominence in joint purchasing of expensive medicine (Based on Mitchell et al., 1997)
4.2.1 Legitimacy
Hospitals and health insurers show the most interest to joint purchasing, though for different reasons. The insuring companies want a decrease of care costs, so financial savings can be “Compensated to the society” - Health insurers and subsequently the insured can receive a reduction of the monthly insurance premium. However, the financial interest of hospitals is closely intertwined with the traditional purchasing process and so interest heavily depends on the payment agreements they traditionally make with insurers: "Let's say, the price risk of the case of expensive medicine (...) is made the responsibility of hospitals [in the traditional purchasing process] (...). So the insuring companies say: I give you 30% less [reimbursement] than the actual price of the medicine'. Well that means that I (hospital) receive the risk on my plate and so I have to get to work with it". - Hospital. So, joint purchasing is perceived to be an opportunity for hospitals to relieve the financial risks they cope with every year. The elements ‘quality of care’ and ‘patient-focus’ are not mentioned separately from the financial related terms efficiency and effectiveness by the interviewees. So, the overall interest appears to be driven at first by finances.
In contrary to the legitimacy of the hospital, the medical specialist is not directly interested in joint purchasing. They are aware of the financial pressure that purchases of expensive medicine put on the hospital budget, but this is not a leading argument for them. Their main focus remains on treating patients best. Since joint purchasing and its chosen ‘preferred medicine’ immediately affect the prescription behavior of medical specialists, reluctance dominates. Just like the medical specialist, the pharmaceutical companies have no direct interest to join this project since lower medicine prices would harm their profit. Manufacturers do bring in that their interest comes from aspects like quality and convenience for the patient. However, the respondents of health insurers and hospitals do not support this argumentation.
4.2.2 Power
According to the data, pharmaceutical companies have most power due to the beneficial rules and regulations around patent rights in the Netherlands. Patents are valid for many years and when the expiration date arrives, they make use of tactics like changing an element in the medicine to protect their medicines from becoming generic. Such techniques result in the infinite development of medicines and this knowledge together with misuse of patent rights creates a variety of possibilities to gain power for manufacturers. With this power they can easily, when necessary, force other stakeholders like the hospital into difficult situations by depriving the Dutch care market of a medicines or by cutting off discounts. Furthermore, the Netherlands is so small and almost irrelevant to the pharmaceutical market that the chance they will refuse the supply of medicines is plausible in comparison to more important countries like Germany and France.
The hospital has come forward from the interviews as the only stakeholder group with two powerful tools in hands that the manufacturer and the health insurer misses out on. They are seen as the focal group within the joint purchasing project since they have both knowledge of the market and expertise of medicines. The insurer does try to gain some of this power. They make benchmarks from the data they collect from hospitals, whereupon they shift the cost burden towards the hospital by making threats to lower the reimbursement percentage. Nevertheless, they lack information regarding agreements made between hospitals and manufacturers and therefore they can only make presumptions about this. So their decisions are hypothetical, and disclosure agreements between hospitals and manufacturers disable any actual transparency.
actually influence the game". - Medical Specialist. In the end of the preparation phase of this pilot, a delegation of the belonging specialism was asked for approval. Though, individual specialists within their employing hospital are in the end dependent of the purchases and agreements hospital pharmacists for example make. Their freedom of choice is restricted to the freedom given by their employing hospital. And this can be limited.
4.2.3 Urgency
At first, the medical specialist does not experience urgency since good treatment is their aim. However, when joint purchasing is officially put into action nationwide, they experience the need to keep a close eye on the project. Primarily, because they aim to keep control of aspects that can directly influence their daily job activities. They feel the urge, for example, to check the feasibility of the 80/20 rule (i.e. 80% of the patients need to be treated with the preferred medicines. 20% can be treated differently), but also the interchangeability of medicines. At the same time, their felt level of urgency also comes partly from fear and pressure from other circumstances and stakeholders. For instance, with the occurrence of two bankruptcies of hospitals in 2018 medical specialists experience a higher level of financial urgency. Meanwhile, patients put pressure on medical specialists to prescribe a specific branded medicine. Media and Internet are enlarging a patients' knowledge of disease and treatment, leading doctors experience urgency to keep track of all decisions around medicines.
Whilst the medical specialist wants to keep control since their daily activities can come into danger, the pharmaceutical companies experience high urgency to thwart the project. "Look, of course there is a complicated relationship because of all those different interests, positions, etc. and there are many parties (...). Well, it is an interest of the pharmaceutical company then to play one off against another". - Healthcare insurer. They rather maintain a setting of hospitals with individual medicine contracts since it brings along more profitability. As long as collaboration fails they can continue the standard processes: shareholders receive their profits, and offices can stay employed in the Netherlands. Only when joint purchasing is considered for a medicine that they have in their portfolio, they feel the positive urge for early involvement in the process to strive for market share.
they feel the competitive pressure of the market mechanism in the traditional purchasing process, remaining their focus point on that. Others mentioned that insurers saw it all as an opportunity to experiment with collaborating with different stakeholders: the corresponding and disappointing discount was just ‘tedious’.
Table 4.1 will provide you a summarized insight of the attributes each stakeholder holds in the joint purchasing pilot of 2018, and also the argumentation why or why not.
Table 4.1 – Summarized argumentation of stakeholder prominence in joint purchasing of expensive medicine
Medical Specialist Hospital Health Insurer Pharmaceutical Company
Power - + - +
Legitimacy - + + -
Urgency + - - +
Power * Opinion asked, but
not decisive * Market knowledge * Medicine expertise * Perceived as focal group * Benchmark data * Lack information regarding agreements * Only presumptions * Patent rights * Infinite medicine market
* Size of Dutch care market (small)
Legitimacy * Treat patients best * Relieve financial
risk * Quality of care * Patient focus * Efficiency and effectiveness * Decrease of care costs * Reduction insurance premium
* Prevent harm on profit
Urgency * Check influence on
job * Check feasibility 80/20% rule * Check interchange- changeability of medicines
* Pressure from other stakeholders * Own discount is sufficient * Loss of freedom * Focus remains on market mechanism (competition) * Remain traditional setting (individual contracts) * Continue standard process (profit for shareholders/
4.3 Stakeholder synergy
From the gathered data, we measured stakeholder synergy with the following two aspects: the connection stakeholders have with one another, and the interests they share concerning the process of joint purchasing expensive medicine in the 2018 pilot (see figure 4.2).
Figure 4.2 - Stakeholder synergy in joint purchasing of expensive medicine (Based on Archer, in Friedman & Miles, 2002) 4.3.1. Connection: necessary / contingent
Overall, the data revealed that the relationships between medical specialists and other involved stakeholders are distant from each other. The project of joint purchasing is experienced relatively far away from the work floor and representatives in umbrella organizations make the decisions whereas individual organizations decide whether they commit themselves to this. The following findings show the connection between individual stakeholder groups.
The experienced connection between medical specialists and hospitals is complicated. Traditionally, the connection is perceived to be with mutual willingness because of the communication flow about medicines and treatment related instruments within the treatment process (e.g. injection needles, packages, tablet-strips). However, hospitals take the dominating role in joint purchasing raising annoyance by specialists. Hospitals allow themselves to deliver the preferred medicine from the agreement with the manufacturer (i.e. the 80/20 rule) for patient treatment; even when the medical specialist requested the original medicine. Both ethical and theoretical friction is the outcome since “The doctor has the right to prescribe without discussion so patients can count upon the medical specialist prescribing the best medicament” - Medical specialist. It causes feelings of being a subordinate by specialists. And despite the fact that medical specialists have not expressed their frustration heavily by refusing to work along in this pilot, interviewees are unsure whether this is inevitable for the future.
Necessary Contingent
Compatible
Incompatible
Hospital - Medical Specialist Insurer - Medical Specialist Pharmaceutical company - Medical
The connection between a medical specialist and a healthcare insurer is not straightforward; neither in traditional purchasing nor in joint purchasing. Especially direct one-on-one contact is uncommon. Though, the opinion they have about each other in general is deeply rooted and mainly negative. Mutual frustration exists where medical specialists have the feeling to continuously be kept an eye on. The example was given where an insurer suggested the doctor to deviate its treatment advice for a patient, otherwise no reimbursement was provided (i.e. the treatment was not automatically reimbursed). It seems that freedom of choice is completely different interpreted by both, since “the doctor has the right to prescribe without discussion” according to a medical specialist. In the setting of joint purchasing, only a representative of the corresponding specialism is heard during meetings between the insurer and hospitals. As long as contact is limited to the purchasing process the connection appears to be in state of neutrality. Unfortunately, though, the connection starts to show heavy tensions in the form of distrust in prescribing properly during the operational phase: "Too often we hear something back in the form of distrust from the insurer, that by definition doctors are not in for doing well. And that the doctors need to be controlled about prescribing it (the medicine) for the correct indication. Sorry guys but we talk about properly prescribing (...) Like if I am going to give 10 pills for treatment extra just because I think it's fun!". - Medical specialist.
Medical specialists and pharmaceutical companies experience mainly a positive connection with willingness from both sides. Years ago, new rules were brought forward to limit the connection to sole knowledge exchange. And this information sharing continued during joint purchasing since the connection is still perceived as highly necessary: Pharmaceutical companies need to do trials to research their medicines whereas medical specialists need financial help for own investigations. A mutual stake continues. However, the interviews revealed that the introduction of joint purchasing on a larger scale could jeopardize the connection. When a medicine of a particular pharmaceutical company is not chosen as preferred medicine, they may feel fewer urge to support investigation financially.
4.3.2. Interests: compatible / incompatible2
As mentioned before, doctors have in general a limited interest in joint purchasing, but they do agree with their employing hospital on the interest: delivery of good qualitative care. Though medical specialists have the feeling that hospital interests are always, both in traditional and joint purchasing, mainly dominated by political and managerial choices. While quality of care for doctors are defined as providing the best care possible, hospitals always have the underlying thought of financial effectiveness and efficiency. They take the financial aspect as a key interest due to the experienced
2 Compatible or incompatible interests between stakeholders are found in two ways. Either directly: an interviewee provided
financial pressure and therefore perform activities that disperse them from medical specialists. For example, they make agreements with the pharmaceutical industry to share patient information in exchange for discounts; seen as spoilage of powerful data by medical specialists. Resuming this, their interests are compatible in theory, but from practical experiences there are clashes, either minor or major, that cause their interest to be different in the end.
The setting of interest differences mentioned by interviewees between medical specialists and health insurers is similar. Both agree that good advice towards the patient is the focal point. The insurers though add another interest to that by aiming to provide good advice for an affordable price. Of course doctors are well aware of the financial difficulties that are attached to care provision at the moment, but this should never be the leading argument for obligatory changes in treatment. Arrangements agreed upon in contracts between insurers and hospitals interfere with the interests of the medical specialist: treatment.
Both the medical specialists and the pharmaceutical companies are low in their interest for this process. Their role is substantially inferior in comparison to the other two stakeholders as well as they are relatively late involved; the manufacturer intentional and the medical specialist by ignorance. In general, both stakeholders have a solid argument about the quality of the product: “When you look at manufacturers and the argument that they only want to sell their product, I think that is too narrow-minded. Because I think that when your product is not good, it would not bring along the results you work for (quality/ extended live expectations). When it is not good at all, you also pull the short stick out… I think, sometimes, it is all a bit too negative and that it is only about money and profit for the shareholders (...). I think that they [pharmaceutical companies] do a good job via a variety of ways like education”. - Pharmaceutical company. Manufacturers are convinced about the additional value their product will have for certain treatments. But also medical specialists understand very well the advantages of specific medicines after investigation, information sharing, or real-life practice. In the end, the relationship manufacturer-doctor is intrinsic and can be very rewarding when valued in processes like joint purchasing.
Table 4.2 - Summarized argumentation for stakeholder synergy in joint purchasing of expensive medicine
Medical specialist -
Hospital Medical specialist - Health insurer Medical specialist - Pharmaceutical company
Necessary X
Contingent X X
Compatible X
Incompatible X X
Necessary * Need each other for
trials/investigation * Information Sharing
Contingent * Hospitals dominate (own decision can overrule medical specialists choice) * Feelings of being subordinate * State of negativity in operational phase
* Tensions around prescription behavior
* Continuous check on medical specialist
Compatible * Quality of medicines
* Research
Incompatible * Quality of care vs.
affectivity and efficiency
* Sharing information vs. Remaining information for self
DISCUSSION
5.1 Key Insights
This study aims to answer the question: How does stakeholder prominence and stakeholder synergy between medical specialists and key stakeholders influence succeeding of joint purchasing? Our data reveals that prominence of and synergy between current stakeholders in the setting of the joint purchasing pilot in 2018 do not contribute to successful outcomes. To explain how stakeholder prominence and synergy affect joint purchasing success we present three propositions below.
The first interesting finding has been the legitimacy attribute among stakeholders, which appears important for creating team spirit. Bhakoo et al. (2012) stated that different interests do not directly have to lead to problems when, for example, stakeholders communicate openly. Thus, the findings that medical specialists are interested in quality, and insurers in financial advantages of joint purchasing do not have to hinder the existence of relationships immediately. However, our findings point us to look at the actual legitimacy level of stakeholders. We discovered that when one stakeholder has the legitimacy attribute because of the high level of interest, as opposed to a stakeholder with no legitimacy (i.e. little interest), a relationship is hindered. Take for example the relationship between medical specialists and hospitals/health insurers. Both relationships show low synergy. Regarding interests, hospitals and health insurers have the legitimacy attribute, whilst the medical specialists do not. Bringing these two findings together we have found that legitimacy and synergy are influencing each other and subsequently affect succeeding of joint purchasing. The article of Rezaee (2018) confirms our findings and states that when two stakeholders deal with one another whilst deviating in legitimacy level, it is difficult to build a strong relationship. A stakeholder with legitimacy feels the stress to conform socially with others, in contradiction to a stakeholder without legitimacy. A legitimate stakeholder sees value in transparency and the culture that is attached to the project (Rezaee, 2018), and therefore they are more willing to invest in relationships. Since the stakeholder with no legitimacy misses out on these feelings, the following proposition is formulated:
Proposition 1: Lacking overlap on legitimacy weakens stakeholder synergy, thereby influencing succeeding of joint purchasing
Secondly we found that a relationship can benefit when both stakeholders feel the urge to be involved in joint purchasing. Whilst Parent and Deephouse (2007) rated urgency as the second most important attribute concerning stakeholder prominence, this paper rates urgency as most important attribute concerning stakeholder synergy. Urgency can be a very visible attribute when someone shows to be actively involved. This visible confirmation of mutual involvement may make it for stakeholders worthwhile to invest in a good relationship. The results revealed that medical specialists and pharmaceutical companies experience both the urge to be involved, though for different reasons. The medical specialist is mainly focused on keeping control over a project that can highly influence their daily job, whereas the pharmaceutical company only wants to be involved to remain the disruptive factor. The fact that both feel the need to undertake action, no matter what the reason is, explains why specialists and manufacturers have found each other. Stakeholders become more aware of each other’s role when being both involved, creating potential for a good relationship (Morsing & Schultz, 2006).
Proposition 2: Overlap on the urgency attribute strengthens stakeholder synergy, thereby influencing succeeding of joint purchasing
In short, having an active role and focusing on short-term results in joint purchasing creates opportunities for a good relationship. When you do not take an evident active role in the project, another stakeholder sees no value in cooperating with you. Therefore, awareness of your own involvement level gives space to grow synergy.
Proposition 3: Equality in stakeholder prominence is not a precondition for strong stakeholder synergy, thereby explaining succeeding of joint purchasing
Irrespective of the amount of prominence attributes, stakeholders should thus always invest in good relationships. A strong relationship is a success factor during projects like joint purchasing and thus it is of such great value that stakeholders should either be willing to push their own power, urge, and legitimacy to the background or to use it as a tool for their partner in the relationship to grow a new attribute.
5.2 Theoretical contribution
These findings have contributed to stakeholder theory because it improves the understanding of the two models of stakeholder prominence and stakeholder synergy. This research shows that either stakeholder prominence influences stakeholder synergy or the other way around. The claim that a project can be successful by solely measuring the relationship an individual has with the project (prominence) (Mitchell et al., 1997) has been challenged. This investigation has revealed that a shortage of stakeholder synergy and stakeholder prominence brings a disappointing outcome to projects like joint purchasing, and further research should focus on this to expand understanding of the in-between link. Therefore, the conceptual framework is revised (see figure 5.1). As the results and the propositions above support, stakeholder prominence and stakeholder synergy cannot be seen as two fully independent variables and therefore a connection should be made between those two elements.
Figure 5.1 - Revised conceptual framework
Stakeholder prominence - Power - Legitimacy - Urgency Stakeholder synergy - Connection
-
Interests5.3 Practical relevance and recommendations
With the obtained knowledge from the data analysis and discussion, a recommendation can be given on necessary changes in both stakeholder prominence and current relationship synergy. The overall goal of the project was to restrict pharmaceutical companies, though they turned out as a prominent player in the project. Therefore other authorities like the Ministry of Health, Welfare, and Sports (VWS) should actively participate with the imposition of sanctions. For example, VWS can charge a fine when manufacturers deliberately cause a medicine shortage (Kleijne, 2017b). The ministry can also make policies that spread the responsibility for expenses across all three stakeholders groups. When awareness is further raised on the need to form a team, urgency and legitimacy will grow, creating overall power. Elements like open communication, transparency, and the provision of mutual feedback are needed in practice to come to success.
5.4 Limitations and future research
CONCLUSION
By combining all sections of this paper, an answer can be given on the question: How does stakeholder prominence and stakeholder synergy between medical specialists and key stakeholders influence succeeding of joint purchasing?
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