Msc BA Small Business and Entrepreneurship
Stakeholder development in the healthcare innovation process.
by
ANIEK MARJAN OUENDAG
University of Groningen Faculty of Economics and Business
April 2015
Student number: 1335995 Supervisor: Dr. O. Belousova Second Supervisor: Prof. Dr. A. Groen
[Word count: 11.348]
Hamburgerstraat 4B 9714 JB Groningen aniek.ouendag@gmail.com
KEYWORDS
Stakeholders – Healthcare Innovation - Development
ABSTRACT
Innovation in the conception and delivery of new treatments is a key aspect of the modern healthcare systems. In all stages of the innovation process the differences in stakeholder positions will affect the costs and benefits for the different stakeholders and the consequent preferences and priorities of these stakeholders. However there is little written about the stakeholder positions in healthcare innovation development. This thesis presents a model that shows how stakeholder importance changes throughout the development of a healthcare innovation.
LIST OF FIGURES
Figure 1. Stage model of innovation in (Varkey, Horne and Bennett (2008)).!...!3!
Figure 2. The process of healthcare innovation (Omachonu and Einspruch (2010)).!...!4!
Figure 3. New product development (Rothaermel and Deeds (2004)).!...!5!
Figure 4. Development Cycle (Girling et al. (2010)).!...!5!
Figure 5. Stage model of medical product development ( IJzerman and Steuten, (2011)).!...!6!
Figure 6. Phases of new drug introduction (Lipsky and Sharp (2001)).!...!7!
Figure 7. Health care delivery network (Rouse (2008)).!...!10!
Figure 8. Social systems model (Groen et al. 2008)).!...!16!
Figure 9. Conceptual model.!...!18!
Figure 10. Adjusted conceptual model .!...!33!
LIST OF TABLES Table 1. Healthcare innovation development models.!...!8!
Table 2. Stakeholders at different stages of product development (IJzerman and Steuten (2011)).!...!11!
Table 3. Five key stakeholders (Omachonu and Einspruch (2010)).!...!12!
Table 4. Stakeholders of healthcare innovation.!...!14!
Table 5. Capital intensity per stage.!...!26!
Table 6. Stakeholder analysis category matrix (author, 2015, based on Mitchell, Agle Wood (1997)). !...!28!
Table 7. Needs per stage.!...!29!
Table 8. Stakeholder analysis!...!60!
TABLE OF CONTENTS
INTRODUCTION!...!1!
LITERATURE REVIEW!...!2!
HEALTHCARE INNOVATION PROCESS!...!2!
STAKEHOLDERS!...!9!
STAKEHOLDER NETWORK!...!9!
STAKEHOLDERS IN HEALTHCARE!...!9!
TECHNOLOGY DEVELOPMENT!...!15!
CONCEPTUAL MODEL!...!16!
STAGES!...!16!
METHODOLOGY!...!19!
RESEARCH DESIGN!...!19!
CASE DESCRIPTION!...!19!
DATA-SOURCES AND DATA-COLLECTION!...!20!
EXPERT INTERVIEWS!...!21!
DATA ANALYSIS!...!21!
ANALYSIS!...!21!
TESTING STAGES ASSUMPTIONS!...!22!
STAKEHOLDERS!...!22!
CAPITALS AND NEEDS!...!25!
ADDITIONAL ANALYSIS!...!26!
DISCUSSION!...!32!
ADJUSTED CONCEPTUAL MODEL!...!32!
CONCLUSION!...!33!
ACKNOWLEDGEMENTS!...!35!
REFERENCES!...!35!
APPENDIX 1: INTERVIEW GUIDE!...!38!
APPENDIX 2: TRANSCRIPT INTERVIEW ROBBERT BLOEMENDAAL: IMPLEMENTATION IQ!...!39!
APPENDIX 3: TRANSCRIPT INTERVIEW HANS HEKTOR EN FRITS WIJBENGA: BUSINESS GENERATOR GRONINGEN.!...!44!
APPENDIX 4: TRANSCRIPT INTERVIEW MR DRUG DELIVERABLE: DRUG DELIVERY INC..!...!50!
APPENDIX 5: BRAINSTORMING CAPITALS WITH MR. DRUG DELIVERABLE!...!59!
APPENDIX 6: STAKEHOLDER ANALYSIS!...!60!
!
INTRODUCTION!
!
The medical sector is regarded as a component of the economy that affects most individuals at some stage in their lives (Metcalfe et al., 2005). Innovation in the conception and delivery of new treatments is a key aspect of the modern healthcare systems (Metcalfe et al., 2005, Davey et al., 2011). Despite its importance there is little reliable information that explores the business aspect of whether or not an innovation is marketable (Baba and Walsh, 2010). This lack of information means that decision making is accompanied by a high degree of uncertainty.
Grol et al. (2004) mention that there are many factors that affect the success of innovations in healthcare, and according to Lambooij and Hummel (2013) the different positions that stakeholders have and the accompanying differences in priorities and agendas are likely to affect each stage of the innovation process. In all stages of the innovation process the differences in stakeholder positions will affect the costs and benefits for the different stakeholders and the consequent preferences and priorities of these stakeholders (Lambooij and Hummel, 2013; Walshe and Smith, 2007). However there is little written about the stakeholder positions in healthcare innovation development process.
This thesis aims to introduce and test a dynamic model of healthcare innovation development and stakeholders’ involvement, which shows how the stakeholder network around the innovation evolves over time. This model will help answer the research question of this thesis:
“How does a healthcare stakeholder network evolve over the development of a healthcare innovation?”
We first introduce a literature review on the healthcare innovation process, and the current knowledge about stakeholders in healthcare. We then summarize this discussion from the lens of a social systems perspective (Groen, Wakkee and Weerde-Nederhof (2008)), which will lay the groundwork for the conceptual model. Following the introduction of the model, a case study of a healthcare technology company will be presented. This company is developing a new method of drug delivery. During prior research it became apparent there was a desire for more information on what stakeholders are important during different stages of product development. An analysis of the data gathered during research will be followed by a discussion of the results and what this means for the conceptual model, followed by the conclusion.
LITERATURE REVIEW
!
The healthcare stakeholders discussion should start from understanding the nature of the innovation process, which they aim to take a stake into. We, therefore, look into the process of developing and bringing healthcare innovations on the market and align it with the needs of the company and possibilities offered and limitations imposed by the stakeholders. The following sections develop accordingly.
Healthcare innovation process
“Healthcare innovation can be defined as the introduction of a new concept, idea, service, process, or product aimed at improving treatment, and with the long term goals of improving quality, safety, outcomes, efficiency and costs” (Omachonu and Einspruch (2010) as used by Price and St. John (2014)). Specifically for this thesis this means drug delivery, as it is an area that has shown much development. The overall expense to create a pharmaceutical that is a new molecular entity is extremely high; the lower cost to improved delivery of an existing drug is sometimes seen as a better investment. This issue is exacerbated as drug patents expire after 17 years, and a new drug delivery system may permit continued benefits for the company producing it (Langer (1990)). One estimate is that expiry of patents and consequent generic entry on key blockbuster drugs, between 2012 and 2018, will reduce revenues of R&D-based pharmaceutical companies by about US$ 148 billion (WTO, WHO and WIPO (2013)).
Innovation in medical technologies is distinct from innovation in general. It is characterized by several distinguishing features:
* The need for a rigorous regulatory framework to assess medical technologies in terms of their quality, safety, and efficacy or effectiveness.
* The high costs of research and development and the high risk of failure.
* A high level of public-sector input, in terms of input from basic research, funding and infrastructure (WTO et al. (2013)).
WTO et al. (2013) describe healthcare innovation as a process of three steps; discovery, development and delivery. From discovery to development, translational research takes place and from development to delivery, market approval and manufacturing happens.
The following models follow the overall pattern as mentioned by the WTO et al. (2013), discovery, development and delivery. However the models differ in complexity, terminology and present different perspectives on the process.
Varkey, Horne and Bennett (2008) introduce an extensive model (figure 1) of the healthcare innovation process. The focus of Varkey et al. (2008) is on the tools needed in this process (figure 1).
They find that the innovation process begins with idea generation and/or opportunity recognition followed by idea evaluation. In the following development process the top ideas that were created are taken and they pass through the stages of design, prototyping, experimentation, and analysis in an iterative process. Finally, the process ends with the development of a product, system, or device that fulfills the vision of the users and meets the requirements of the project.
The first use differs from prototyping because the product is now standardized, repeatable, and designed to capture the value envisioned for the innovation.
In the commercialization stages, the invention is incorporated into products or service platforms that reach a broader market delivering far reaching value to patients and financial value to the innovator.
Diffusion occurs as the use of an innovation spreads through the health care industry.
Figure 1. Stage model of innovation in (Varkey, Horne and Bennett (2008)).
!
The model of Omachonu and Einspruch (2010) (figure 2) find in accordance with Varkey et al. (2008) that innovation generally follows the path of problem identification and idea generation, idea evaluation, development, first use, commercialization, and diffusion. However they look at the changes that occur to the process based on the source of idea generation. They state that the need for a healthcare innovation comes from either!the healthcare!stakeholders, such as patients, patient advocacy groups, healthcare organizations, physicians, or other healthcare professionals or the need for change is forced upon the healthcare organizations by the government. If the innovation originates from within the healthcare organization, it is tested, modified and adopted. If it does not originate from
within the healthcare organization, the need instead, is met by a healthcare technology company that develops, tests and markets the technology. They find that healthcare technology companies might use an incomplete innovation by a healthcare organization to develop further. !
Figure 2. The process of healthcare innovation (Omachonu and Einspruch (2010)).
The role of stakeholders is highlighted by Rothaermel and Deeds (2004) who suggest that the whole process happens in alliances for both, exploration and exploitation alliances are milestones of the development. (figure 3). They assume that the innovation process has four stages; exploration, products in development, exploitation and products on market, where the stages overlap and flow with each other.
As can be seen in figure 3, Rothaermel and Deeds (2004) distinguish between exploration alliances and exploitation alliances. Exploration alliances are formed to discover and develop new technology through knowledge sharing. In the biotechnology industry exploration collaborations are motivated by a desire to acquire basic knowledge that can be used to create novel ideas which are then entered into the development and regulatory process.
Once a product is ready to enter the development stage, uncertainty is greatly reduced.
Successful exploitation enables the firm to commercialize the knowledge gained through exploration.
New biotechnology firms often focus on creating new drugs, which are then commercialized by established pharmaceutical companies, which Rothaermel and Deeds (2014) call exploration alliances.
!
Figure 3. New product development (Rothaermel and Deeds (2004)).
The model of Girling, Young, Brown and Lilford (2010) (figure 4) follows the general development of idea generation, product development and bringing the product to market. However they also introduce two decision gates. At G1 a decision is taken whether to enter a full development phase (P2).. At the end of the development phase a final decision is made to bring the product to market. At this point (G2) the product will enter the post market phase (P3) with the corresponding commitment to the costs of production and the development of a pricing and marketing strategy, or else the project will be abandoned altogether.
Figure 4. Development Cycle (Girling et al. (2010)).
!
According to Price and St. John (2014) the simplest way to describe innovation is in three stages:
invention, adoption and diffusion. They find that this is equal Evidence-Base Medicine (EBM) which consists of five key steps: (i) formulating the question; (ii) searching for evidence; (iii) appraising evidence; (iv) applying evidence; and (v) assessing the experience (Price, 2012). In these five steps the unmet need is identified, the evidence of effectiveness is determined (generation and critical appraisal of evidence; including looking at potential benefits and potential harms (safety)), application of evidence and audits of the application. These models are in line with WTO et al. (2013) but also take the importance of the need for testing during the development of a healthcare innovation.
Figure 5. Stage model of medical product development ( IJzerman and Steuten, (2011)).
While previous models stayed at a general level of describing a healthcare innovation process, the most adapted to the realities of medical product development is the model of IJzerman and Steuten (2011) (figure 5.). It describes four stages in medical product development. In stage 1’ basic research’
a mechanism-based research portfolio is built, stage 2 ‘translational research’ consists of targeting specific products for an existing or newly defined population, in stage 3 ’clinical research’, the evidence base for the new products is built and lastly in stage 4 ‘market access and pricing’ the new products are ready to be brought to market and market access and pricing are the main issues.
This model also alludes to the phases of clinical trials as prescribed in official guidelines. When discussing healthcare innovation development, these official guidelines for new drug introduction to the market cannot be ignored. The actual drug development can generally be divided into four phases.
The first phase is the preclinical phase, which usually takes 3 to 4 years to complete. The preclinical phase consists of laboratory and animal testing to assess safety and biological activity. If successful, this phase is followed by an application to the approving authority as an investigational new drug (IND). After an IND is approved, the next steps are clinical phases 1, 2, and 3, which require approximately 1, 2, and 3 years, respectively, for completion. Importantly, throughout this process the
approving authority and investigators leading the trials communicate with each other so that such issues as safety are monitored. The manufacturer then files a new drug application (NDA) with the approving authority for approval. This application can either be approved or rejected, or a further study might be requested before making a decision. Following acceptance, the approving authority can also request that the manufacturer conduct additional post marketing studies. Overall, this entire process, on average, takes between 8 to 12 years (Lipsky and Sharp, 2001). Figure 6. shows a summary of the different phases.
Figure 6. Phases of new drug introduction (Lipsky and Sharp (2001)).
While the above introduced models differ in terminology and complexity, there is an overlapping pattern of an idea or concept that is evaluated and developed which leads to a product to be developed and then brought to market. Furthermore Rothaemel and Deeds (2004) focus specifically on the role that stakeholders play in the medical product development. Figure 6 provides a summary of the discussed models. The following section will discuss stakeholders in general and stakeholders in
healthcare specifically.
care innovation development models. l. Varkey, Horne andBennett (2008) Omachonu andEinspruch (2010) Rothaemel andDeeds (2004) Girling et al. (2010) Price and St. John (2014) Price (2012) an y Idea generation/problemrecognition Idea identification
Exploration Concept
Invention Formulating thequestion Idea generation Investment decision
Idea evaluationIdea evaluation
Products indevelopment Product development Searching forevidenceTr ent Idea development Idea development Appraising evidence
First useFirst useExploitation Market decision Applying evidence
Adoption
y CommercializationCommercialization
Products onmarket Post Market Assessing theexperienceDiffusion Diffusion Diffusion
or individual who can affect or is affected by the achievement of the organization’s objectives”.
Friedman and Miles (2006) further introduce the most common stakeholders:
• Shareholders
• Customers
• Suppliers and distributors
• Employees
• Local communities
Jawahar and McLaughlin (2001) find that the firm’s life cycle is important in defining stakeholders.
They argue that stakeholder value will change across the firm‘s life cycle stages because certain stakeholders, because of their potential to satisfy critical organizational needs, will be more important than others. Carlton and Downes (2014) further state that several characteristics of the firm influence stakeholder importance, such as: identity orientation (utilitarian, relational, collectivist), size (large, small), form (manufacturing, service), stage (start-up, maturity/decline, revival), and function (for profit, not-for-profit).
Stakeholder network
For the purpose of this research, the stakeholder network is the group of stakeholders involved in the development of a healthcare innovation.
Since 1963 stakeholders have been extensively researched. This stream of literature produced at least 75 different definitions and many more studies into the subject (Friedman and Miles (2006)). For our research, we delve into the question of who the stakeholders in healthcare are and what knowledge has been developed up to date about them.
Stakeholders in healthcare
This section aims to identify stakeholders that are deemed important in healthcare innovation.
Stakeholders are important during the development of the innovation because as Jewell et al. (2012) state, in order to successfully demonstrate the value of a medical treatment, all stakeholders have to unite and work together. Competing priorities of the different stakeholders have to be overcome in order to send a single message about the value of a new treatment. This message should ‘reflect the
interaction between scientific evidence and therapeutic purpose and their combined impact on health at a reasonable cost’ (Jewell et al., 2012).
Furthermore this unanimous message can be used to persuade payers and policy makers to adopt rules and regulations that make the treatment part of a financially sustainable health care system. This is in accordance with Herzlinger (2006) who states that, the healthcare sector has many stakeholders, each with their own agenda. These players often have substantial resources and the power to influence public policy and opinion by attacking or helping the innovator. Innovators need to recognize and try to work with the complex interests of the different stakeholders in order to make the process run smoother.
Several stakeholder groups in the process of healthcare innovation can be distinguished, as shown in figure 7, the health care delivery network of Rouse (2008). It should be noted that each separate group includes many companies and other types of enterprises (Rouse, 2008). It is important to understand that – in the context of healthcare – the value provided to consumers and the payment received for this value, determine the financial potential for all of the other players in the network (Rouse, 2008).
Figure 7. Health care delivery network (Rouse (2008)).
Biemans (1991) finds that by involving potential users in the process of product development the product developer may develop a product that better fits user needs, shorten the length of the development process, as well as speed up the process of market acceptance of the product.
Furthermore users may be involved in many stages of the product development process.
"
As can be seen in the model presented by Rouse (2008, figure 7), government and policy makers are stakeholders in the healthcare delivery network. In 2011 the Council of the European Union published their conclusions on innovations in the medical device sector. They state that the European Commission and member states should promote measures that make use of valuable innovative solutions with proven benefit, and improve information and training for healthcare professionals, patients and patients' families regarding their use; further map and share national and European best practices regarding innovation and enhance the deployment of research to facilitate, where relevant, the transfer of experiences gained in national or regional studies and pilot projects to the multinational, multiregional or European level; ensure stronger collaboration and dialogue between the various actors involved in the innovation process.
IJzerman and Steuten(2011) introduce several stakeholders that are involved in the different stages of medical product development (table 2); government, industry, and clinical and clinical and basic research centers.
Decision problems for three stakeholder groups in four stages of research Stakeholder Stage 1: Basic research.
Building a mechanism-based research portfolio
Stage 2: translational research.
Targeting specific products fora n existing or newly defined population
Stage 3: clinical research.
Building the evidence base for the new products
Stage 4: market access and pricing.
Coverage of the new products to the market, access and pricing negotiation
Industry Should we invest in further research, expand our research portfolio or partner with other public/private partners? How to obtain public funding
Should we invest in R&D and target our products to specific patient groups?
Where and how to launch the product.
How to organize the clinical research strategy. Develop the economic evidence alongside
Develop a value dossier. What is the best market access strategy and what is the best possible price given regulatory constraints?
Government Should we use public resources for further research?
To which consortia should it be awarded?
Should we invest in product development for economic growth and health benefits? Is there a market failure?
Should we use public research funding for clinical research on new products?
Do we approve new products for market access and for what price?
Clinical and basic research centers
Should we apply for public funding, and in what consortia? What is our research focus and does the project fit our portfolio?
Should we apply for public funding, and in what consortia? What is our research focus and does the project fit our portfolio?
What is the clinical evidence for new products? How to design and manage our clinical research?
How do we get timely access to the new products and how do we manage and monitor quality assurance?
Table 2. Stakeholders at different stages of product development (IJzerman and Steuten (2011)).
According to Price and St. John (2014) the stakeholders that are involved in the technology employed in the delivery of care to patients include (a) the inventor, (b) the researcher/developer, (c) the manufacturer/marketing/sales organization, and (d) the healthcare provider organization.
Omachonu and Einspruch (2010) state that there are five key stakeholders in the healthcare innovation process, each with its unique and deliberate needs, wants and expectations as listed in table 3 below.
They further name patient advocacy groups and healthcare organizations.
Stakeholders Needs, wants & expectations
Physicians Improved clinical outcomes, improved diagnosis and
treatment
Patients Improved patients’ experience, improved physiological
well-being, reduced waiting time, reduced delay Organizations Enhanced efficiency of internal operations, cost
containment, increased productivity and quality and outcomes improvement
Innovator Companies Profitability, improved outcomes
Regulatory Agencies Reduced risks and improved patient safety.
Table 3. Five key stakeholders (Omachonu and Einspruch (2010)).
"
Price and St. John (2014) further find that it is important to recognize all of the stakeholders involved in any care pathway as the benefits of an innovation will be seen in a number of stakeholder domains, other than the domain in which the new technology is delivered. Different stakeholders will have differing needs or expectations of the healthcare service , and its component parts, and there are likely to be tensions or differences of views between stakeholders.
The purchaser (commissioner/insurer) can be seen as the patient's advocate and an important starting point for innovation, by understanding (and articulation in strategic planning) of the patient's unmet needs—albeit most commonly expressed on a population basis.
According to Varkey, Horne and Bennett (2008) collaboration is one of the biggest drivers of innovation in health care. They state that open communication, interpersonal relations and networks, and close connections between innovators and the mainstream businesses are necessary criteria for an innovative organization. Secrecy, viewed as critical in healthcare innovation, has to be managed in a way that allows for collaboration to create innovation.
Rothaermel and Deeds (2004) find an additional reason for collaboration in the field of healthcare innovation. Since high-technology start-ups are generally resource constrained, they are likely to rely on alliances with established firms for access to knowledge and for access to product markets.
As they initially will have a weak bargaining position, new technology ventures tend to cede a disproportional amount of control rights to the financier of the R&D alliance.
By transforming knowledge, created through exploration, into a prototype product, a technology venture is able to distinguish itself and to signal the quality of its project. This intermediate success generates alliance opportunities for the biotechnology firm.
Established pharmaceutical companies have long-standing routines and competencies to manage a new drug through the regulatory process and then to market it via existing channels. In addition, large pharmaceutical companies tend to have the resources to finance this most costly and time consuming part of the development process, and they are often short of innovative products in their own research pipelines.
The literature fails to describe investors as an important stakeholder in healthcare innovation, however Friedman and Miles (2006) find that shareholders are one of the most important stakeholders.
Investors cover the need for funding..
Table 4 shows an overview of stakeholders in healthcare, as well as a brief description. A more detailed description of the separate stakeholders is given below.
Inventor."An inventor is one of the sources of idea for a healthcare innovation.
"
R&D laboratories."As described above, alliances can be formed with R&D laboratories or technology development businesses. These alliances are formed to discover and develop new technology and to overcome resource constraints. Initially the new technology venture will have a weak bargaining position."
"
Pharmaceutical organizations."Established pharmaceutical companies are chosen to form alliances with to make use of their existing channels and financial resources. Secrecy needs to be managed in a way that allows for the creation of innovation.""
Purchaser/insurance."Purchasers or insurance can be seen as the patients’ advocate, furthermore they are an important starting point of innovation. They also are an important starting point of innovation.
If the purchaser or insurance chooses not to purchase/insure the innovation, this heavily influences the innovator. "
Stakeholder Description
Inventor Source of idea
R&D laboratories Alliances to overcome resource constraints, knowledge creation
Pharmaceutical organizations
Alliance to overcome resource constraints, make use of channels
for market access Purchaser/Insurance Decision of buying/insuring
product. Source of idea Government/Policy makers Policies to improve innovation
and collaboration/approval
Healthcare Providers
User of product. May improve development process, change
product
Patients Benefit of innovation
Patient advocacy groups Source of idea
Investors Financing
Table 4. Stakeholders of healthcare innovation.
"
Government/policy makers."Government and policy makers are urged to promote measures that make use of valuable innovative solutions with proven benefit, as well as ensure stronger collaboration and dialogue between the various actors involved in the innovation process. Furthermore they regulate drug testing and drug approval.""
"
Healthcare provider."As stated earlier involving potential users in the process of product
development can lead to a product that better fits user needs, shorten the length of the development process, as well as speed up the process of market acceptance of the product. By involving them in the development process, the developer may make changes that would otherwise not have been made."
"
Patients. Finally patients are the group of stakeholders who stand to benefit from a new technology.
While they don’t exert any direct power on the technology development, Davey et al. (2011) find that various factors need to be taken into account in the development of new technologies in healthcare, such as the reduction of risk for the user as well as the reduction of effort for the user.""
"
Patient advocacy groups"Patient advocacy groups can be a source of idea generation."
Technology development
Healthcare innovation development is an innovator driven process. However as Kirwan, van der Sijde and Groen (2006) state, the innovator is not an independent actor. The innovator is embedded in a social context and needs to interact with other actors. Groen et al. (2008) adopt a social system perspective, which assumes that actors purposefully act in interaction with other actors, and that every action as well as artefact can be decomposed into four types of capital as input, which also produces an effect on each of these capitals.
They created a model (figure 8.) in which they introduce the four capitals: strategic, economic, social and cultural. Strong positions in one type of capital may counter a weak position in another type of capital, however managing of tensions may lead to the creation of new tensions if the capitals are not balanced carefully. In the short run social capital may be used to counterbalance a complete lack of other capitals.
Strategic Capital is defined as ‘the set of capacities that enables actors to decide on goals and to control resources and other actors to attain them’. Strategic capital does not only reside in people.
Artefacts can also contribute towards the achievement of an actor’s goals.
Cultural Capital is defined as ‘the set of values, norms, beliefs, assumptions, symbols, rule sets, behaviors and artefacts that define the actor in relation to other actors and environment.’
Economic Capital is defined as ‘the set of mobile resources that are potentially usable in exchange relationships between the actor and its environment in processes of acquisition, disposal or selling’.
Social capital is defined here as ‘the set of network relations through which actors can utilize, employ, or enjoy the benefits of capital that is controlled or owned by other actors’.
As with stakeholders, where the firm’s life cycle is found to be important in defining them (Jawahar and McLaughlin (2001)), Groen et al. (2008) find that the balance of capitals may shift over time, because as Groen et al. state this approach is a dynamic process, so having reached a base level the as the innovation development continues, new capitals are required to address development needs.
Figure 8. Social systems model (Groen et al. 2008)).
CONCEPTUAL MODEL
"
In this section the conceptual model, based on the preceding literature review will be introduced. The conceptual model proposes that at different stages of healthcare innovation development, the stakeholders that are involved change. These changes in stakeholder involvement are related to the social systems theory as introduced by Groen et al. (2008).
Stages
The healthcare innovation development models as introduced in the literature review section show considerable overlap (table 1). Four general stages of development can be distinguished, which will be referred to as stages 1 through 4. A description of the stages follows below. Per stage assumptions will be made on the needs of the healthcare innovator, which combined with the four capitals will lead to a division of stakeholders over the different stages. Where there might be lack of capital in relation to certain needs, social capital can be used to counterbalance this, therefore it can be assumed social capital is involved in every stage.
Stage 1a: Idea Generation." The need in this stage is idea generation. This need highlights requirements in cultural capital, which may be counterbalanced with social capital. Therefore we
suggest that the stakeholders involved in this stage are patient advocacy groups, inventors, and purchasers.
Stage 1b: Idea Development. In stage 1b basic research is undertaken which will lead to new knowledge, which in turn helps in developing a prototype product and/or a patent. The needs for this stage are financing, overcoming R&D resource constraints, as well as developing and registering a patent and/or prototype. These needs highlight requirement economic capital, cultural capital as well as social capital. Alliances can be formed with R&D laboratories or technology development businesses, to overcome resource constraints to develop new technology. Investors are also stakeholders in this stage. Government is involved regarding patent registration.
Stage 2a: Product development." " During this stage the idea in the form of a prototype or patent transforms into a product for pre-clinical testing. The potential product will be assessed against customer needs and experience. A comparison with alternatives is made, which leads to a value assessment. Specific products target an existing or newly defined population.. A need remains for overcoming R&D resource constraints as well as a need for financing, furthermore there is a need for knowledge regarding customer needs and experience. This highlights requirements in cultural capital, economic capital as well as social capital. We suggest that collaboration with R&D laboratories will remain stable. Government and policy makers are urged to promote measures that make use of valuable innovative solutions with proven benefit. Such measures could include subsidies, which covers a need for financing. Investors also still play a roll. Healthcare providers and patients give access to required customer needs and experience.
Stage 2b: Pre-clinical research."In stage 2b the preclinical phase of actual drug development takes place. The preclinical phase consists of laboratory and animal testing to assess safety and biological activity. If successful, this phase is followed by an application to the approving authority for an IND.
There is a need for regulation access as well as the granting of an IND, as well as access to laboratory resources and knowledge regarding the preclinical phase. These needs show requirements in cultural capital and strategic capital therefore the stakeholders in this stage are R&D, and government.
Stage 3: Clinical trials."Stage 3 consists of clinical research, in this stage phase 1, 2 and 3 of clinical trials will take place. At the end of this stage a new drug application is filed for approval. The needs in this stage are, as in stage 2b, access to trial regulations. Furthermore drug approval is important as well."
At this stage there is also a need for access to financing as well as a need for access into the clinic for clinical trials. These needs show high requirements in all capitals. Established pharmaceutical companies are chosen to form alliances to make use of their existing channels and financial resources.
Cooperation with healthcare providers as well as patients is important in this stage as well, as they are the (potential) users of the product. Government involvement is important in relation to the regulations regarding clinical trials as well as the granting of an NDA.
"
Stage 4: Market access." In the final stage the product is brought to market and market access and pricing are the main concerns. The need in this stage is market access. This need highlights requirements in cultural capital as well as strategic capital. The stakeholders involved are pharmaceutical companies, healthcare providers, purchasers as well as patients.
"
Conceptual model." Figure 9. On the following page gives an overview of the development of different stakeholders and the four capitals over the four stages of development of a healthcare innovation."
Figure 9. Conceptual model.
METHODOLOGY
As stated in the introduction, the research question that this paper aims to answer is:
“How does a healthcare stakeholder network evolve over the development of a healthcare innovation?”
Research design
The research will be structured according to the engaged scholarship model as presented by Van de Ven (2007). Engaged scholarship is a participative form of research for obtaining the different perspectives in producing knowledge about complex problems.
There are four steps to undertake when applying engaged scholarship:
1. Problem formulation: The problem that is addressed, by answering the above mentioned research question, is, that while innovation in the conception and delivery of new treatments is a key aspect of the modern healthcare systems (Metcalfe et al., 2005, Davey et al., 2011), there is high uncertainty whether or not an innovation is marketable (Baba and Walsh, 2010). Stakeholders are important during the development of the innovation because as Jewell et al. (2012) state, in order to successfully demonstrate the value of a medical treatment, all stakeholders have to unite and work together.
However there is little information about what stakeholders are involved in each stage.
2. Theory building: In the literature review section, existing literature relevant to the subject is analyzed, which leads to the development of a conceptual model in the next step.
3. Research design: In this phase a model for empirically examining the alternative theory, needs to be designed. This phase is represented by the conceptual model section of this research.
4. Problem solving: Research, interpret, communicate and apply the empirical findings, that create alternative models that better answer the research question about the problem. This last phase is represented by; conducting expert interviews; analyzing the findings from these interviews; discussing the results which may lead to an adjusted conceptual model and finally the conclusion.
Case description
The case study company chosen for this research is developing a new method of drug delivery. During prior research it became apparent there was a desire for more information on what stakeholders are important during different stages of product development.
Drug Delivery Inc. Drug Delivery Inc. is a private-owned pharmaceutical company. It develops new methods for drug delivery. Drug Delivery Inc. is supported by several financial investors and has
partnerships with other companies and academic institutions in the sector. The core business of Drug Delivery Inc. is the development of cutting-edge drug delivery systems for customers, who will take their product to market. "
Drug Deliverable. At this time in development Drug Deliverable is a project management set-up to reach ‘first in man’. Drug Deliverable has a specific aim in drug delivery for disorders that come with pain indications, such as back pain and muscular pain. To alleviate these pains patients could use oral drugs, but this is undesirable as there are many side effects, the liver has to process them, and they pass through the kidneys. Drug Deliverable allows for the drugs to be delivered in another way. Drug Deliverable is therefore a specific application of Drug Delivery Inc. At this point Drug Deliverable is a licensee of Drug Delivery Inc. and when it starts to develop its own products, it will also be a client of Drug Delivery Inc. Discoveries made with Drug Deliverable and registrations during the clinical trials of Drug Deliverable will contribute back to the overall proposition of Drug Delivery Inc. due to a then existing proof of principle through ‘first in man’, because if the delivery method work in one application, it is more likely to be effective in other medical applications as well.
The development of the product at this moment has come to animal testing. Therefore the development of Drug Deliverable is in stage 2 of the conceptual model.
Implementation IQ. Implementation IQ is an implementation specialist that helps innovators bring their product to market. They do this through a set of software programs they developed in-house, that focuses on the stakeholders involved in the implementation of the innovation as well as the wishes and demands of these stakeholders. From this point on Implementation IQ will be referred to as IIQ.
Business Generator Groningen."The Business Generator Groningen undertakes several activities, for the most part for the Rijksuniversiteit Groningen (RuG) and Universitair Medisch Centrum Groningen (UMCG). The first activity is technology transfer, out-licensing of technology. The key word is valorization, making sure that research undertaken at the university actually ends up in society;
directly, in cooperation or through patenting. The last activity is to generate businesses, help set up start-ups and financing these start-ups. These can be spin offs from the university or with private entrepreneurs. From this point on Business Generator Groningen will be referred to as BGG.
Data-sources and data-collection
For this research expert interviews will be conducted. Expert interviews are a specific form of semi- structured interview (Belting, 2008). Semi-structured interviews are often the sole data source for a qualitative research project and are usually scheduled in advance at a designated time and location outside of everyday events. They are generally organized around a set of predetermined open-ended questions, with other questions emerging from the dialogue between interviewer and interviewee(s).
Semi-structured in-depth interviews are the most widely used interviewing format for qualitative research and can occur either with an individual or in groups (DiCicco-Bloom and Crabtree, 2006).
The interview guide for each interview was slightly different within the bounds of three set topics:
introduction, company and model specific, see appendix I.
The interviews are recorded for full access to the gathered data during the analysis phase, transcripts of these recordings are added to the appendices (appendix 2, 3 and 4). Furthermore data from research conducted in June 2014 at the same case study company will also be used, as well as information gathered during informal discussions with Mr. Drug Deliverable, in so far as there were notes taken, these will be also added to the appendices (appendix 5).
Expert interviews
For this research four experts in the field of healthcare innovation will be interviewed during three expert interviews. The first interviewee is Robbert Bloemendaal of Implementation IQ, the second interview will be conducted with Hans Hektor and Frits Wijbenga of the Business Generator Groningen and the last expert interview is with Mr. Drug Deliverable at Drug Delivery Inc..
Data analysis
For the analysis of the data gathered via interviews, with-in case analysis will be conducted to gain familiarity with the matter. The within-case analysis will be conducted through the reading, coding and interpreting of the data gathered through interviews. A comparison of the data gathered in the interviews will be made to see if they overlap with each other, disagree and how they relate to the
model.
After the interviews are transcribed, the transcripts will be scanned on the main topics relevant for this research by entering the words ‘stakeholder’, ‘steekhouder’, ‘partner’, ‘need’, ‘capital’, ‘stage’, and
‘fase’ into the search function in Word. Consequently the sections where these words were found were scanned and the data interpreted for use in the analysis.
"
"
ANALYSIS
"
In this section the findings from the expert interviews as well as data gathered in previous research and informal conversations will be discussed. The analysis will be conducted based on the separate elements of the conceptual model: stages, stakeholders, and capitals and needs.
"
Testing stages assumptions
An innovator business may not follow the whole path of development of the product, but separate organizations may 'guide' it through the different stages. Interviewee 4 shows that while the healthcare innovation itself follows the path of the proposed model, this may not necessarily be in one and the same company. In this case, a license was bought from a university. Because the possible application of the product was clear, they entered development in stage 2. This is supported by interviewees 2 and 3, who find that the initial idea generally comes from a researcher, this idea may then be developed further by a separate company after a patent was granted and consequently sold and then further developed. Also big pharmaceutical companies generally bring the product to market, so there is an exit from the developing company at some stage, as Interviewee 3 put it “the biggest model you see, is mostly focused on an exit in phase 2a of clinical trials”, which takes place in stage 3. This is also the case for Drug Deliverable “we will develop products towards the clinic, but that doesn’t mean we will eventually distribute it to patients all over the world. We will take it to the clinic stage, hoping that pharmaceutical companies will buy us out, or do a so called ‘carve out’ (Interviewee 4.).
"
The stages in the conceptual model show an aggregated view on the development of a healthcare innovation. According to Interviewee 1, there could be up to 12 stages in the development.
Interviewee 2 further specifies that while the aggregated view on a whole gives a good representation
“usually there are the research stage, the pre-clinical stage, the clinical stage and the market stage”, the path followed may differ per innovation development: “if you undertake a project for a base indication, with only a very limited number of patients per year, then you have a different route than when you undertake an oncology project”.
Furthermore more than one product may flow from one idea, Drug Deliverable for instance has a specific aim towards pain applications, but also other disorders..
From the analysis it becomes apparent that while the general described stages in the process are correct, there are several factors that were not considered in the conceptual model.
1. Multiple products may evolve from one initial idea
2. Multiple players take ownership the innovation through the entire process.
3. The process differs per innovation
"
Stakeholders
A single element regarding the stakeholders in the model that all interviewees agreed up on, is that all stakeholders matter throughout the entire development process. This is also linked to value creation, as Interviewee 1 states: “if you develop the product with all the stakeholders in mind, you develop a
However, not all stakeholders have the same stake in all the different stages, for example facilitators like the Business Generator are more involved in the early stages: “the third stage, that is usually not the stage we are involved in”.
"
Which stakeholders are involved or of significance in certain stages also in a way depends on the innovation. Interviewee 4 says that health insurance companies are not important to him at this point, as they only become interested if there is proof of principle, so not before the clinical trials in stage 3.
It is also important to take into account if and when an organization wants to exit. If Interviewee 4 wants to exit, it is important to develop the product that is suitable for reimbursement: “This will determine the value of my exit”. However in some cases, according to Interviewee 2:“it helps to talk to insurance companies at an early stage”.
"
Stakeholders under one label can also differ throughout the stages. Investors exist in every stage, but there are likely different investors in different stages. You begin with “ ‘fools, friends and family’ and from there it evolves to seeds and in the stage 3 towards clinical trials, when you go from several millions to dozens of millions, it evolves to professional venture capital” (Interviewee 4). This is also influenced by the fact that 1/3 of the total invested capital is used to actually bring the product to market.
Furthermore R&D in the first stage is usually a researcher who helps develop an idea or the input to the project. In the second and third stage CROs (clinical research organizations) are important to overcome resource restraints and as well as aid with regulatory needs for production. The same distinction can be made for pharmaceutical companies. Pharmaceutical companies are only involved in sales, they don’t develop products. “The bigger pharma companies move further and further to the end of the development” (Interviewee 3). Veterinary pharmaceutical companies are also a possibility to take into account: “What we are dealing with now, are veterinary pharma companies. Who are giving us the first development assignments” (Interviewee 4).
"
Patient advocacy groups can be very important for the development of a healthcare innovation, as they not only bring inspiration, they also have information that the healthcare providers don’t have or which they interpret differently. Lastly they can be a source of funding, “they can really procure money” (Interviewee 4)
Government can also be labeled in two ways, as policy maker/subsidy provider and regulator. In both animal testing and clinical trials, you are dealing with ethics committees, as well as applying for an IND (initial new drug) and a license for your testing: “When you go towards clinical trials, you are
dealing with government approval. You are dealing with a lot of regulatory parties” (Interviewee 3).
And your finished product has to meet certain quality standards, such as the CE label.
"
There are also stakeholders that are missing in the model according to the expert interviews or have a different role than found in literature:
Competitors: Competitors cannot be ignored, as they might “pop up and ruin your plans”
(interviewee 1), and at a certain moment you have to undertake market research: “you have to ask, ‘is there a demand for this product, what other products are already available?’ “ (Interviewee 1)
"
Facilitators: From the interviews it becomes apparent that facilitators, such as BGG and IIQ are very useful aides in healthcare innovation: not reinventing the wheel, but use of experience, network and useful knowledge. Interviewee 4 says regarding facilitators: “In some case it really is a focal point, where things were established, that otherwise wouldn’t have had been established”. However Interviewee 2 nuances it a little, and says it depends on the experience of the innovator. “ If it is a researcher, who has only been trained in academic research, and has never looked at what is needed to set up a company” the BGG can absolutely assist, because of their hands on experience, but there are also more experienced innovators who still seek the help of the BGG. Aside from the actual setting up of a company, they can help with financing, or use their extensive network to help set up contacts for innovators it required.
IIQ finds that innovators are attempting to reinvent the wheel every time, but “the wheel has been invented already” (Interviewee 1). They use their experience translated through their software tooling to help innovators through the process without having to do unnecessary research.
"
Academia:. Universities and university hospitals play a big role in the development of healthcare innovation. The initial idea may come from research at a university hospital: “we actually bought a license from a university” (Interviewee 4), “valorization, making sure what is discovered at the academic institution, ends up in society” (Interviewee 2). In the early stages academia can help scan possibilities of what works and what doesn’t work, as well as apply for subsidies, separate or together.
Once the innovation is in actual development, academias still play a vital role. In the case of Drug Delivery Inc. a veterinary university has played a vital role in setting up and conducting the animal trials: “the horse trials or dog trials, we could have never set them up and execute them” (Interviewee 4). Furthermore once you start arranging for submissions, you need scientific evidence and evidence based argumentation, “you need a professor or a study group to handle that scientific justification properly” (Interviewee 4).
The academia benefit from collaboration as well: “PhDs may promote on the subject, they need to publish, they can hedge third cash flows, so they definitely have a stake in what we do” (Interviewee 4).
"
Society: Society is a stakeholder that should not be overlooked. For example, Interviewee 4 prefers to avoid animal testing whenever that is possible: “Sustainability, ethical acceptability, that is definitely something you should take into account in my field”.
From this analysis it becomes clear that several stakeholders are missing from the conceptual model and that certain stakeholders may have more than one role.
Capitals and needs
Capitals: What is interesting to see is, that in the case study company, many of the stakeholders that cover a need during the healthcare innovation, were available in the network of Mr. Drug Deliverable already. This shows that existing social capital is a very important capital in the development of a healthcare innovation. The players available in the network can help grow the other capitals and cover needs per developmental stage.
Furthermore all interviewees agree that there needs to be a balance of capitals in all stages of the innovation process.
The remaining capitals in the model; strategic, cultural and social; evolve along the development of the healthcare innovation. There is a process of professionalization that takes place, the people mainly concerned with the development are initially more “technology geeks” and later “people who can manage processes and procedures” (Interviewee 4). The cultural capital shifts more from
‘entrepreneurial’ to ‘bureaucratic’ (Interviewee 4, Brainstorming).
Throughout the different stages the type of financing changes with the amounts and potential, from
“personal, to private, to public” (Interviewee 4, Brainstorming).
Needs: A constant need throughout all stages is financing: “The needs change with the different stages. Aside from money. Because you always need money. Equally hard to acquire in each stage, but the amounts change and the potential changes along with it (Interviewee 4).
Stage 1 shows a need for support from the surroundings, “you need encouragement”(Interviewee 4).
Where in stage 2 it is important to focus your research, “that you are rewarded for making choices”
(Interviewee 4).
Stage 3 further has a need for scientific evidence needed from the clinical trials for drug approval,
“you need a professor or a study group to handle that scientific justification properly” (Interviewee 4)..
In the final stage “marketing and financing play a big role” (Interviewee 2). Together with stage three, this can be described as the “valley of death” (Interviewee 1). These stages are very costly; therefore there is a financing need. As well as a need for the knowledge and ability to guide the innovation through the process of trials and bringing to market: “what they often do, is pump some money into the innovation and then hope that big pharmaceutical companies buy their innovation and guide it through these stages” (Interviewee 1).
From the analysis it becomes apparent that every stage in the innovation process sees a need for financing. Further needs in stage 1 are support, stage 2 focus, stage 3 access to knowledge of trials and access to market, the need for access to market is apparent as well.
It is apparent that there is a need for a balance of capitals, however throughout the innovation process the separate capitals change intensity. Table 5 shows how the capitals change in intensity over the course of the innovation process. Least intensity is presented as white, while the highest level of intensity is depicted in black. The levels in between have differing grey scales.
Stages
Stage 1a:
Idea generation
Stage 1b:
Idea development
Stage 2a:
Product development
Stage 2b:
Pre- clinical research
Stage 3:
Clinical trials
Stage 4:
Market access Capitals
Strategic
Economic Personal Personal Seed Seed Public Public
Social
Cultural Entrepreneurial Entrepreneurial Bureaucratic
Table 5. Capital intensity per stage.
"
Additional analysis
During the interviews we have found that while the conceptual model looks at stakeholders that may be important at different stages of development of a healthcare innovation, it does not differentiate in importance of these stakeholders. Therefore we decided that analysis of relative importance of the stakeholders can be of use here.
Stakeholder analysis is a way to determine which stakeholders can have the most positive or negative influence, who will be most affected by the effort, and how you should work with stakeholders with different levels of interest and influence (Rabinowitz, 2014).
Mitchell, Agle and Wood (1997) find, that there is no consensus on who the stakeholders of an organization are and to whom should be paid attention, but that stakeholders become important to organizations, when they are perceived to possess three attributes:
• The power to influence the firm
A relationship among social actors in which one social actor, A, can get another social actor, B, to do something that B would not have otherwise done
• The legitimacy of the relationship with the firm
A generalized perception or assumption: the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, definitions
• The urgency of the claim on the firm
The degree to which stakeholder claims call for immediate attention
The above mentioned three attributes lead to the creation of seven stakeholder categories and one non- stakeholder category.
Low importance:
1. Dormant: dormant stakeholders only have power.
2. Discretionary: discretionary stakeholders only have legitimacy.
3. Demanding: demanding stakeholders only have urgency.
Moderate importance:
4. Dominant: dominant stakeholders possess power and legitimacy.
5. Dangerous: dangerous stakeholders have both power and urgency.
6. Dependent: dependent stakeholders possess legitimacy and urgency.
Highly important
7. Definitive: definitive stakeholders possess power, legitimacy and urgency.
8. Non-stakeholder
These categories are summarized table 6.
Although we have not directly tested power, legitimacy and urgency, we can find proxies.
Because power, according to Mitchell et al. (1997), is seen as a relationship among social actors in which one social actor, A, can get another social actor, B, to do something that B would not have otherwise done’, we say a stakeholder has power when a decision to undertake an action to not fulfill a developmental need influences the development of the innovation directly. For example the decision to invest, grant a patent or an NDA.
Stakeholder
type Possesses Power Legitimacy Urgency
Dormant X" " "
Discretionary " X" "
Demanding " " X"
Dominant X" X" "
Dangerous X" " X"
Dependent " X" X"
Definitive X" X" X"
Non-stakeholder " " "
Table 6. Stakeholder analysis category matrix (author, 2015, based on Mitchell, Agle Wood (1997)).
Urgency is described as ‘the degree to which stakeholder claims call for immediate attention’, therefore a stakeholder has urgency when their actions have an acute effect on the innovation process.
Legitimacy is a generalized assumption, where the actions of a stakeholder are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, definitions.
As all stakeholders matter throughout the entire development, they can never be seen as a non- stakeholder, as mentioned by Mitchell et al.(1997). Therefore it can be said that the actions of the stakeholders are always desirable, proper or appropriate and thus we can assume that every stakeholder has at least legitimacy in every stage.
Table 8 in appendix 6 shows an overview of all stakeholders as based on literature and the expert interviews and their power, legitimacy and urgency in every stage. The choices for power legitimacy and urgency per stakeholder were based on the needs per stage as became apparent from the analysis.
Some stakeholders, like society or competitors, could not be directly linked to a need that became apparent, however these stakeholders cannot simply be ignored, some assumptions regarding their power, legitimacy and urgency were made.
There is a need for financing in every stage, while the type of economic capital changes throughout the stages, every stages has one or more types of finance provider.
The needs in stages 1 through 4 are summarized in table 7.
Stages Stage 1a:
Idea generation
Stage 1b:
Idea
development
Stage 2a:
Product development
Stage 2b:
Pre-clinical research
Stage 3:
Clinical trials
Stage 4:
Market access
Needs Idea generation Financing Support
Financing Overcoming resource constraints Patent/prototype development Support
Financing Overcoming resource constraints Focus
Financing Regulation access IND granting Focus
Financing Scientific evidence Regulation access
Clinical access Drug approval
Financing Market access
Table 7. Needs per stage.
"
R&D Laboratories: R&D Laboratories play an important role in stage 1a as they can foresee in the need of idea generation. In stage 1a R&D laboratories have power as their offering of an idea can prompt the developer to use this idea. However as there are other sources of idea generation present, they lack urgency. Therefore in stage 1a they are a dominant stakeholder. In stages 1b and 2a they can foresee in access to R&D knowledge and equipment. In these stages this stakeholder aside from legitimacy, has power as the decision to provide access to resources will influence progress of the innovation development. They also have urgency as the decision to provide access has an acute effect on development, therefore they are definitive stakeholders in these stages. From stage 2b on R&D laboratories are no longer actively involved and only have legitimacy.
R&D CROs: The role of CROs is bound to stages 2b and 3. As clinical research organizations, as with R&D laboratories they cover a need of knowledge as well as physical resource constraints, furthermore they can provide clinical access. In these stages this stakeholder aside from legitimacy, has power as the decision to provide access to resources will influence progress of the innovation development. They also have urgency as the decision to provide access has an acute effect on development, therefore they are definitive stakeholders in these stages.
