5 Medical Distribution Strategies Doomed to Fail in 2012

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5 Medical Distribution Strategies Doomed

to Fail in 2012

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

gunter@mytigi.net@gunterwessels

Sam ORear, M.A. BASenior Partner, Founder, TIGI

sam@mytigi.net@TIGI_Inc

www.tigi.net

TIGI 2012 All rights reserved

Help you make good decisions in an uncertain time.

How? Discuss some observed mis-steps and best practices

Resulting in?Actionable implications for your business

Objective

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What is failure? Sluggish Growth Marketshare Decline Price/Margin Erosion Commoditization Diminished Profitability Increased Uncertainty

Failure Defined

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Major Changes in Healthcare: Accountable Care Organizations Value Based Purchasing IT Integration and Health IT Incentives Reimbursement Declines Readmission Penalties Bundled Payments

The New Normal

Top 10 Concerns of Distributors

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Acquiring brands that open doors to parts of their portfolio

Obtaining product lines that turn over quickly

Maintaining focus within market segment

Supporting manufacturers while staying true to their own mission.

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

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Top Concerns of Distributors

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Top Concerns of Distributors

Managing GPO Contracts

Backorders, support issues & customer service from manufacturers

Field support from manufacturers, and training

Avoiding/Mitigating channel conflict

Managing lead and referral processes and programs

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The Big Five

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Portfolio Expansion

Focus on High Volume SKUs

Manufacturer and Product Focus

Private Label Products

Feature-Advantage-Benefit Sales and Marketing

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Priority: Acquire OEM Brands that open doors

Portfolio Expansion1

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Portfolio Expansion Remedy

Recognize that its your brand that opens doors

Maintain Focus on your area of expertise and value-add

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

Focus on High-Volume SKUs2

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

- Manufacturers control much of this market- Exclusivity is rare in high volume- Primary lines can unbalance the portfolio- GPO contracts drive margins down in high

volume SKUs

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Competing in Healthcare in 2012

Maximize

Maximize

Incre

ase

Offs

et

Minimize

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Focus on High-Volume SKUs - Remedy

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

Recognize that high volume is not always associated with high value

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

Add complimentary products that relate to your focus and expertise

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

Manufacturer and Product Focus3

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

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

Quality Access Convenience

Service Lines are comprehensive, product lines including:Screening & Prevention Diagnosis Treatment Aftercare support

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Manufacturer & Product Focus Remedy

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

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

and support, education

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

Private Label Products4

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Risks:- Backorders- Support- Quality- Regulatory review- Liability

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Private Label Products - Remedy

- Focus your core business on service lines

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

- Consider a spin-off of packaging business

- If youre in this business, bulk up compliance and risk management

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Feature-Advantage-Benefit5

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A Balanced Approach

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What are the Hurts?

ClinicalUtility

OperationalEfficiency

FinancialPerformance

Department

Allocated Revenues and

Expenses

Equipment, Facilities,

Technology

Evidence-Based Medicine

Service Line

Favorable Market Conditions

Community Outreach and

Marketing

Definition of Services

Facility

Adequate EBITDA Margin

Staffing Skill-Mix Required MD/RN/

AH

Growing or Reducing

Services Offered

Capitalization, Debt Service,

Leverage, Acquisitions

Resource Coordination

Care Coordination and

Service Line Portfolios

IDN/System

Market Power Aggregation with

Suppliers and Payers

Shared Services and Process Outsourcing

Population Management

and Cooperation

ACO/Network

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

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

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

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

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

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

What to Do?

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Questions?

www.tigi.net

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Upcoming EventsWebinars:

June: How Healthcare Reform Impacts Your Business Today

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

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

Open Enrollment, 1 Day Workshop:

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

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

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Thank You

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

gunter@mytigi.net@gunterwessels

Sam ORear, M.A. BASenior Partner, Founder, TIGI

sam@mytigi.net@TIGI_Inc

www.tigi.net