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Special issue on challenges and opportunities for the pharmaceutical industry in a changing health care environment
ELSEVIER
INTRODUCTION
Special Issue on Challenges and Opportunities for the Pharmaceutical Industry in a Changing Health Care Environment Sheryl L. Szeinbach THE UNIVERSITYOF MississipPi
James H. Barnes THE UNIVERSITY OF MISSISSIPPI
he U.S. pharmaceutical industry leads the world in the discovery, development, production, and sales of ethical pharmaceuticals. Worldwide sales reported from members of the Pharmaceutical Research and Manufacturers of America (PhRMA) increased from $4.1 billion in 1965 to an estimated $96.6 billion in 1996. Unlike other industries, it takes 12 years and an average of $359 million to discover, develop, and bring to market a new drug. While this estimate appears high, it actually represents the cost of drugs that started clinical trials in the late 1970s. Prescription drugs today account for only about seven cents of every health care dollar, and the percentage of gross domestic product (GDP) spent on prescription medicines has remained stable for the past 30 years, at about one-half of one percent (Pharmaceutical Research and Manufacturers of America, 1994). Changes in the delivery of health care are having a direct influence on pharmaceutical manufactures and their ability to supply and manufacture new products. For example, managed care groups, including health maintenance organizations (HMOs), are demanding steep price discounts from pharmaceutical manufacturers. Managed care organizations will continue to play a predominant role in health senqce delivery through leveraged buying strategies and cost control mechanisms such as tormularies, generic substitution, cost-effectiveness studies, and drug use review. Currently, managed care accounts for 30% to 50% of the market; by the },ear 2000,
T
Address correspondence to Sheryl L. Szeinbach, Department of Pharmacy Administration, School of Pharmacy, The University of Mississippi, University, MS 38677. E-Mail: [email protected] or to James H. Barnes, Department of Management & Marketing, School of BusinessAdministration, The University of Mississippi, University, MS 38677. E-Mail: [email protected] Journal of Business Research 40, 181-182 (1997) © 1997 Elsevier Science Inc. All rights reserved. 655 Avenue of the Americas, New York, NY 10010
these organizations will account for approximately 90% of the market. Also by the year 2000, it is estimated that more than 70% of the prescriptions dispensed will be filled by generic drugs. As a result of competitive forces from generic drug makers and dramatic price moderations demanded by managed care organizations, about 40,000 _job reductions in the pharmaceutical industry have occurred between October 1992 and February 1996. Change in the delivery of health care is inevitable as we realize the limitations of health care resources and finances. New technologies, innovative therapies, and existing programs must demonstrate cost efficiency and value to society. Organizations have realigned entire operations to meet the demands of an evolving health care system whose final form is yet elusive. Although change can be traumatic to society, researchers also realize that new challenges provide opportunities to investigate the effect of change on health care providers and professionals. Thus, this special issue of the.lournal qfBusiness Research is dedicated to the changing health care environment and an examination of how the pharmaceutical industry, health care providers, health care professionals, and consumers are coping with change brought on by managed care. This special issue of the Journal ojBusiness Research contains seven articles pertaining to the pharmaceutical industry, managed care providers, and consumers. The production of this special issue would not be possible without the support of dedicated reviewers who gave generously of their time throughout the review process. Reviewers ,sTere selected from both the academic community and pharmaceutical industry and included Jerry Albaum (University of Oregon), Eileen Bridges (Kent State University), Lester Carlson (Clemson UniISSN 0148-2963/97/$17.00 PII S0148-2963(96)00233-0
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J Busn Res 1997:40:181-182
versity), William R. Darden (Louisiana State University), Kelly Fish (Rhodes College), Jean Paul Gagnon (Hoechst Marion Roussel Pharmaceuticals), Betsy Gelb (University of Houston), Faye Gilbert (University of Mississippi), Dhruv Grewal (University of Miami), Charles A. Ingene (University of Washington), Jeffery Inman (University of Wisconsin-Madison), Joseph D. Jackson (Bristol-Myers Squibb), John D. Johnson (University of Mississippi), Holly L. Mason (Purdue University), Robert A. Mittelstaedt (University of Nebraska), Brian C. Ortmeier (Hoechst Marion Roussel Pharmaceuticals), Jane Osterhaus (Glaxo Wellcome), Elenor M. Perfetto (Wyeth-Ayers Research), Andreas M. Pleil (Pharmacia g~ Upjohn), Karen L. Rascati (University of Texas-Austin), Eugene Reeder (University of South Carolina), Mark Rose (Sandoz Pharmaceuticals), Clayton R. Rowland (Pharmacia & Upjohn), Mickey C. Smith (University of Mississippi), Fran Talarowski (Zeneca Pharmaceuticals), N. Vish Viswanathan (Janssen Pharmaceuticals), and Elizabeth J. Wilson (Louisiana State University). The issue begins with an empirical investigation of group purchasing organizations (GPOs) and the ability of these organizations to foster and maintain the commitment of its members. Doucette tests the influence of trust, satisfaction with the GPO, the availability of suitable alternatives to membership in the GPO, the degree of information exchange between member and GPO, and the perceived commitment of other GPO members. Regression analysis is used to identify the influence of these variables on commitment. The study by Momson, Johnson, Barnes, Summers, and Szeinbach focuses on the use of Medicaid claims data and offers a prediction model for the total treatment cost for a Mississippi Medicaid patient. Artificial Neural Systems (ANS), a new methodology for the prediction of health care costs, are used to examine postmenopausal women who are Medicaid recipients. The results from the neural network along with traditional regression analysis are compared. Morrison et al., find that neural networks outperform traditional regressionbased models, and demonstrate the usefulness of this technique to model the cost of health care. Gould, Oakes, and Considine report results of a study profiling allergy medications with respect to symptom relief as perceived by consumers. They find that individual products may be usefully profiled in terms of the symptoms, symptom relief, and personal consumers' characteristics. Also discussed are both managerial and research implications for positioning and reformulating established products, as well as developing new products.
S.L. Szeinbach and J. H. Barnes
In the fourth article, Boerkamp, Reuijl, and HaaijerRuskamp develop the framework for their research from the service delivery literature. Specific issues deal with how the information supply services of pharmacists and their potential competitors are viewed by physicians with respect to the quality of services delivered. The sample includes 329 Dutch internists and regression analysis is used to show that technical and process dimensions significantly relate to the overall perceived quality with an information supplier. Information sources for internists varied with respect to a situation; however, subspecialized physicians and supporting medical specialists are perceived as the most important, while the hospital pharmacist is perceived as lacking in expertise in the areas of therapy choice and implementation of the therapy. Next, Kavanoor, Grewal, and Blodgett provide us with a study that examines the effects of advertisement credibility and format (comparative vs. noncomparative) on consumers' beliefs, attitudes, and purchase intentions for over-the-counter medications. Results from three experiments provide consistent support for the main effects of advertisement credibility and format. Although increased persuasion was evidenced with higher credibility advertisement and with comparative advertisements, the interaction effect was consistently not supported. The sixth article provides an assessment of value-added services as perceived by hospital pharmacy directors. Szeinbach, Barnes, and Garner use a maximum difference conjoint analytic approach to determine which services are the most important in contributing to customer loyalty. As determined from the model, pharmaceutical economics is considered the most important service followed by total quality management, strategic planning, resource management, and delegation, respectively. The research performed by Barksdale, Johnson and Suh uses social exchange theory to investigate patients' commitment to their relationship with their physician. The model is tested separately using a traditional fee-for-service subsample and a managed health care subsample. Results reveal that the patient-physician relationship maintenance process with respect to commitment is different in a traditional fee-forservice group and the managed health care group. Our appreciation is extended to the authors who made this special issue possible.
References Pharmaceutical Researchand Manufacturersof America, 1996 Industry Profile.1996.
INTRODUCTION
Special Issue on Challenges and Opportunities for the Pharmaceutical Industry in a Changing Health Care Environment Sheryl L. Szeinbach THE UNIVERSITYOF MississipPi
James H. Barnes THE UNIVERSITY OF MISSISSIPPI
he U.S. pharmaceutical industry leads the world in the discovery, development, production, and sales of ethical pharmaceuticals. Worldwide sales reported from members of the Pharmaceutical Research and Manufacturers of America (PhRMA) increased from $4.1 billion in 1965 to an estimated $96.6 billion in 1996. Unlike other industries, it takes 12 years and an average of $359 million to discover, develop, and bring to market a new drug. While this estimate appears high, it actually represents the cost of drugs that started clinical trials in the late 1970s. Prescription drugs today account for only about seven cents of every health care dollar, and the percentage of gross domestic product (GDP) spent on prescription medicines has remained stable for the past 30 years, at about one-half of one percent (Pharmaceutical Research and Manufacturers of America, 1994). Changes in the delivery of health care are having a direct influence on pharmaceutical manufactures and their ability to supply and manufacture new products. For example, managed care groups, including health maintenance organizations (HMOs), are demanding steep price discounts from pharmaceutical manufacturers. Managed care organizations will continue to play a predominant role in health senqce delivery through leveraged buying strategies and cost control mechanisms such as tormularies, generic substitution, cost-effectiveness studies, and drug use review. Currently, managed care accounts for 30% to 50% of the market; by the },ear 2000,
T
Address correspondence to Sheryl L. Szeinbach, Department of Pharmacy Administration, School of Pharmacy, The University of Mississippi, University, MS 38677. E-Mail: [email protected] or to James H. Barnes, Department of Management & Marketing, School of BusinessAdministration, The University of Mississippi, University, MS 38677. E-Mail: [email protected] Journal of Business Research 40, 181-182 (1997) © 1997 Elsevier Science Inc. All rights reserved. 655 Avenue of the Americas, New York, NY 10010
these organizations will account for approximately 90% of the market. Also by the year 2000, it is estimated that more than 70% of the prescriptions dispensed will be filled by generic drugs. As a result of competitive forces from generic drug makers and dramatic price moderations demanded by managed care organizations, about 40,000 _job reductions in the pharmaceutical industry have occurred between October 1992 and February 1996. Change in the delivery of health care is inevitable as we realize the limitations of health care resources and finances. New technologies, innovative therapies, and existing programs must demonstrate cost efficiency and value to society. Organizations have realigned entire operations to meet the demands of an evolving health care system whose final form is yet elusive. Although change can be traumatic to society, researchers also realize that new challenges provide opportunities to investigate the effect of change on health care providers and professionals. Thus, this special issue of the.lournal qfBusiness Research is dedicated to the changing health care environment and an examination of how the pharmaceutical industry, health care providers, health care professionals, and consumers are coping with change brought on by managed care. This special issue of the Journal ojBusiness Research contains seven articles pertaining to the pharmaceutical industry, managed care providers, and consumers. The production of this special issue would not be possible without the support of dedicated reviewers who gave generously of their time throughout the review process. Reviewers ,sTere selected from both the academic community and pharmaceutical industry and included Jerry Albaum (University of Oregon), Eileen Bridges (Kent State University), Lester Carlson (Clemson UniISSN 0148-2963/97/$17.00 PII S0148-2963(96)00233-0
182
J Busn Res 1997:40:181-182
versity), William R. Darden (Louisiana State University), Kelly Fish (Rhodes College), Jean Paul Gagnon (Hoechst Marion Roussel Pharmaceuticals), Betsy Gelb (University of Houston), Faye Gilbert (University of Mississippi), Dhruv Grewal (University of Miami), Charles A. Ingene (University of Washington), Jeffery Inman (University of Wisconsin-Madison), Joseph D. Jackson (Bristol-Myers Squibb), John D. Johnson (University of Mississippi), Holly L. Mason (Purdue University), Robert A. Mittelstaedt (University of Nebraska), Brian C. Ortmeier (Hoechst Marion Roussel Pharmaceuticals), Jane Osterhaus (Glaxo Wellcome), Elenor M. Perfetto (Wyeth-Ayers Research), Andreas M. Pleil (Pharmacia g~ Upjohn), Karen L. Rascati (University of Texas-Austin), Eugene Reeder (University of South Carolina), Mark Rose (Sandoz Pharmaceuticals), Clayton R. Rowland (Pharmacia & Upjohn), Mickey C. Smith (University of Mississippi), Fran Talarowski (Zeneca Pharmaceuticals), N. Vish Viswanathan (Janssen Pharmaceuticals), and Elizabeth J. Wilson (Louisiana State University). The issue begins with an empirical investigation of group purchasing organizations (GPOs) and the ability of these organizations to foster and maintain the commitment of its members. Doucette tests the influence of trust, satisfaction with the GPO, the availability of suitable alternatives to membership in the GPO, the degree of information exchange between member and GPO, and the perceived commitment of other GPO members. Regression analysis is used to identify the influence of these variables on commitment. The study by Momson, Johnson, Barnes, Summers, and Szeinbach focuses on the use of Medicaid claims data and offers a prediction model for the total treatment cost for a Mississippi Medicaid patient. Artificial Neural Systems (ANS), a new methodology for the prediction of health care costs, are used to examine postmenopausal women who are Medicaid recipients. The results from the neural network along with traditional regression analysis are compared. Morrison et al., find that neural networks outperform traditional regressionbased models, and demonstrate the usefulness of this technique to model the cost of health care. Gould, Oakes, and Considine report results of a study profiling allergy medications with respect to symptom relief as perceived by consumers. They find that individual products may be usefully profiled in terms of the symptoms, symptom relief, and personal consumers' characteristics. Also discussed are both managerial and research implications for positioning and reformulating established products, as well as developing new products.
S.L. Szeinbach and J. H. Barnes
In the fourth article, Boerkamp, Reuijl, and HaaijerRuskamp develop the framework for their research from the service delivery literature. Specific issues deal with how the information supply services of pharmacists and their potential competitors are viewed by physicians with respect to the quality of services delivered. The sample includes 329 Dutch internists and regression analysis is used to show that technical and process dimensions significantly relate to the overall perceived quality with an information supplier. Information sources for internists varied with respect to a situation; however, subspecialized physicians and supporting medical specialists are perceived as the most important, while the hospital pharmacist is perceived as lacking in expertise in the areas of therapy choice and implementation of the therapy. Next, Kavanoor, Grewal, and Blodgett provide us with a study that examines the effects of advertisement credibility and format (comparative vs. noncomparative) on consumers' beliefs, attitudes, and purchase intentions for over-the-counter medications. Results from three experiments provide consistent support for the main effects of advertisement credibility and format. Although increased persuasion was evidenced with higher credibility advertisement and with comparative advertisements, the interaction effect was consistently not supported. The sixth article provides an assessment of value-added services as perceived by hospital pharmacy directors. Szeinbach, Barnes, and Garner use a maximum difference conjoint analytic approach to determine which services are the most important in contributing to customer loyalty. As determined from the model, pharmaceutical economics is considered the most important service followed by total quality management, strategic planning, resource management, and delegation, respectively. The research performed by Barksdale, Johnson and Suh uses social exchange theory to investigate patients' commitment to their relationship with their physician. The model is tested separately using a traditional fee-for-service subsample and a managed health care subsample. Results reveal that the patient-physician relationship maintenance process with respect to commitment is different in a traditional fee-forservice group and the managed health care group. Our appreciation is extended to the authors who made this special issue possible.
References Pharmaceutical Researchand Manufacturersof America, 1996 Industry Profile.1996.