Episode 069 | August 14, 2023 | 28:36
Guest: Kristoffer Hvidsteen
Published: August 14, 2023
Duration: 28:36
Description
What is the impact of digital transformation, the growing trend of single-use products, and the importance of sustainability and decarbonization efforts in the healthcare sector? Frederik van Deurs and Kristoffer Hvidsteen address these questions and the challenges faced by commercial organizations in the pharma industry.
Full transcript
About this transcript
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What is interesting is that they have set a very specific date — 2027. If you want to be ready for that, you have to start now. If you have things you need to do in your end-to-end production and operations, now is the time.
Hello and welcome to the Sustainable Healthcare Podcast. Today I have a special guest in the studio besides my newborn son. Welcome Kristoffer. Today we talk about commercialization and challenges that commercial organizations, particularly in pharma, are facing.
What is a commercial organization? It is connecting the company with the rest of the world. A pharma company typically has headquarters in the UK or Switzerland, but to go to market they have local commercial organizations that engage with healthcare providers and payers. The commercial organization is the interlocutor between the company and the providers and buyers. They have a very local angle because healthcare systems differ country by country — insurance, national and private payers — so commercial orgs reflect that.
Many products go to market via what looks a lot like door-to-door sales with general practitioners. Many organizations have very large car fleets because the commercial organization is driving around all day visiting clinics. Digital transformation has not yet made it to these sales processes. Depends on therapeutic area, but typically nurses ride around in cars visiting healthcare providers. Lots of face-to-face interaction, feet on the ground.
Traditionally the parameters defining product success have been: effective, safe, and the price. A fourth parameter has driven a lot — single-use products gained ground because they helped healthcare providers be more productive, spend less time on cleaning.
What has changed? Sustainability requirements coming into full force. The NHS — the national healthcare system of the UK, the largest single healthcare provider in the world — has come up with very firm commitments. By 2027 they will not deal with any company that has not set clear climate reduction targets aligned with the Paris Accord. Science-based targets are one way to ensure alignment. The companies with science-based targets jumped 50% from 2021 to 2022 — once you reach plus-50% adoption, it stands out if you are a laggard. Big companies create a natural pull for smaller and medium-sized ones.
The 2027 date is super specific. If you want to be ready, you have to start now. Some of these changes — formulation, packaging — can take years in a highly regulated industry. Even changing the inner lining of packaging can take several years.
What we see is a wide disparity across markets. One client identified more than 260 different types of sustainability requirements across their business. We did a mapping in Switzerland of how many sustainability requirements appeared in that market — 600+. So both homogeneity is coming in on decarbonization, and in parallel heterogeneity from buyers and providers asking for different things. It creates a lot of uncertainty.
Example: a tender required packaging with 85%+ recycled fiber. The client was surprised — first response was that they could not meet it. After due diligence they could. But imagine the cost and agony. Next time it might be a requirement they cannot meet. Some markets may just disappear because it is too costly for you to organize production for that particular requirement.
It cuts across silos in a new way. You used to have a sustainability department on a corporate level. Now commercial offices are in a different reality. NHS asks for corporate-level commitments like science-based targets, but you are also met with product-level criteria. There is increased focus on LCAs requested per product. If you do not have one, you cannot just do it — it takes time and effort to do well. Setting boundaries for a believable LCA is incredibly complex. If you have many SKUs, doing an LCA per SKU is prohibitively expensive.
What to do? There are ways around this. Why are these requirements coming up? Because healthcare providers are looking at their Scope 3 — where there are lots of emissions — and saying “could we bring these down?” If we can choose a product with a lower footprint than another, we bring our Scope 3 down. That is the governing logic.
The key insight: how do you, as a pharma company, not just decarbonize your own footprint, but enable the healthcare provider and payer to decarbonize theirs? Powerful example: you could do an LCA for your product and reduce its footprint by 10%. Or you could do a different formulation that is more effective — instead of three injections, two — but because it has more of the effective dose, the LCA per dose is higher. On a like-for-like comparison you are losing ground, but you are not — because from the provider’s point of view, one less trip to the hospital is dominant. Travel of patients, travel of staff, use of buildings — such an important driver of carbon that in a lot of cases this would be a superior product.
You become a choreographer rather than just dancing to the beat. Take a step back: the world is bigger than just our corporate footprint or product footprint. We can contribute more to decarbonization by enabling the provider’s decarbonization.
This drives competitiveness. When a requirement like 85% recycled fiber comes up, someone planted that seed. Is recycled fiber important? Yes. Is it material? Not sure. When you look at the numbers, one less trip to the hospital is more important. Forward-looking companies use this proactively to change the scales of competitiveness — presenting providers with even better ideas. That is what the game is about now. The most forward-looking companies look at the whole situation — competitors, providers, payers — and find the strategic response that lowers cost and increases competitiveness.
We love working with companies that want to weaponize decarbonization to win the market — because if they move the scale forward dramatically, competitors have to follow, and we all win because now it is decarbonized.
Summary: Commercial organizations are fragmented outside the headquarters geography. They respond to many local requirements — sometimes random, sometimes central like the NHS 2027 Paris alignment. The key question is how to turn that into commercial advantage by looking at the entire care pathway. Thanks Kristoffer. Thank you for listening — please share the podcast.