The New Age of IDNs Six Reasons to Sharpen Your Strategy

Many pharmaceutical companies struggle

to figure out the right level of investment in

creating and executing an IDN strategy.

If your organization has struggled to understand when and how much to

invest in integrated delivery network (IDN) account management, you are

not alone. IDNs, also called integrated health systems, have been

discussed for decades, but until recently have not been a strong enough

force to meaningfully impact brand market share. Some manufacturers

formed account teams too early and subsequently disassembled these

teams, only to build them again in the past year or two. Some

manufacturers are still watching and waiting, wondering if the time has

come to form a dedicated IDN account team; others are worried that they

have fallen behind.

This white paper pulls together insights to answer the question “Have IDNs reached a tipping

point?” and demonstrates why IDNs have in fact grown in importance and now require greater

attention from manufacturers. The insights are based on secondary data as well as a year of in-

depth market research conducted by Zitter Health Insights in support of our suite of IDN

products and services. Our primary market research has encompassed the following

stakeholders:

In-depth interviews with executives from more than 20 pharmaceutical manufacturers that

are in various phases of forming IDN account management strategies

In-depth interviews with more than 30 IDN executives responsible for pharmacy, medical,

population health, formulary, clinical pathway, and contracting initiatives

Quantitative real-time online survey data on more than 350 pharma-IDN meetings that

have taken place in the past nine months

This white paper answers the question “Are we falling

behind with our IDN strategy?”

Contents – Six Reasons to Sharpen Your IDN Strategy

1. Rapidly increasing reach of IDNs

2. Rising power over payers and brand share

3. Rapid advancement in clinical integration

4. Emerging core of heavily detailed IDNs

5. Differing needs and interests compared to payers

6. Room for improved pharma-IDN interactions

Conclusion: What it all means for your brand

1. Rapidly Increasing Reach of IDNs

IDNs are rapidly acquiring control of large numbers of patients in concentrated geographic areas.

The growth of Sutter Health in Northern California serves as an example of how quickly

integrated delivery networks can expand to dominate a concentrated geographic region.

The system has almost quadrupled its revenues from $3.5 billion in 20001 to $12 billion in

20162, and is approaching the size of the long-established Kaiser Permanente system in

Northern California. Sutter Health owned 24 acute care hospitals in 20162 with more than 3

million active patients3 compared to Kaiser’s 21 hospitals and 4.1 million members4 in Northern

California. Sutter Health has been ramping up its integration while continuing its expansion,

launching a health plan in 2014 and completing a system-wide electronic health record

implementation in 2015. These two IDNs provide care for more than 7 million of the

approximately 15 million people who live in Northern California -- close to half of all Northern

California patients.

A key driver allowing IDNs such as Sutter Health to rapidly gain control of substantial

patient populations in concentrated regions is the combination of existing local systems

through mergers and acquisitions. Looking across the United States, there were 561 hospital

mergers and acquisitions between 2011 and 2015. Two-thirds of all US hospitals are now part

of a system.5

1 http://www.sutterhealth.org/about/news/news_2000financials.html 2 http://www.sutterhealth.org/about/news/news_facts.html 3 http://annualreport2015.sutterhealth.org/ 4 https://share.kaiserpermanente.org/article/northern-california-fast-facts 5 http://www.aha.org/research/rc/stat-studies/fast-facts

25422626

27752921

31003198

2000 2003 2006 2009 2012 2015

Number of Hospitals Part of a Health System (2000-2015)

Facts at a glance

53,000 employees

24 acute care hospitals

3 million active patients

Facts at a glance

75,000 employees

21 acute care hospitals

4.1 million members

66% of hospitals

Source: American Hospital Association

Northern

California

2. Rising Power over Payers and Brand Share

Once an IDN controls a large number of medical facilities in a geographic region, it has leverage over payers.

Payers have long had the upper hand in negotiating reimbursement rates and drug

access due to their control over large groups of patients. For example, an IDN with 50% of

patients covered by Aetna would feel a substantial negative impact if excluded from Aetna’s

provider network. This dynamic limits an IDN’s negotiating power to lobby payers for higher

reimbursement or to dictate drug formularies.

IDNs that have expanded to control a large number of patients in a concentrated region

have turned the table on payers. When an IDN is prevalent in a geographic area, they own a

high percentage of hospitals and medical clinics, making it less convenient for patients to find

care outside of their system. Now payers are reluctant to exclude a large IDN from their health

plan as this leads to angry patients who defect to other insurance providers. As a result of this

changing dynamic, IDNs now have a stronger voice when negotiating with payers about

reimbursement and formulary design.

In addition to exerting pressure on payers, IDNs also have the power to influence

physician prescribing. These IDNs employ large numbers of physicians and are able to exert

control over prescribing patterns via financial incentives, system-wide formularies, and clinical

pathways programmed into electronic health records (EHRs). For example, an IDN may use

their EHR technology to limit the medication choices displayed to their physicians at the point of

prescribing to a narrower set of options than payers would employ. The IDN can also use

clinical pathways to add its own utilization hurdles to prescribing.

80%63%

Clinical pathways System-wide formulary

Percent of IDNs Detailed by Pharmathat Use Means to Influence Physician Prescribing

Source: Zitter Health Insights survey of 56 IDNs detailed by pharma

Geisinger and Aetna 5 Year Deal

Aetna is very excited to have reached this agreement with Geisinger, which adds approximately 1,100 physicians to the Aetna network, and gives Aetna direct contracts with providers in all 67 Pennsylvania counties.

Source: Aetna News Release

3. Rapid Advancement in Clinical Integration

Many IDNs now have technology that allows tracking and coordination of patient care across conditions, providers, settings, and time.

Integrated delivery networks are motivated to achieve clinical integration to gain needed visibility

into system-wide cost drivers, as well as to better predict and control these costs. Without

coordination across multiple settings, patients are more likely to receive duplicative diagnostic

tests and conflicting care plans. A few benefits of clinical integration are highlighted below.

Less prescribing variability, which increases the predictability of the cost of care.

This is important to all IDNs, but especially those bearing financial risk

Decrease in drug spending via increased use of generics and IDN-preferred brands

Ability to benchmark care outcomes and physician performance

Clinical integration also enables IDNs to more successfully take on and manage risk, which

leads to even more aggressive scrutinizing and managing of drug costs. In fact, 20-30% of

highly integrated IDNs are expected to engage in direct contracts with pharmaceutical

manufacturers in 2017, bypassing GPOs6 as a strategy for controlling drug costs. The

following are some comments from IDN decision makers on this topic.

In 2014, there were 104 IDNs with health plans, with 61%

operating in multiple lines of business. These plans were available

in 43 states, with a total enrollment of 15.3 million in 2014, up from

12.4 million in 2010.7 Some of the most recent IDN health plan

launches are collaborations between payers and IDNs. While the

overall number of lives covered by IDNs remains smaller than

traditional payers, an IDN with a health plan can be a major player

in a particular region.

6 http://www.healthstrategies.com/blog/idns-and-direct-contracting 7 http://healthcare.mckinsey.com/provider-led-health-plans-market-evolution

*Source: Zitter Health Insights survey of 56 IDNs detailed by pharma

Percent of IDNs* Achieving Clinical Integration Steps

93% 89% 86% 56% 30%

Moving towards

or have system-

wide formulary

Performance and

outcomes metrics

used for at least top

DRGs

Moderate to high

level of centralized

decision-making

Offer a

health plan

Participate in

capitated

“shared savings”

contracts

“As a large system, we have

the leverage to direct

contract with pharma to

decrease our drug spending

on brands.”

“We are trying to stay away from

biosimilars if cost reduction can be

obtained from the pharma industry

for brands… Biosimilars lag behind

in patient assistance programs.”

“We are trying to ensure constant

pricing for at least 2-3 years... It

is a commitment from our system

to use their product almost

exclusively.”

4. Emerging Core of Heavily Detailed IDNs

A core group of IDNs with some specific features in common are being targeted and detailed by multiple pharmaceutical manufacturers.

Zitter Health Insights has recruited a premier panel of IDN decision makers

who are called on by pharmaceutical manufacturers. Information about

more than 350 pharma-IDN meetings submitted by these IDN decision

makers over several months reveals just how active IDN detailing has

become. Meetings were reported for all of the top 25 pharmaceutical

manufacturers and many others – 56 companies in total.8

We have identified a core group of 75 IDNs that regularly meet with a

large number of major pharmaceutical manufacturers. The six IDNs

listed below are those that are detailed by the highest number of

manufacturers. All of these IDNs have system-wide EHRs, and five of the

six offer health plans. This signals a high level of clinical integration and

appetite for risk-bearing – indicators that these organizations have the tools

to control costs and drug utilization, and feel successful doing so.

Six IDNs Included on Most IDN Call Lists

IDN Name listed in alphabetical order

Health Plan Single EHR

system

System-wide formulary

Revenue (approx.)

Employed MDs

Advocate Health Care Downers Grove, IL

BlueCare Direct Collaboration with Blue Cross launched 2015

Cerner

$5.6 B 1,350

Banner Health Phoenix, AZ

Banner | Aetna Collaboration with

Aetna launched 2016

Cerner

$7.6 B 3,000

Northwell Health9 New Hyde Park, NY

CareConnect Launched 2013

Allscripts

$9.5 B 2,750

Partners HealthCare Boston, MA

None Epic

Data NA $12.5 B Data NA

Sutter Health Sacramento, CA

Sutter Health Pus Launched 2014

Epic Outpatient

only

$11.8 B 5,100

University of Pittsburgh Medical Center (UPMC) Pittsburgh, PA

UPMC Insurance Division

Owned by UPMC (established 1997)

Epic

$13.0 B 3,600

8 Zitter Health Insights IDN Message Monitor 9 Used to be NorthShore Long Island Jewish

Source: Data on file at Zitter Health Insights

Core group of

75 IDNs that are

heavily

detailed

5. Differing Needs and Interests Compared to Payers

All IDNs are interested in ways to reduce cost while providing high quality care, but each is unique due to geography and other factors.

The strategies used to call on payers are not directly applicable to calling on IDNs. A hallmark

difference between IDNs and payers is that IDNs have a fairly fixed patient population,

whereas payers have high annual turnover in their insured patient base.

Approximately 20-30% of a payer’s insured patient base will switch to another payer

annually.10 This makes payers more interested in short term savings and less so in

population health. If a payer covers an expensive medication that improves outcomes in

two years, the payer may have footed the bill while a different payer reaps the reward.

In contrast, IDNs serve a particular geographic area. They have a stable patient

population because domestic migration rates are typically only about 1%.11 This means

IDNs care about population health, especially as IDNs take on risk for the patients

they serve. The healthier their patients, the lower the total cost of care.

Unlike payers, every IDN is unique. Each was formed through

a different process of mergers and acquisitions, which leads to

idiosyncratic challenges surrounding information

technology and the path to clinical integration. Also, each

serves a specific geographic region that has its own

population characteristics. Therefore, an IDN based in

Florida with an elderly patient population may be much more

concerned about COPD than an IDN based in Mississippi that

faces one of the nation’s highest rates of diabetes. Additionally,

if one IDN has a system-wide EHR and formulary and another

is still working towards this level of integration, these two IDNs

will have different capabilities in the types of solutions or

programs they can implement and in the way they make

decisions (system-wide vs institution level).

Most importantly, IDN decision makers are seeking partnerships with pharmaceutical

manufacturers that understand and develop custom solutions for an IDN’s unique needs rather

than transactional relationships. The Zitter Health Insights’ IDN decision maker panel has

shared a variety of partnership stories, indicating a high level of ongoing activity.

Providing an outcomes specialist to support clinical pathways development

Developing purchasing contracts outside GPOs

Adding hyperlinks to copay assistance into EHRs

Supporting inpatient-outpatient transitions and coordinated care management

Providing closer outpatient monitoring to prevent re-hospitalizations

Developing drug agnostic educational programs for patients and staff

Offering pharmacy inventory management support

Delivering provider education on barriers to achieving quality metrics

10 Community Tracking Study, Robert Woods Johnson Foundation 11 http://www.businessinsider.com/census-domestic-migration-map-2014-3

“A successful relationship

would entail data sharing

to foster appropriate

utilization and excellent

outcomes within our

patient population. Our

main focus is value and

understanding what

outcome our patients are

getting for the incurred

cost.”

IDN Decision Maker

Examples

of ongoing

pharma-IDN

partnerships

6. Room for Improved Pharma-IDN Interactions

IDN decision makers offer a list of critical success factors for which pharmaceutical manufacturers need to improve performance.

Critical Success Factor #1: Understand the IDN you are meeting with

IDN decision makers are frustrated when pharmaceutical manufacturers don’t understand their

organization or needs. This seems basic, but is a common misstep. Less than half of pharma-

IDN meetings include a needs discussion.12 The following are actions to consider:

Know how the IDN is organized, who the key players are, and how decisions are made;

do not ask these questions during meetings

Look up HEDIS and STAR scores; bring ideas to help an IDN with low score areas

Provide market research data on an IDN’s geographic area showing an unmet need

Know an IDN’s priorities through unmet needs discussions and align with those priorities

Know which IDNs are willing to share their population health or other data with you

Understand the timelines required to partner with an IDN and plan accordingly; some

agreements require multiple levels of review that may take months

12 Data from 388 pharma-IDN meetings captured in Zitter Health Insights IDN Message Monitor

“We hope they have done their

homework and know where we

do well and where we don’t do

well. They come to us saying,

‘We see that you are not doing

very well in breast cancer

screening. Would you like to

partner with us to develop some

programs that would help?’”

“Meetings end quickly if the manufacturer

has not done their homework. We will stop

after 15 minutes, and say ‘Let’s reschedule

when you understand what we need.’”

“I tell the pharmaceutical

manufacturers – why are you paying

Quintiles to aggregate my six month

old data? I will give it to you.”

“Information about how our IDN

is organized is readily available.

I don’t want to waste 15-20

minutes discussing how many

hospitals and clinics we have.”

“Many manufacturers don’t

understand how long it takes to

partner. We have so many levels of

approval (legal, IT, security). In a

busy system there are many

projects going on, so it takes more

time than manufacturers expect. It

can take 4-6 months.”

Comments from IDN Decision Makers

6. Room for Improved Pharma-IDN Interactions, continued

Critical Success Factor #2: Be a true partner – bring ideas that offer a win-win

Successful partnerships involve ideas where both the IDN and the pharmaceutical manufacturer

have something to gain. An approach that is focused purely on selling is not highly valued by

IDNs. On the other hand, IDN decision makers recognize that if there isn’t enough gain for the

manufacturer, a partnership may fail due to lack of consistent support or priority from the

manufacturer. The following are actions to consider:

Avoid approaching IDNs from a purely sales perspective

Be able to clearly articulate the value to the IDN of your information or proposals

Don’t be afraid to articulate what the win is for the manufacturer

Think about resources a manufacturer can offer that an IDN would benefit from, such as

market research capabilities, data analytics, message testing, etc.

“It has to be a

partnership. Not just

selling us stuff, but

truly being a partner in

how to leverage each

other’s resources for it

to be a win-win.”

“For a successful

partnership, the

interests of both

parties must be met.”

“Successful partnerships happen

when manufacturers listen to our

goals and find unique ways to align

with us. We are able to determine

success by evaluating whether or

not both the manufacturer and the

health system got what they needed

from the agreement.”

“It is difficult when manufacturers

come in without information about

what they can do for us. We have a

lot of initiatives we could use help

with but we don’t know what

capabilities that company can offer.”

“They partnered with us and together we worked on a program

where they did market research in our state (to identify barriers to

a screening test)… Then they helped us craft messages around

those barriers and they developed materials that we can print and

distribute… No money exchanged hands. We worked together…

It is a very compelling way of developing a program vs. them

developing the program behind their walls and bringing it to us.”

Comments from IDN Decision Makers

6. Room for Improved Pharma-IDN Interactions, continued

Critical Success Factor #3: Focus on above-the-brand partnerships

Partnerships at the above-brand level are more likely to be perceived as true partnerships

because the manufacturer is working with the IDN to benefit patients rather than to sell a

medication. IDN decision makers recognize that pharmaceutical manufacturers will also see

some benefits from these types of relationships downstream, such as a higher fill rate for

prescriptions written, and greater adherence to therapy. For many IDNs, there are certain types

of information or support that must be above-the-brand, such as educational materials. Despite

this strong preference for above-brand discussions, over 90% of pharma-IDN meetings

include brand-specific discussion, indicating that manufacturers do not understand the

types of conversations IDN decision makers consider most productive.13

Critical Success Factor #4: Create clear communication channels

IDN decision makers experience frustration when the individuals involved in IDN-pharma

discussions change from meeting to meeting, or when they cannot figure out whom to reach out

to for answers or have to wait an inordinately long time for responses. The following are actions

to consider:

Provide a single point of contact who has knowledge and authority to answer questions

Be sensitive to time constraints; utilize phone vs. in person meetings appropriately

Ensure sustained, honest, and clear communication

Provide prompt responses to inquiries

Once an initiative has been started, follow it through to completion

13 Data from 388 pharma-IDN meetings captured in Zitter Health Insights IDN Message Monitor

“We like that the

manufacturer came in with

non-branded materials,

saying let’s work together

to create a program for

your underserved diabetes

patients. They really

haven’t even been talking

about their drugs.”

“It cannot be

branded with

anything from the

pharmaceutical

company if it is an

educational tool.”

“We worked on a mutually beneficial

project. It was unbranded and

brought forward by the company.

Since the idea did not include

branding, the thought was the

company was really looking to impact

patient care and not sell product,

which really allowed the idea to gain

more traction.”

“Another critical factor

regarding a

relationship is how

prompt the company

is when responding to

inquiries.”

“I would have preferred

if the MSL had

answered the question

rather than passing it off

to a faceless person

somewhere else.”

“We all struggle with 6 or 7

different people from a

pharmaceutical

manufacturer contacting

us and then we don’t know

who our main contact is.”

Comments

from IDN

Decision

Makers

Comments

from IDN

Decision

Makers

What Does This Mean for Your Brand?

The level of IDN detailing taking place and large number of IDN-pharma partnerships indicate that IDN influence has reached a tipping point.

Our data indicate that a core group of IDNs have

reached a tipping point in their ability to influence

brand market share and wrestle control away from

payers. IDN influence is only going to grow in the years

to come as more IDNs complete their clinical integration

processes.

If your company is not in the trenches now,

learning how to work with IDNs, you are falling

behind. The manufacturers who are forming

partnerships, learning the intricacies of how these

systems operate, and building trust are going to

have a competitive advantage.

IDN decision makers are ready and eager to work with pharmaceutical manufacturers on

projects that are mutually beneficial and have high value impact, with a shared end goal of

better serving patients. Zitter Health Insights has the experts and tools available to work

with you to sharpen your IDN strategy. Contact your Zitter Health Insights representative or

Dr. Sarah Foss (sfoss@zitter.com) for more information about any of the following:

Launched in 2017

IDN Rapid Response – Answers to your IDN business questions in as little as 10 business days

IDN Message Monitor – Real-time monitoring of pharma interactions – both yours and competitors

IDN Qualitative Insights – Three strategic reports per year each based on 20 IDIs on hot topics

Coming in 2018

IDN Clinical Pathways Navigator – Tracking how clinical pathways are impacting your brand

IDN Access Tracking Tool – Tracking how IDNs control access to your brand

“I am eager to begin building a healthcare ecosystem

where we can work collaboratively to serve the greater

good of our patients and optimize health outcomes.”

If you don’t

have a solid

IDN strategy

and plan, you

are falling

behind.

IDN Decision Maker

About Zitter Health Insights

Zitter Health Insights has offices in New Jersey and San Francisco and serves virtually all major

pharmaceutical companies in the US, as well as prominent specialty pharmacies and managed

care organizations. Over the years, access to medication has become even more complex, with

many new influencers emerging, including IDNs, specialty pharmacies, and patient support

programs. Zitter Health Insights has kept pace by introducing first-in-class products to help

customers understand each of these influencers and how these influencers fit together to impact

patient access to medications and ultimately market share.

Zitter Health Insights is committed to remaining a leader in all areas related to pharmaceutical

access through our knowledgeable staff, proprietary technology, timely and accurate data, and

commitment to client service.

About the White Paper Authors

This white paper was created by the Zitter Health Insights IDN team. Zitter Health Insights is

your go-to resource for IDN account strategy research and information. We have created a

premier panel of IDN executives and are co-creating a suite of IDN products and services

alongside our customers. Contact your Zitter Health Insights representative or Dr. Sarah Foss

(sfoss@zitter.com) for more information.

Join the Zitter Health Insights Innovation Community

Interested in co-creating products that address your unmet payer or IDN access needs?

Contact Pamela Morris (pmorris@zitter.com), Senior Director of Innovation, to participate in our

online customer communities or to be a part of our in-person or telephone voice-of-customer

initiatives. Honoraria are provided.

©2017 Zitter Health Insights