IDNs — So What?

John Marchica, CEO, Darwin Research Group

Since the signing of Affordable Care Act nearly 15 years ago, the U.S. health care system has been in continuous state of change — from the myriad ways in which care is delivered to how care is paid for. In that time, the pharmaceutical industry has faced considerable challenges to its traditional sales and marketing models — challenges such as the rise of telemedicine, the introduction of Amazon Pharmacy, CVS’ acquisition of Aetna, the founding of CivicaRx, and UnitedHealth Group’s burgeoning power in primary care and pharmacy benefits management.

Yet it is the integrated health system, or integrated delivery network, that may present the toughest challenge. Integrated Delivery Network (IDNs) are like holding companies for care delivery; all offer some combination of sites of care (hospitals, physician groups, home-based care, etc.) and some offer an insurance product for employers, as well. While some IDNs have a limited geographical footprint, others, like Ascension and CommonSpirit, have a presence in dozens of states. IDNs are complex institutions with varying degrees of integration, and the shift to value-based care, where payment is focused on outcomes rather than procedures, has incentivized them to control all aspects of care. Although the goal may be to minimize variations in care, there are consequences — such as severely restricting (and in some cases forbidding) physician autonomy.

Given these widespread changes, the traditional “reach and frequency” model, where pharmaceutical representatives call on individual physicians, is in danger of becoming as obsolete as the door-to-door salesmen of a bygone era. The conventional sales approach can still be highly effective in places where physicians are still the principal decision makers, unfettered by protocols, formularies, and other restrictions. But much like independent physicians, traditional drug reps are becoming increasingly rare.

Various analyses and surveys demonstrate a remarkable increase in the proportion of physicians employed by IDNs and other corporate entities. One of the most conservative, an analysis by the American Medical Association, found the percentage of employed physicians increased from 41.8% to 49.7% in the 10 years between 2012 and 2022.¹ Another one, by Avelere, found an increase from 62.2% to 73.9% between 2019 and 2022.² For several years now, large health systems (and payers) have been acquiring physician groups with hundreds of primary care physicians and specialists.

By employing physicians and owning physician groups, IDNs have a stable revenue and referral stream they can rely on — and they have more control over how patients are treated. Employed physicians have far less autonomy and authority in the decision-making process, as IDNs use financial sticks and carrots to ensure that treatment and prescribing decisions are centrally controlled.

New payment models, including ACOs, bundled payments, and other value-based agreements, also foster centralized decision making and restrict physicians’ decision-making autonomy. Further, clinical decision making in the IDN setting is more sophisticated than in the private physician’s office, often driven not only by formularies but also by protocols, order sets, and other tools aided by technologies that independent physicians usually cannot afford to deploy.

Add to this the new decision makers commonly found in today’s IDNs — such as Chief Patient Experience Officers, Chief Quality Officers, and Chief Population Health Officers, all of whom can influence prescribing behavior — and it is even clearer why the traditional sales approach is no longer as effective as it once was.

Pharma has an invaluable opportunity to engage with these newer clinical executives, but a different kind of representation is necessary: a highly strategic representation that can lead higher-level conversations, including “above-brand” discussions focused on patient types and patient journeys (instead of product features and benefits), and one that can manage the variety of relationships required to fully engage with the customer.

John Marchica, CEO, Darwin Research Group

References

1. https://www.ama-assn.org/press-center/press-releases/ama-examines-decade-change-physician-practice-ownership-and Retrieved 8.17.24
2. https://www.physiciansadvocacyinstitute.org/Portals/0/assets/docs/PAI-Research/PAI%20Avalere%20Physician%20Employment%20Trends%20Study%202019-21%20Final.pdf Retrieved 8.17.24