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    Columns

    Challenges for Nutritional Products in Healthcare Facilities

    Marketing medical products to institutions is much different than targeting retailers or consumers.

    Challenges for Nutritional  Products in Healthcare Facilities
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    Gregory Stephens, Windrose Partners11.01.16
    Demand for nutritional products in healthcare facilities continues to grow rapidly. A key driver has been the increasing quality of clinical and cost-benefit research on nutritional interventions. More companies are also acquiring the know-how to penetrate this unique segment.

    Marketing to healthcare institutions differs quite significantly from non-institutional markets (e.g., natural products, FDMC, direct-to-consumer, etc.). Still, there are many similarities to the rapidly evolving health practitioner channel, though the decision-making process remains unique.

    Traditionally, healthcare institutions consist of hospitals, skilled nursing facilities and home care agencies. Each has its own unique nuances regarding use of nutritional products. The total market for medical nutritional products in healthcare institutions exceeds $1.3 billion. By segment, the market is about 20% hospitals, and the remaining 80% is about equally divided by skilled nursing facilities and home care agencies. Though the hospital market is smaller, the downstream retail sales for patients after discharge can be significant.

    The use of dietary supplements in healthcare facilities is not new; however, the products administered have typically been multivitamins and minerals used prophylactically. The early clinical nutrition products (e.g., Boost/Sustical and Ensure) were formulated to meet the needs of patients unable to consume normal food, often due to an illness. With advancements in nutritional science we have seen the development of many “disease specific” product formulations—regulated by the FDA as Medical Foods—like Oxepa, which is marketed as “Therapeutic Nutrition for Modulating Inflammation.” Disease-specific or specialty formulas account for about 40-50% of institutional clinical nutrition sales.

    The needs of patients and residents differ among the three-primary institutional settings. Hospitals tend to value disease management (therapeutic) products where the benefits are realized in a relatively short period. The average length of stay (ALOS) in hospitals is less than 5 days. Nursing homes and home care agencies, on the other hand, may place more value on preventive health benefits. The ALOS in skilled nursing facilities is approximately 2 years.

    Unique Attributes of Healthcare Institutions
    I discussed some of the challenges and opportunities of penetrating this segment with Keith Hine, MS, RD, healthcare business director for Orgain. He has a diverse background in sales and marketing of nutritionals in healthcare settings.

    Business Insights (BI): What are some of the unique aspects of nutritional intervention in hospitals, nursing homes and other healthcare settings, like home care?

    Keith Hine (KH): Typically within hospitals and nursing homes the services provided to patients is coordinated through the Food and Nutrition Department, which is often under the direct or co-leadership of a registered dietitian (RD). Services such as medical nutritional therapy from an RD and meals and/or tube feedings (patients that are unable to consume food orally) are typically provided as part of standard room charges.

    As it relates to physicians’ offices where services are provided for healthcare facilities, nutritional services are often referred to a consultant RD in the community or to an outpatient RD at a local health system. Large physician practices or specialty groups may have an RD on staff. Services provided are generally counseling on diet and nutrition and may be billed to insurance or paid “out of pocket” by patients. Medical foods or other nutritionals recommended or prescribed are most often paid for by patients.

    BI: As compared to the dietary supplement industry, which is highly fragmented, is it true that the institutional market is dominated by a few large multinational companies?

    KH: The two-major players that have the most comprehensive adult product portfolios for oral supplements and tube feedings are Abbott Nutrition and Nestlé Health Science. There are several smaller companies with limited product offerings.

    BI: How do smaller companies compete against multi-million-dollar marketing budgets?

    KH: Generally speaking, in hospitals nutritional manufacturers of any size try to get their products on a formulary (approved products that can be administered to patients) of the targeted hospital. Products typically must have ample clinical support or evidence as dietitians and physicians will closely evaluate any product before it’s approved. One benefit to nutritional manufacturers of having products on formulary is that this translates into product exposure to patients, which can yield product loyalty and continued use upon discharge.

    With this in mind, a common approach of the large nutrition companies is heavily discounting products for hospital purchases. They do this to improve the opportunity of being selected for formulary by the decision makers. If products are added to formulary the brand may gain patient loyalty, so upon discharge they will purchase the product at retail prices.

    It should be noted that these down-stream retail sales can be a double-edged sword. Exposure to nutritional products in a healthcare institution may drive down-stream retail sales; however, it may also adversely affect hospital pricing. Buyers at healthcare institutions are aware of this benefit to the marketer of products, thus they require competitive bidding, which drives down product margins. Major suppliers of standard meal replacement beverages may sell products to hospitals at or near cost just to capture the post-discharge retail sales. Thus, a company considering introducing its product in hospitals should ensure products are well differentiated from the competition.

    BI: What other unique issues come up when introducing dietary supplements and other nutritional products in healthcare institutions?

    KH: Most healthcare institutions do not negotiate pricing with manufacturers directly for their nutritionals but instead leverage pre-approved pricing contracts they can access by being a member of a Group Purchasing Organization (GPO). These GPOs often have strong buying power as they represent many facilities and as such can negotiate very good prices with manufacturers on behalf of their members. Typical GPOs include Premier, Novation and MedAssets, to name a few.

    Prelaunch Planning is Crucial
    There are more than 5,700 hospitals in the U.S. and more than 16,000 skilled nursing facilities. The number of clinical departments, purchase decision makers and influencers makes marketing a daunting task. Trish Cadwallader, former director of institutional marketing for Abbott Nutrition, offers some advice to companies interested in promoting their products to healthcare facilities...

    First, answer some basic marketing questions. What do you know about your brand? For structure, you may want to start with a simple SWOT analysis. Identify what you need to learn about your product and where the gaps are. This may include:
    • Clarify the 4 Ps of marketing: Price, Product, Promotion and Place.
    • What is your brand’s promise (benefits and identity)?
    • Have you conducted any recent marketing research with healthcare professionals or consumers?
    • What insights can your advertising agency provide?
    • Review the who, what, when, where and how of your brand.
    From this assessment, you may identify marketing research needs (qualitative/quantitative) that are critical to fully understanding your objectives. Then move on to developing strategy and tactic concepts. To accomplish this task, analyze the institutional segment relevant to your product(s).
    • Determine the targeted patient populations’ greatest need. 
    • Which healthcare professionals (HCPs) should be targeted, how and where?
    • Who are potential HCP recommenders?
    • Who are potential HCP influencers?
    • How does one reach the targeted HCP?
    • What is the potential for third-party reimbursement for your product(s)?
    The next step in the process may include concept testing. Once you have narrowed down the unmet needs to be addressed (e.g., providing nutritional management for C. difficile infections in nursing homes), you can begin testing the concept. At this point you may conduct qualitative and quantitative research with targeted HCPs, administrators and other decision makers.

    With these additional insights one would proceed to refining strategies and tactics. The next steps could well be a pre-launch test market followed by a broader launch plan. A successful launch includes ongoing monitoring of launch activities and results as well as investigating further market expansion opportunities in the clinical nutrition segment.

    Clearly, the market for nutritional products in healthcare institutions is large and broadening. Traditional meal replacement beverages and supplements like omega-3s, probiotics and peptides are making inroads, and more products will follow as clinical documentation of efficacy increases. A company interested in investigating distribution of nutritionals into healthcare facilities would be wise to seek counseling from a qualified consultant or other persons who have experience and have successfully launched institutional products. Institutional distribution can be rewarding. In addition to financial benefits, providing nutritional support to the management of a range of serious diseases is something patients and healthcare professionals value.


    Gregory Stephens
    Windrose Partners

    Greg Stephens is president of Windrose Partners, a company serving clients in the the dietary supplement, functional food and natural product industries. Formerly vice president of strategic consulting with The Natural Marketing Institute (NMI) and Vice President of Sales and Marketing for Nurture, Inc (OatVantage), he has 25 years of specialized expertise in the nutritional and pharmaceutical industries. His prior experience includes a progressive series of senior management positions with Abbott Nutrition (Ross Products Division of Abbott Laboratories), including development of global nutrition strategies for disease-specific growth platforms and business development for Abbott’s medical foods portfolio. He can be reached at 267-432-2696; E-mail: gregstephens@windrosepartners.com.
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