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Finding A Cure For Heathcare Pain
By: Cassandra Johnson
Issue: 2010jun
While the new law has cut deeply into healthcare market sales, it’s time to let the healing begin.
Three years ago the healthcare market perched fourth atop a dizzying list of 31 top markets for promotional products, according to a PPAI research study. A year later it was teetering toward a crash following the July 2008 decision by the Pharmaceutical Research and Manufacturers of America (PhRMA), a trade association for the pharmaceutical industry, to modify its voluntary member code on interactions with healthcare professionals effective January 2009.
The volunteer code discouraged members from offering all non-educational promotional products. It was the first step that limited access to this highly profitable market—and other actions followed.
On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law. It calls for manufacturers of a covered drug, device, biological or medical supply to report items given to covered recipients. The law defines these recipients as physicians and teaching hospitals and covers the transfer of anything of value with three exceptions:
1. A transfer of anything the value of which is less than $10, unless the aggregate amount transferred to, requested by or designated on behalf of the covered recipient by the applicable manufacturer during the calendar year exceeds $100
2. Educational materials that directly benefit patients or are intended for patient use
3. The term “payment or other transfer of value” does not include a transfer of anything of value that is made indirectly to a covered recipient through a third party in connection with an activity or service in the case where the applicable manufacturer is unaware of the identity of the covered recipient (see box for details)
Before 2009, the role of promotional products in healthcare marketing, which comprises pharmaceutical companies, medical equipment manufacturers, physician groups, hospitals, clinics, urgent care and workplace compensation, residential care and more, was ripe with opportunities.
Not only did promotional products salespeople love the healthcare industry—the healthcare industry loved promotional products. Says one pharmaceutical representative who’s worked for 18 years for one of the largest drug companies in the U.S., “We used promotional products to really keep our name in front of the physician in any way we could, whether it was a pen, a notepad or a calendar. From the paper on the exam tables to paper clips, it was a constant reminder to them, especially when a new product was launched. It was definitely a daily practice to use promotional products. It helped us with access to everyone, from the front entrance to the nurses to the physicians.”
The company put a halt to all promotional products marketing as of December 31, 2009.
While the bad news is that the PPACA is another big piece of legislation that has had a major effect on sales of promotional products, the good news is that the new law limits sales in only two areas: teaching hospitals and physicians (including all doctors of medicine and osteopathy, dentists and oral surgeons, podiatrists, optometrists and chiropractors). Businesses that market directly to consumers and those marketing to segments of the industry other than physicians and teaching hospitals are not included under the law.
U.S. Healthworks, a national provider of occupational marketing, has long been a heavy user of promotional products to support business-to-business and business-to-consumer marketing. Because the markets it serves are not included in the PPACA or under the PhRMA code, it continues to use promotional products to market to its audiences.
“We use mugs, pens, paper weights, pencil holders, magnets and squeeze toys in our daily sales practices to show that we are there to help our sales team,” says Diane Yu, vice president of sales and marketing for U.S. Healthworks. “For internal use, we might choose apparel, plaques and awards. We also use items to give away at health fairs.”
In addition to legislative pressures, the industry has also faced consolidation, economic pressures and product safety issues.
“Hospitals are under the same scrutiny as the general population,” says Eric Ekstrand, MAS, senior vice president of Chagrin Falls, Ohio-based distributor The Mort C. McClennan Company (UPIC: MCMCC). “They are really focusing on their bottom line. They have cut back on their marketing and advertising campaigns.”
Ekstrand has been selling to hospitals for decades, and attributes hospitals, physicians’ offices and a medical equipment manufacturer for 60 to 70 percent of his business. While his clients—hospitals—are not directly affected by PPACA, he’s feeling the effects in other ways, such as through client consolidation.
Isa Cocallas, owner of Kihei, Hawaii-based distributor 3Koi (UPIC: 3KOI), provides a unique perspective to this shift in tides, as she worked for many years for a pharmaceutical company before launching 3Koi. Her former associates are now many of her clients, so she is in a position to feel the direct affects of this legislation.
“We saw a lot of cuts in internal spending and external distribution,” says Cocallas.
“With the economic changes, these companies are always buying each other, springing up new companies and splitting off. This caused layoffs and budget cuts. Even companies that were doing well and didn’t have layoffs seemed to avoid being in the limelight of the big spender.”
Selling To Today’s Healthcare Market
“Gone are the days where you sit back and get a $100,000 pen order,” says Paula Gossett, MAS, senior promotional consultant for Atlanta, Georgia-based distributor Brown & Bigelow (UPIC: BB1896).
A 25-year veteran of the promotional products industry, Gossett sells primarily to urgent care occupational medical centers, and some other businesses. Even though her primary clients are not affected by PPACA, her products were under the scrutiny of the PhRMA code, which contributed to a 25-percent loss of business. As a safety net, she began working with human resources departments and meeting planners.
“There’s a misconception that you can’t sell anything to a pharmaceutical company; they still use products for their employees,” says Gossett. Employee programs often include recognition, sales awards, employment anniversaries, incentives, company milestones, holiday gifts and wellness programs. In today’s economy, these uses for promotional products may mean even greater opportunities during a down economy when it’s easier for companies to give recognition than raises.
Even still, many distributors today are choosing to avoid the market all together, although there’s still a need for marketing and advertising tools. For example, hospitals still have recognition events for nurses and volunteers, charitable golf outings and other events and activities where tangible advertising is highly desirable.
“Instead of learning what this legislation means, many distributors are running the other direction,” says Gossett. “It’s foolish to run because there’s still business. You just have to think outside the box.”
The way dollars are being spent in the healthcare industry and the types of products being purchased has also shifted. For example, there are more orders for internal projects, such as gifts for sales reps as well as a huge swing in recruitment campaigns.
“[The types of products selected] used to be very wide open. Custom stuffed toys and mascots were very popular, as well as office supplies,” says Cocallas. “When self regulation happened, a lot of that got cut. In most cases it was no longer educational. With the new regulation, the trend has moved towards anything educational. For example, USB drives were popular where companies provide information, but also leave a data partition for the physician to use. But even that data partition became questionable as a gift, so now materials are strictly educational.”
Now that PPACA is in place, some sales within the healthcare industry could actually come back. As Cocallas points out, instead of self-regulation, companies will go by the letter of the law, which could actually result in more distribution or in the revitalization of distribution.
Here are some recommendations to be successful in today’s healthcare market.
1. Be a problem solver and source of knowledge.
One of the biggest ways to secure business is to provide information and solutions to healthcare clients. One way a distributor can be a resource is by thoroughly understanding the new law. It’s important to understand what the law states, who the recipients are, what they can and can’t accept, and understand the reporting and exclusions.
“The issue has come up with a medical equipment client that I had,” says Ekstrand. “Every year they do a calendar campaign with me. We got ready to start the calendar campaign, and their attorney said they couldn’t give out any promotional products. My response was to send them information on the law. Now my goal is to go over the new language with them because they don’t market to teaching hospitals; instead they focus on medical equipment and supplies to ambulatory services and municipalities, which are not covered recipients.”
“We’ve been actively studying the new law as well to see if we can assist our clients in interpreting how it applies to their companies,” says Cocallas. “We can’t offer them legal advice, but we can bring up points they can consider when they’re looking to decide on their future budgets.”
Gossett used the changes as an opportunity to build the relationship with her clients through trust. “It was critical that I let them know what was coming down the road,” says Gossett. “There were times that I knew more than they did, and knowing what their budgets were going to be for the next year, I actually advised them to slow their buying. At that time [the PhRMA code] was voluntary. I didn’t get as many orders, but it did much to boost the level of trust.”
2. Help clients manage their brand.
For pharmaceutical companies, hospitals and other healthcare clients, brands are important. Many have strict guidelines around logo color, placement, white space and products. A distributor who takes the time to fully understand the client’s logo guidelines and restrictions and actually helps monitor the brand usage can also be a huge resource for the company.
Ekstrand works with a large regional hospital as well as affiliated community hospitals. As a preferred supplier, this hospital system relies on him to make sure that brand standards are followed.
“Sometimes I’ll get a call from another division with an idea and
I’ll have to say that they can’t move forward because we have branding standards,” says Ekstrand. “There’s a trust and relationship there to support the brand image. When you get into brand image and standards, that’s sacred to an institution.”
3. Look for additional people to tap into and departments to contact.
Looking beyond your initial relationship in a company is important to the growth of the account. The key, again, is to understand the new law, know what “covered recipients” means and determine where you can change the recipient of the product.
For example, as Cocallas points out, the new law doesn’t pertain at all to the patient or the office staff, so those are healthcare audiences you can suggest to your client. Even a simple change of address from the doctor to the office manager could be interpreted as not addressing the covered recipient.
Also, look for opportunities to work with different departments in the organization.
“You have to really reinvent yourself and find ways to be of value so people will look at you twice and start working with you,” says Gossett. “If prospecting [for sales], think about some ideas for human resources and contact them. Employee retention programs, name badges, new-hire packets are all great concepts to promote. If you are working in the manufacturing area, then consider programs that promote environmental services and safety departments.”
4. Look at additional companies for opportunities.
There are many companies that make up the healthcare market, and many that are not affected by PPACA, such as medical supply companies and nonprofits such as organ donation centers. But to find these, distributors must be proactive.
“By self-regulating distribution to healthcare professionals, they left the opportunity to focus on other areas, like patient marketing,” says Cocallas. “We’ve seen a shift in marketing to patients through broadcast and print adverting, but promotional products could have that opportunity as well. Let’s say you can no longer give an item to a medical office because it doesn’t fit the regulations. You could give a blanket that would be distributed to oncology offices for use with infusion chairs. The clinics store the blankets and give to patients to keep warm during treatments.
Blankets and the packaging can be subtly branded, plus they’re stored on-site, so there’s still visibility and you’re entirely within the guidelines.”
Cocallas also gives the example of office supplies, which hospitals need. A distributor could go to the infrastructure companies in the surrounding areas—such as a landscape supply company—and sell them sticky notes. The landscape company could offer the sticky notes to the hospital, and now you’ve received the sale on a different end.”
5. Become a preferred vendor.
Another approach to securing healthcare business is to earn your way onto preferred vendor lists. The key is to start with the right contact. For example, many companies are recruiting, so start with human resources.
“Any relationship that you develop starts with a one-to-one relationship, so you have to understand the person you are working with. You only become a preferred supplier because they want to work with you,” says Cocallas.
Sometimes getting the foot in the door requires paying your dues to be considered.
“The purchasing department for my client—a manufacturer of contact lenses—had an e-auction for anything the marketing department wanted to do,” says Gossett. “There is virtually no money in this, but you have to participate in order to pay your dues. At the same time, if you do a good job and you are a professional, your name gets passed around. Now I’m dealing with three other departments who don’t require the e-bid process. You need to do what it takes to become a preferred supplier so you can access some of the other business that’s available.”
In addition, by making progress within one organization, it sometimes leads to opportunities for preferred vendor status in other organizations. Take hospitals, for example, many of which have experienced mergers during the past few years. Ekstrand worked as a preferred vendor for a large regional hospital. It recently merged with two other hospitals; he’s now working with all of them.
When establishing initial relationships, the key is to ask the right questions. Do you have a preferred vendor now? Are you satisfied? Start with the one contact you find approachable and to whom you can add value.
6. Help clients overcome challenges.
Another way to help a client and position youself as an indispensible resource is to help that person or department overcome challenges.
“You’re dealing with very busy people,” says Gossett. “Demonstrate that you’re the kind of person who has their back. They don’t have to worry about all the details; you’ll take care of them for them. Do your job and the legwork for them. The more you take off their plate, the more valuable asset you’ll become and the less likely your ideas are going to be bid out.”
“The best way to approach is to help make the process turnkey,” suggests U.S. Healthworks’ buyer Yu. “Provide a nice flyer with recommendations. Offer programs for top salespeople. Recommend things like hand sanitizer with nice containers. This helps me as a buyer by giving me ideas and visualizing what I can be doing with your products. If you lay it all out for me, with pricing and contact information, then you’re giving me ideas. Don’t give me a catalog. That’s very overwhelming. Literally I recycle everything.”
One challenge that’s facing pharmaceuticals and medical equipment suppliers is how to manage the new reporting requirements, as stated in the PPACA. For example, if your client gives away pens at a tradeshow, how do you track if a physician received it and who you gave it to?
“I think one of the misconceptions is where the limitations apply,” says Cocallas. “Become familiar with how they apply. If you are suggesting a product that could be given away, then be sure the pharmaceutical company knows what they have to do to track that. They have to obtain the attendee list and the value of item they gave away. It’s good to warn them that they are going to have to make that information available starting in 2012.”
7. Be creative.
Of course, a way to stand out and position your company for opportunity is to be creative, whether it’s a creative campaign or a creative solution to a problem.
A unique angle that Gossett has taken is to produce products that go into starter kits for physicians’ offices.
“It’s not a promotional product,” says Gossett. “It’s a needed item, like an applicator, syringe or stickers that go into a medication box. They have to get this stuff from somewhere, so why not us? Once you build that relationship as the go-to person, you’ll really be pulled into these kinds of opportunities.”
Ekstrand has received numerous awards, including the PPAI Pyramid Award, for his creative campaigns. For example, he worked with a hospital that was recognized as being No. 1 in cardiac care for 15 years. Ekstrand started by recommending a simple campaign that included a badge pull with a logo on it. Then the patients received No. 1-shaped compressed t-shirts that announced the hospital’s achievement. Next, all employees were asked to wear their t-shirt to a professional baseball game. Hundreds of employees walked around the stadium as billboards that their hospital was No. 1 in cardiac care.
“In general, the healthcare market is heavily regulated, so the marketing managers are very cautious about what they have to do. We like to give them some ideas and alternate ways to look at their situations,” says Cocallas.
Another way to be creative is to consider promotional products that satisfy an educational need such as books. “Since the new PhRMA guidelines went into effect, cookbooks to guide patient health have become a highly sought after promotional product for pharmaceutical and medical device companies,” says Doug Greenhut, president of Delray Beach, Florida-based The Book Company (UPIC: BOOKCO), a supplier offering health-related cookbooks that can be distributed by doctors and other medical professionals for patient education.
With topics ranging from diabetes to cancer, heart health to gastro disorders, the cookbooks can easily support drug campaign themes, medical ailments or disorders and can be reformatted to fit any budget.
Even if the product is not necessarily educational it is acceptable for use in segments of the industry not covered by the healthcare law. For example, digital incentive cards containing music downloads, custom skins and ringtones can be used as highly desirable recruiting tools at nurse job fairs and as incentives for orthodontist patients. The products can be used to reward patients for arriving on time and achieving oral hygiene goals. Mark Bruk, vice president of Schaumburg, Illinios-based CFS Promotions For Now! (UPIC: cfspromo), says he sends out weekly industry-specific sales e-mails to distributors with ideas for selling the cards to specific markets. “Ours is such a unique product [the e-mails] are the No. 1 way to educate distributors and give them ideas they can use to sell to their customers,” he says.
8. Take action.
Finally, as a promotional professional, you can make a difference by taking action. Take action to learn as much as possible about legislative and regulatory changes through resources such as PPAI Law, your regional associations, the internet and more. Then be prepared to take steps to make a change.
When the state of Ohio decided it was going to propose similar legislation to the PhRMA code, Ekstrand and his peers with the Ohio Promotional Professionals Association traveled to Columbus and testified against it. They were successful in getting this legislation out of committee.
Entering The Healthcare Market
With all of these restrictions, is it worth tackling the healthcare market? Certainly opportunities within the healthcare market have shifted but healthcare remains a huge growth sector and the U.S. government is predicting a 28-percent increase in nursing, psychiatric and home health aide jobs over the next decade.
“People are starting to uncork a little bit and decide that even if they have layoffs, they realize that they have employees who are working hard, absorbing more functions than they had before, so they are starting to reward them,” says Cocallas, adding that her company just experienced a strong first quarter.
But as Gossett points out, long-standing relationships are not an insurance policy. Companies get bought out and people get laid off every day, she says.
“Even though I’ve been doing this for a long time, I’m constantly reinventing myself and making new contacts. For someone who’s approaching a new company, it’s a level playing field,” says Gossett. “If they can sell themselves as someone to be trusted, someone who is knowledgeable, then there is just as much of an opportunity as someone who is firmly entrenched in the organization. There is business all around. All you have to do is ask.”
Cassandra Johnson has spent 20 years as a writer and marketing communications consultant. She is a frequent contributor to both PPB and Promotional Consultant magazines.
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