Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal Change Management Analysis & Solution

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Leadership & Managing People Case Study | Stefanos Zenios, Robert Chess, Sara Gaviser Leslie, Lyn Denend

Case Study Description

This case has been developed to facilitate a negotiation exercise related to the formation of partnership deals in the healthcare industry. It is based on actual information, but reflects a hypothetical situation involving two companies and a product that have all been disguised. The scenario described within the case involves Pharmac, a large pharmaceutical company, and Respire, a small medical start-up. Pharmac and Respire began negotiating a partnership to develop and eventually market an inhaled form of parathyroid hormone (PTH) to treat osteoporosis. If successful, this product would improve the available options for the treatment of osteoporosis. It was also expected to produce "blockbuster" sales since it would make PTH, an already extremely effective treatment option, more convenient and appealing to a large segment of untreated patients who were injection-averse (injection was the standard delivery mechanism for this drug). Development of the product was highly speculative and was expected to take six to seven years due to early stage development of the inhalable delivery system and the multi-year Phase III fracture trials required for approval. Pharmac had released the first man-made, injectable form of parathyroid hormone, called Strocal, in 2002. However, no one had yet developed a non-injectable version of PTH, despite efforts by Pharmac and other companies that spanned more than a decade. Respire's goal was to be the first company to solve this problem by developing an inhaled formulation and a device to deliver Strocal through the lungs in a safe, effective, and reproducible manner. Enough information is provided within the case to enable students to negotiate terms for royalties, milestones, exclusivity provisions, and an equity investment. At the end of OIT-81A, information known to Pharmac (but not to Respire) is provided. In OIT-81B, information known to Respire (but not to Pharmac) is given.

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What is Change Management Definition & Process? Why transformation efforts fail? What are the Change Management Issues in Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal case study?

According to John P. Kotter – Change Management efforts are the major initiatives an organization undertakes to either boost productivity, increase product quality, improve the organizational culture, or reverse the present downward spiral that the company is going through.

Sooner or later every organization requires change management efforts because without reinventing itself organization tends to lose out in the competitive market environment. The competitors catch up with it in products and service delivery, disruptors take away the lucrative and niche market positioning, or management ends up sitting on its own laurels thus missing out on the new trends, opportunities and developments in the industry.

What are the John P. Kotter - 8 Steps of Change Management?

Eight Steps of Kotter's Change Management Execution are -

1. Establish a Sense of Urgency
2. Form a Powerful Guiding Coalition
3. Create a Vision
4. Communicate the Vision
5. Empower Others to Act on the Vision
6. Plan for and Create Short Term Wins
7. Consolidate Improvements and Produce More Change
8. Institutionalize New Approaches

Are Change Management efforts easy to implement? What are the challenges in implementing change management processes?

According to authorlist Change management efforts are absolutely essential for the surviving and thriving of the organization but they are also extremely difficult to implement. Some of the biggest obstacles in implementing change efforts are –

Change efforts create an environment of uncertainty in the organization that impacts not only the productivity in the organization but also the level of trust in the organization.
Change management is often a lengthy, time consuming, and resource consuming process. Managements try to avoid them because they reflect negatively on the short term financial balance sheet of the organization.
Change efforts are often made by new leaders because they are chosen by board to do so. These leaders often have less trust among the workforce compare to the people with whom they were already working with over the years.
Change efforts are often targeted at making fundamental aspects in the business – operations and culture. Change management disrupts are status quo thus face opposition from both within and outside the organization.
Change management efforts are made when the organization is in dire need and have fewer resources. This creates silos protection mentality within the organization.

Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal SWOT Analysis, SWOT Matrix, Weighted SWOT Case Study Solution & Analysis

How you can apply Change Management Principles to Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal case study?

Leaders can implement Change Management efforts in the organization by following the “Eight Steps Method of Change Management” by John P. Kotter.

Step 1 - Establish a sense of urgency

What are areas that require urgent change management efforts in the “ Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal “ case study. Some of the areas that require urgent changes are – organizing sales force to meet competitive realities, building new organizational structure to enter new markets or explore new opportunities. The leader needs to convince the managers that the status quo is far more dangerous than the change efforts.

Step 2 - Form a powerful guiding coalition

As mentioned earlier in the paper, most change efforts are undertaken by new management which has far less trust in the bank compare to the people with whom the organization staff has worked for long period of time. New leaders need to tap in the talent of the existing managers and integrate them in the change management efforts. This will for a powerful guiding coalition that not only understands the urgency of the situation but also has the trust of the employees in the organization. If the team able to explain at the grass roots level what went wrong, why organization need change, and what will be the outcomes of the change efforts then there will be a far more positive sentiment about change efforts among the rank and file.

Step 3 - Create a vision

The most critical role of the leader who is leading the change efforts is – creating and communicating a vision that can have a broader buy-in among employees throughout the organization. The vision should not only talk about broader objectives but also about how every little change can add up to the improvement in the overall organization.

Step 4 - Communicating the vision

Leaders need to use every vehicle to communicate the desired outcomes of the change efforts and how each employee impacted by it can contribute to achieve the desired change. Secondly the communication efforts need to answer a simple question for employees – “What it is in for the them”. If the vision doesn’t provide answer to this question then the change efforts are bound to fail because it won’t have buy-in from the required stakeholders of the organization.

Step 5 -Empower other to act on the vision

Once the vision is set and communicated, change management leadership should empower people at every level to take decisions regarding the change efforts. The empowerment should follow two key principles – it shouldn’t be too structured that it takes away improvisation capabilities of the managers who are working on the fronts. Secondly it shouldn’t be too loosely defined that people at the execution level can take it away from the desired vision and objectives.

Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal PESTEL / PEST / STEP & Porter Five Forces Analysis

Step 6 - Plan for and create short term wins

Initially the change efforts will bring more disruption then positive change because it is transforming the status quo. For example new training to increase productivity initially will lead to decrease in level of current productivity because workers are learning new skills and way of doing things. It can demotivate the employees regarding change efforts. To overcome such scenarios the change management leadership should focus on short term wins within the long term transformation. They should carefully craft short term goals, reward employees for achieving short term wins, and provide a comprehensive understanding of how these short term wins fit into the overall vision and objectives of the change management efforts.

Step 7 - Consolidate improvements and produce more change

Short term wins lead to renewed enthusiasm among the employees to implement change efforts. Management should go ahead to put a framework where the improvements made so far are consolidated and more change efforts can be built on the top of the present change efforts.

Step 8 - Institutionalize new approaches

Once the improvements are consolidated, leadership needs to take steps to institutionalize the processes and changes that are made. It needs to stress how the change efforts have delivered success in the desired manner. It should highlight the connection between corporate success and new behaviour. Finally organization management needs to create organizational structure, leadership, and performance plans consistent with the new approach.

Is change management a process or event?

What many leaders and managers at the Pharmac Respire fails to recognize is that – Change Management is a deliberate and detail oriented process rather than an event where the management declares that the changes it needs to make in the organization to thrive. Change management not only impact the operational processes of the organization but also the cultural and integral values of the organization.

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