LAKE BUENA VISTA, Fla. -- Industry consolidation will continue, as will pressures on margins, Dr. Edward F.X. Hughes told drug wholesalers and manufacturers attending the National Wholesale Druggists Association Marketing Conference here. Hughes is director of health services and policy research at the Kellogg Graduate School of Management at Northwestern University, Evanston, Ill.
Companies will experience both horizontal and vertical integration, said Hughes. The key to survival is for wholesalers and manufacturers to align themselves with managed care health plans and help these plans operate efficiently, said Hughes. Such health plans will themselves encompass a variety of physician, hospital and other services, he said. Until recently, health care has been decentralized and unorganized, said Hughes. "Management is being applied to health care to make decisions as to the appropriate mix of the factors of production, from a health outcomes and cost-effectiveness perspective," he said.
Managed care is nothing more than "a process for the application of standard business practices to the delivery of health care, in the tradition of the American free enterprise system," said Hughes. "It will squeeze out excess supply, excess costs and excess profits. That's what markets do. Capitalism is not warm and fuzzy.
"The rewards will go to those who produce the services in the most cost-effective manner, while maintaining quality," said Hughes. This will cause the mix of services to shift, he said, from surgery to pharmaceuticals, from a doctor's visit to hospitalization, from a visit to a specialist to a primary care practitioner, from a visit to a primary care practitioner to a nurse practitioner.
Outcomes research is needed, said Hughes. Eventually "customer satisfaction" will emerge as a significant driving force in determining which managed care plans prosper, he said.