Using Public Procurement to Stimulate Innovation and Address Demographic Change in Europe Conference Board of Canada Centre for the Advancement of Health Innovation Ottawa, Canada May 6th, 2014

If the need for innovation in healthcare is obvious…

… the role of purchasers in the innovation process is not! Primary care doctors Medical specialists Nurses Hospital administrators Technology manufacturers Para-professionals Purchasers Pharmaceutical companies Nutritionnists Public Health Commissioners

Summary of the presentation Introduction About RESAH About Hospital procurement in Europe Purchasing: new doorway for innovation in hospitals? The HAPPI experience Context and objectives Our methodology: a market-oriented approach Main outcomes and lessons learned Conclusion 5 recommendations for a smart procurement of innovation

Summary of the presentation Introduction About RESAH About Hospital procurement in Europe Purchasing: new doorway for innovation in hospitals? The HAPPI experience Context and objectives Our methodology: a market-oriented approach Main outcomes and lessons learned Conclusion 5 recommendations for a smart procurement of innovation

PART I: INTRODUCTION

Regional RESAH: Overview National « Réseau des Acheteurs Hospitaliers », founded in 2007 Public, not-for profit Staff : 30 people in central team 140 contact points in hospitals A network of 1000 experts A key player of healthcare procurement in France 3 levels of activity International National Regional

RESAH: Regional Core Business Funded by the Regional Health Authority of « Ile-de-France » Groups the purchases of 140 member hospitals & nursing homes 42,000 beds 1,5 billion € procurement/y Partnership with AP-HP (biggest teaching hospital in Europe) Purchase both medial & non-medical products & services 11,7 M people 18,5 % total F Mission of support to the RHA to set up an innovation policy at regional level

RESAH: National Activities Provides consultancy and training services via a Resource and Expertise centre Training Consulting Benchmark Mandates Drives an inter-regional coalition of joint hospital procurement Support of the French Ministry of Health 8 B€

RESAH: International networks European projects : Coordinates HAPPI Participates in INNOCAT, INSPIRE International networks : IHF “Group Purchasing Special interest Group” EHPPA

About hospital procurement Why does procurement matter? 2d expenditure category after staff 30% of the operationnal budget Increasing proportion Security Cost-effectiveness Impact Procurement Continuity of the service Quality Competitivity Social aspects

About hospital procurement Cost control Legal security Quality and efficiency Innovation Basic objectives New!

Hospital Procurement in Europe: overview Total 130B€ /y Main volumes: Allemagne France  18B€ / y UK Italy Spain Several organisation models: Centralisation at National level vs. Regional level Competition vs. Collaborative approach with several organizations that are complementary Private operators vs. Public operators

Hospital procurement in Europe: trends Concentration, reduction of the number of operators In 2030: 100 strategic procurement organisations in EU Cross-border cooperation Strategic collaboration networks Joint procurement

Hospital procurement in Europe: trends The European Commission supports networks of public buyers in all sectors and promotes demand-driven innovation Public procurement of innovation (PPI) when buyers act as « first customers » to purchase existing innovative solutions Pre-commercial procurement (PCP) when buyers and suppliers share the costs and risks of R&D to address needs that are not covered by the market NEW! PCP becomes Innovation Partnership (EU directive)

Why procuring innovation? The purchasing department: perfect doorway for innovation Interface between supply and demand Transversal skills New missions of the buyer: Establish and develop a fruitful dialogue between internal users and external suppliers to express the « fair need » Search for innovative solutions that might improve the quality of care Implement an impartial methodology to guarantee cost-effectiveness

Assess innovation, question needs Research the market What are the existing solutions and how will they evolve? Is there a standard offer? Are there alternative solutions and what are their distinctive features? Main players, characteristics of their offer, marketing strategy? Added-value of a solution compared to another? Risk? Previous experiences, outcomes? Innovation-related cost within the price? Which innovation (product / economic model / services)? Assess and question the need What are the real needs considering priorities and resources? Is this really necessary? What is its added-value? Esteem value or use value? Which price can we afford to pay for it ? Are we able to recoup the cost of the solution on the long run? Should we encourage the suppliers to innovate in economic models (e.g. pay-as-you-go) rather than in warranty levels (e.g. commitment on a maximum consumption rate)? Example of metholodology

The central purchasing body: ideal tool to disseminate innovation Launches procurement procedure 2 Supplier 1 Suppliers Expresses uncovered need 1 Resah-idf Hospital A Supplier 1 Commercializes the innovative offer Hospital B Other hospitals Awards framework contract 3 Sign subsequent agreements 4 Executes contracts 5

Summary Introduction The HAPPI experience Conclusion About RESAH About Hospital procurement in Europe Purchasing: new doorway for innovation in hospitals The HAPPI experience Context and objectives Our methodology: a market-oriented approach Main outcomes and lessons learned Conclusion 5 recommendations for a smart procurement of innovation

PART II: THE HAPPI experience

Healthy Ageing: a priority for Europe As life expectancy increases across Europe, causing healthcare costs to escalate, the European Commission has made the theme « ageing well » a strategic priority for 2020  Healthcare providers must offer innovative solutions for enhanced care in the home, hospitals and nursing homes and improvements in working environments

A European project The European Commission is embarking on a new initiative: supporting demand-driven innovation Call for Proposal 2011: “Supporting Public Procurement of innovative solutions: networking and financing procurement” (CIP Programme) HAPPI: snapshot 10 + 2 partners Duration: 42 months Start date: 2 October 2012 Budget: 2M€ prepa + 2,5M€ procurement

Objectives General Objectives Main outputs Address the challenge of demographic change in Europe Use public procurement to stimulate demand-driven innovation Main outputs Create a network of Public Procurers of innovation in healthy ageing Set up a European collaborative platform where demand meets supply Support the industrial ecosystem and a European market

Who are we? The HAPPI consortium is coordinated by Resah (FR) 7 Central Purchasing Bodies 3 procurement & innovation experts 2 Academics NHS C.S. MH SCR FHL BPI BITECIC ICLEI EHESP Univ. Torino RESAH FPA FIBICO NHS Commercial Solutions (UK) Mercur’Hosp (Be) Società di Committenza Regionale Piemonte (It) Fédération des Hôpitaux Luxembourgeois Resah (Fr) Federal Procurement Agency (Au) FIBICO (Es) BPI France (Fr) BITECIC Ltd (UK) ICLEI (Ge) Univ. Torino (It) Ecole des Hautes Etudes en santé publique (Fr)

Difficult need assessement Methodology Non-mature market Many stakeholders Difficult need assessement

Methodology Solution: a market-oriented approach 1 2 3 Using the HAPPI online platform, research and understand the market (products, solutions and stakeholders) 2 Analyse the market & develop specifications 3 Issue a joint European invitation to tender & award contracts to enable healthcare organisations to procure innovative products and services

What are we buying? Products, services, systems which enable independent activity and optimise health for older people and those working in that environment - healthy outcomes

How to define innovation? First application / commercialisation New to the contracting authority and new to home markets Including existing technologies used in an innovative way Including non-technological innovation (e.g. design)

4 infodays to engage the market Vienna London Paris Turin

The HAPPI Platform

The HAPPI Platform

The Innovation Showcase

Main outcomes Main figures Where do we stand now? More than 500 people participating in the infodays More than 200 suppliers registered on the platform 142 innovative solutions submitted on the platform 2 new buyers (associate members) Where do we stand now? Ongoing design of specifications on 4 topics of interest : Fall detection & alerting system Rehabilitation treadmill Walking track Cooling/warming mattress topper Ongoing preparation of tendering documents Call for tender to be published by next July.

Lessons learnt Challenges Opportunities Market engagement Communication plan is strategic Involve SMEs (SME helpdesk) Language barrier! Legal obstacles (joint call for tender) 1 EU directive, 27 application laws! Need to find the « lowest common denominator » Match market offering with needs (involve experts) Opportunities Online tool  enlarges your vision Open mindness brings good ideas and address unknown needs Monitoring the market prepares future procurements

One example

PART III: CONCLUSION

1. Develop the lead of purchasers

2. Give direction to your suppliers Short-term Mid-term Long-term Try to design a roadmap: “Ask for a solution, do not prescribe it”. (Guide for Public Procurement of Innovation by the European Commission) “The root cause of failures is not bad outcomes, it’s bad expectations” (Pr Ron Adner, Tuck School of Business)

3. Build up a collaborative approach Suppliers are more willing to invest in / share innovative ideas when they have close relationships with their customers 3 important collaborative activities : Involve suppliers in your processes - especially the seek of performance Demonstrate openness. Share information with suppliers in a timely manner. Work with suppliers to help them improve their competitiveness both in terms of cost and quality. Strong buyer – seller ties not only influence innovation outcomes but also affect inventory reduction, quality improvement and cost efficiency.

4. Become a “preferred customer” of leading suppliers Long history of collaboration Possible adjustments of cost policies Strategic importance (image, turn over)

5. Identify the most innovative suppliers Suppliers must have a certain level of know-how in order to become innovative contributors.  Establish indicators. Small is beautiful! Go meet SMEs. Think global and cooperate!

THANK YOU FOR YOUR ATTENTION! QUESTIONS? Contact: Carole GANDON Head of International Affairs RESAH c.gandon@resah-idf.com