STOCKHOLM SCHOOL OF ECONOMICS Department of Management and Organisation 6180 International Business Case Research Thesis Spring 2015

The Complexities of Introducing New Pharmaceuticals to the Swedish Market

How Do Pharmaceutical Companies In the Swedish Market Handle Uncertainty? A Case Research Study of Seven Pharmaceutical Companies Aleksandra Dennier (22214) & Yevgeniya Podolskaya (40674) This thesis concerns the Swedish pharmaceutical market, its main processes for introducing new pharmaceuticals, how pharmaceutical companies handle these processes and how the current processes can change to facilitate market presence for companies. Recently, the system of introducing new drugs in Sweden has undergone changes, aimed at ensuring more equal treatment of patients across the country and regulating the increasing pharmaceutical costs. However, unfortunately, the changes have contributed to increased complexity and uncertainty for the industry in question. Today, companies in Sweden are facing pressure from both the market and headquarters. Therefore, to evaluate companies’ strategies given the market peculiarities, the analytical framework is divided into two parts. The first part assesses the strategic freedom of subsidiaries in Sweden, while the second part assesses whether companies use influencing or adapting strategies, or both. The framework is also used to suggest future improvements for the companies’ strategies and to the process of introduction itself. To get the necessary empirical information, semi-structured interviews with seven company representatives have been conducted. Half of the companies appear to have less strategic freedom, i.e. they are leaning towards a boy scout posture, while the other half has more freedom and therefore leans more towards a subversive strategist posture. It has also been found that the strategic freedom and strategic posture coincide almost perfectly, as subversives mostly are influencers and adapters mostly are boy scouts. We recommend companies leaning towards a boy scout posture to become more subversive in order to become more embedded in the local context, and to prioritize to become more influential to capture the opportunity to co-create the structure of the process while it is under construction. Last but not least, we recommend for the process itself to become more predictable and transparent, to have longer-term horizons and goals, one responsible party, and to improve processes within county councils.

Supervisor: Hans Kjellberg Date submitted: May 29th, 2015

ACKNOWLEDGEMENTS We would hereby like to take the opportunity to express our gratitude to all organizations and individuals, which have selflessly taken time to contribute to this thesis and without whom it would have been impossible to complete this study. First and foremost, we would like to thank LIF, the organization’s Head of Strategy, Karolina Antonov, and Christoffer Holmberg from Bristol-Myers Squibb, who helped us immensely to understand current market processes and establish contact with all interviewees. We are no less grateful to all the companies and company representatives who have taken the time to patiently answer all our questions. Mikael Svensson and Sofie Alverlind at SKL also took the time to correct our introduction system description, which we highly appreciate. Last but not least, we are grateful to Henrik Glimstedt, our case research thesis course director, for all his inputs and our much-appreciated supervisor Hans Kjellberg who guided us patiently and with much wisdom through this process.

TABLE OF CONTENTS 1.   INTRODUCTION  ..................................................................................................................................  1   1.1.   THE  ORDERLY  INTRODUCTION  –  THE  CURRENT  WAY  TO  INTRODUCE  NEW  PHARMACEUTICALS  ....  2   1.2.   COMPANIES’  CURRENT  CONCERNS  .................................................................................................................  5   1.3.   PROBLEM  DESCRIPTION  ...................................................................................................................................  7   1.4.   RESEARCH  QUESTIONS  ......................................................................................................................................  8   1.5.   DELIMITATIONS  ..................................................................................................................................................  9   2.   LITERATURE  REVIEW  .....................................................................................................................  10   3.   THEORETICAL  FRAMEWORK  .......................................................................................................  15   3.1.   TWO-­‐SIDED  PRESSURE  ...................................................................................................................................  15   3.2.   A  FRAMEWORK  FOR  ANALYSING  THE  DEGREE  OF  STRATEGIC  FREEDOM  ............................................  15   3.3.   FRAMEWORK  FOR  ANALYSING  STRATEGIC  POSTURE  ..............................................................................  16   3.3.1.   Influencing .................................................................................................................... 16   3.3.2.   Adapting ....................................................................................................................... 18   3.4.   EMPIRICAL  RESEARCH  QUESTIONS  ..............................................................................................................  21   4.   METHODOLOGY  ................................................................................................................................  22   4.1.   RESEARCH  APPROACH  ....................................................................................................................................  22   4.2.   APPROACH  FOR  CHOOSING  THEORETICAL  FRAMEWORK,  DATA  COLLECTION  AND  ANALYSIS  ........  22   4.3.   SAMPLING  .........................................................................................................................................................  22   4.4.   DATA  COLLECTION  AND  ANALYSIS  ..............................................................................................................  23   5.   RESULTS  ..............................................................................................................................................  25   5.1.   RELATIONSHIPS  WITH  HEADQUARTERS  .....................................................................................................  25   5.2.   HOW  COMPANIES  HANDLE  THE  INTRODUCTION  OF  NEW  PHARMACEUTICALS?  ................................  26   5.3.   SUGGESTED  IMPROVEMENTS  FOR  THE  INTRODUCTION  PROCESS  ..........................................................  30   6.   ANALYSIS  .............................................................................................................................................  32   6.1.   LEVEL  OF  STRATEGIC  FREEDOM  ..................................................................................................................  32   6.2.   STRATEGIC  POSTURE  ......................................................................................................................................  35   6.3.   CONNECTIONS  BETWEEN  STRATEGIC  FREEDOM  AND  STRATEGIC  POSTURE  ......................................  41   7.   RECOMMENDATIONS  ......................................................................................................................  43   7.1.   HOW  TO  BECOME  MORE  SUBVERSIVE?  ......................................................................................................  43   7.2.   HOW  TO  INFLUENCE  AND  ADAPT  TO  THE  SWEDISH  MARKET?  ...............................................................  45   7.3.   RECOMMENDATIONS  FOR  PROCESS  IMPROVEMENTS  ...............................................................................  47   8.   LIMITATIONS  .....................................................................................................................................  51   8.1.   SUGGESTIONS  FOR  FURTHER  RESEARCH  .....................................................................................................  52   9.   DISCUSSION  AND  CONCLUSION  ....................................................................................................  53   10.   SOURCES  ...........................................................................................................................................  55   11.   APPENDIX  .........................................................................................................................................  57   11.1.   GENERAL  SURVEY  QUESTIONS  ...................................................................................................................  57   11.2.   SURVEY  QUESTIONS  AND  ANSWERS,  SUBVERSIVES  VS.  BOY  SCOUTS  .................................................  57   11.3.   SURVEY  QUESTIONS  AND  ANSWERS,  ADAPTERS  VS.  INFLUENCERS  ....................................................  59  

1. INTRODUCTION In the last couple of decades, a gradual shift has happened within the Swedish healthcare sector. Before the shift, doctors had the main responsibility to choose treatments available for treating patients. With time the responsibility has shifted towards Sweden’s 21 county councils (Antonov, 2013) and hence become more procedure and system driven - more politicized (Interviewee 2, 2015). In the first editions of this more county council dependent process for introducing new pharmaceuticals to the Swedish market, the process was handled in a decentralized manner, i.e. each county council with independent budgets and priorities had the responsibility to choose which new pharmaceuticals to introduce. However, the independence contributed to large quality gaps in medical treatments used in different parts of the country. Table 1: List of Actors In the Swedish Market Actor/Definition

Abbreviation

Function

Swedish association of Local authorities and Regions (Sveriges Kommuner och Landsting) Tandvårds- och läkelmedelsförmånsverket Fyrlänsgruppen

SALAR (SKL)

An employer and interest organization, which supports and helps to develop its members’ (all county councils and regions in Sweden) operations (SKL, 2015)

TLV

A state authority, which decides prices and subsidies on pharmaceuticals (TLV, 2015) A collaboration group between the Skåne Region, Stockholm County Council, Västra Götaland Region and Östergötland County Council, which carry out investigations for all county councils as part of the Collaboration Model (Janusinfo, 2015) Gives recommendations about approaches/attitudes towards new pharmaceutical therapies (Janusinfo, 2015) Coordinates and administers work between different national pharmaceutical investigative authorities, who investigate and prepare material for the European approval of new pharmaceuticals (SKL, 2015) Takes the formal decision about approval on EU level (SKL, 2015) The European pharmaceutical agency and EMA’s scientific committee (SKL, 2015) Developed by the Swedish Government and SALAR, together with many other stakeholders in the pharmaceutical industry. The purpose is to define prioritized improvement areas and plan interventions (Government Offices of Sweden, 2014) A collaboration between county councils with the purpose to commonly evaluate and introduce new pharmaceuticals to the Swedish market A project with the aim to develop a national process for introducing new pharmaceuticals to the Swedish market, involving county councils, many other authorities and pharmaceutical companies (Janusinfo, 2015) An industry association for the pharmaceutical companies in Sweden, with 85 member companies (LIF, 2015)

4länsgruppen

NT Council European Medicines Agency

EMA

EU Commission Committee for Medicinal Products for Human Use National Pharmaceutical Strategy (Nationella läkemedelsstrategin)

CMPH NLS

The Collaboration Model (Samverkansmodellen) Projektet Ordnat Införande i Samverkan

LIF

OtIS

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Furthermore, due to investments in highly specialized pharmaceuticals aimed at very small patient groups and an increasingly aging population, the cost of pharmaceuticals increased (TLV, 2015). Therefore, the newest edition of the county council focused introduction process has been recently implemented with the main goal to make usage of pharmaceuticals in Sweden more geographically equal and cost effective (SKL, 2014). As a main part of these efforts, in the beginning of 2013 a pilot project, OtIS, was initiated to test a new introduction process for new pharmaceuticals in Sweden. The new process, from now onwards called the Collaboration Model, is part of the NLS (see Table 1), has been implemented under interim forms during 2014 and has officially come into effect in January 2015 (TLV, 2015). It mainly involves evaluation and handling of pharmaceuticals that are used on patients while hospitalized (in-patient drugs) as opposed to drugs for home usage (prescription drugs). The Collaboration Model is the main part of a national process, which from now on will be called the Orderly Introduction. The Orderly Introduction includes all possible ways to introduce different kinds of pharmaceuticals to the Swedish market, independent of the classification of the pharmaceutical (i.e. also includes prescription pharmaceuticals). The Orderly Introduction will be the main point of departure in this report (see 1.1 for further elaboration on different options for introducing pharmaceuticals to the Swedish market). 1.1. The Orderly Introduction – The Current Way to Introduce New Pharmaceuticals Already during the drug development phases, up to five years before actual approval, companies need to start preparing (Interviewee 5, 2015). The preparations include planning, working out time lines, compiling documents with research data, mapping out of all relevant stakeholders, mapping out of patient needs, etc. These preparations also include early communication with local (Swedish) county councils. Companies need to inform the councils about their new upcoming products to make sure that the councils include these in their budgets, since budgets are set much earlier than the national applications are submitted and usually do not by default include budgetary space for new drugs (Interviewee 5; Interviewee 1; Interviewee 6, 2015). After the preparations, but before introducing new pharmaceuticals to the Swedish market, companies need to send an application to EMA and then have their products approved on a EU level. The overall purpose of EU investigations and recommendations is to assess efficiency and safety of new drugs. Within nine months after the EMA application, the CHMP should give an opinion about the drug and within additional three months, a formal approval from the EU Commission should be issued (SKL, 2014). The national level assessments are, at least in Sweden, and at least in part, started in parallel with the European processes to ensure a faster introduction of pharmaceuticals. The Swedish national investigations, in contrast to EU level investigations, mainly handle pricing and financing issues of new pharmaceuticals. In accordance with the newest introduction system, pharmaceuticals are introduced in three different ways to the Swedish market. Essentially, which way is implemented is dependent on whether a pharmaceutical is 2

to be considered an in-patient drug, i.e. a drug that is used to treat currently hospitalized patients, or a prescription drug, i.e. a drug prescribed for home use. In practice, this distinction is not clear-cut, since many pharmaceuticals can be considered to be both (Antonov, 2015). Also, the overall ambition is to over time decrease differences between the introduction procedures for these two kinds of drugs (Interviewee 2, 2015). For introducing new prescription drugs, or open care drugs, in Sweden companies usually start by applying for reimbursement with TLV (Interviewee 6, 2015). TLV decides on whether to reimburse the new drug based on a previously completed health-economic assessment, which involves a combined analysis and balancing of price and quality. The most straightforward path through this process is, of course, to receive reimbursement immediately. Currently, as an extended reimbursement process, a three party negotiation process between the county councils’ negotiation delegation, TLV and the pharmaceutical company in question, is under trial. The idea is to give companies yet another opportunity to receive reimbursement for their products, if they do not receive reimbursement immediately. The three-party negotiation involves mainly negotiations concerning risk sharing, e.g. reimbursement only for a limited amount of time, between the companies and TLV. TLV can of course also decline to reimburse a drug (see Graph 1). Then, the company can either go about putting the drug on the market without reimbursement (an option always available to companies when their products are not included in the Orderly Introduction), resubmit the application to TLV for a second round evaluation (usually after six to twelve months of waiting time), or they can sometimes be included to the Collaboration Model (Antonov; Interviewee 6, 2015), which will be presented next. In the Collaboration Model, mainly in-patient pharmaceuticals are included and the process involves voluntary collaboration between the Swedish county councils. It is argued that councils should be willing to participate since they are obliged by law to secure treatment quality and equal healthcare for patients (SKL, 2014). Only a few selected pharmaceuticals are included in the entire or parts of this new process and companies cannot themselves apply for inclusion in the process. Instead responsible authorities, i.e. the NT Council (see Table 1), make the inclusion decision. Overall, pharmaceuticals are chosen for this process based on the needs of, and benefits for, county councils and on their importance in terms of countrywide availability for patients (Antonov; Alverlind, 2015). For some chosen pharmaceuticals, authorities decide that a complete assessment, including thorough collaboration with guidance for patients and follow-up, should be made. Hence, for these pharmaceuticals, both efficiency and cost is assessed on the national level. The companies behind these products are therefore invited to be part of all the steps in the Collaboration Model. The current ambition is to include around ten pharmaceuticals per year in the entire process. Other chosen products are initially assessed to only need price-focused introduction, why these companies are invited only to the price negotiation part of the introduction process. Around fifteen products per year are to be in this category (SKL, 2014; Janusinfo, 2015). The initial phase of the Collaboration Model is called horizon scanning and contains mapping of new pharmaceuticals to identify those that are likely to have an impact on 3

healthcare and that will be launched within a foreseeable future. County councils together with the NT Council conduct horizon scanning, which then results in a so-called ‘condensed list’ of pharmaceuticals to be initially assessed. Based on this initial assessment, county councils give their view on which pharmaceuticals should be prioritised for inclusion in the Collaboration Model. The NT Council then makes the final decision about which pharmaceuticals to include. For the included pharmaceuticals, 4-länsgruppen starts formulating an introduction and follow-up protocol, which contains guidelines for the two processes (introduction and follow-up). In parallel, TLV starts investigating and formulating a health-economic information base, for which involved companies need to prepare all relevant information. Both the TLV evaluation and the formulation of the protocol start after a positive opinion from CHMP. When the health-economic assessment is finalized, a reconciliation meeting is held with all relevant parties to ensure the quality of the introduction and follow-up protocol. Based on this protocol and the health-economic assessment, the NT Councils makes a recommendation regarding the usage of the pharmaceutical. If the recommendation is positive, the introduction will follow according to the protocol, otherwise the process is paused to await possible new price offerings from the company. Table 2: The Collaboration Model (for both in-hospital and prescription pharmaceuticals) (SKL, 2014) Horizon Decision Introduct- HealthReconcil- Price RecomFollowScanning about ion and economic iation negotiate- mendatiup inclusion follow-up assessme- protocol on on protocol nt Actors

4länsgruppen, county councils, TLV, companies, clinical experts

4länsgruppen, NT Council

4länsgruppen, county councils, companies, clinical experts, the Medical Products Agency

TLV, companies

4länsgrupp en, companies, clinical experts, NT Council, TLV

County council’s negotiateon delegateon, companies

NT Council

Timefr ame*

-24 to -3 months

-6 months

-6 month until recommendation

-3 to 3 months

0 to 1 month

1 to 3 months

Results

Condensed list

When health ec. assessment is done Consensus on content of protocol

Three part negotiateon

Recommendation on usage

Which Protocol drugs to be included * Point 0 is the time for marketing authorisation

Health ec. knowledge base

County councils, 4länsgruppen, the Medical Products Agency, TLV, National Board of health and Welfare 1 to 35 months

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After the process shown in Table 2, county councils decide which pharmaceuticals to introduce and in extension, which treatments will be locally available. This means that in the end, county councils are the main customers of companies (Interviewee 6, 2015). If a certain pharmaceutical is not reimbursed, is not included or receives a definite declination in the Collaboration Model, the product can still be legally sold at any price in the Swedish market as a third option (given that the product has received EU approval). It happens, for example, that individual county councils are in need of a certain drug and are willing to sponsor it, and an agreement can be made directly between the country council and the company in question (Antonov, 2015). This, however, is quite unusual and a declination in the Orderly Introduction often means overall lower probability of selling in the Swedish market (Antonov and Holmberg, 2015).

THE ORD. INTRODUCTION

Graph 1: The Orderly Introduction and the Third Option (LIF, 2015)

1.2. Companies’ Current Concerns Since various forms of the new introduction process have been in place for quite many years now and pilot projects of the newest version are currently under trial, companies in the Swedish market, the actors in focus in this paper, have had the time to form an opinion about the different suggestions and actual changes in the introduction process. Despite the goal to coordinate the introduction process, many county councils persist in implementing local processes, on top of national processes. This means that companies first need to prove the cost effectiveness of their products in the national process, to be assessed again and maybe even rejected due to budgetary constraints in one of the 21 county councils. On top of this, there is no official structure for these secondary county council assessments (Interviewee 7, 2015). Therefore, many interviewed companies expressed concerns about these double assessments, (Interviewee 2; Interviewee 1; Interviewee 6; Interviewee 7; LIF, 2015).

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One company reasoned that the issue lies in the fact that while TLV has the responsibility to approve a price, they do not have the budget responsibility. The budget responsibility is instead with the state and county councils. This means that TLV’s approval of a price is disconnected to budgetary concerns and hence might cause the perceived need for double assessments. Some companies argued that the double assessments as such are not the only problem, but that the county councils only focus on the price aspect instead of the economic value aspect. County councils try to push prices well below the value assessed on a national level, which undermines the entire purpose of the national economic value assessment (Interviewee 1; Interviewee 4, 2015). One company reasoned that even the goal of having the best possible treatments for patients in some cases might be difficult to accommodate for to the goals of the county councils, especially when it concerns expensive treatments where benefits fall outside the county council budget (Interviewee 2, 2015). Also, it is argued, county councils do not have enough competence to take on all the responsibilities they have in the new process (Interviewee 1, 2015). Others argue that this is not a question of competence, but rather the problem lies in the fact that employee rotation is very high within county councils, which prevents relationship- and common knowledgebuilding (Interviewee 7, 2015). All of the above means that the problems that the new system was supposed to address, i.e. unequal care in the country and unpredictable market conditions, are not addressed in practice (LIF, 2015; Interviewee 3, 2015). Some companies also experience the problem that physicians are not enough involved in the different introduction processes, e.g. in the configuration of the introduction and follow-up protocol, which is why many doctors are not aware of new studies and developments in the market. Doctors are also, it is argued, in yet another step constrained by own budget restrictions, why especially in-patient drugs might not be used even when they are assessed to be the best treatment for the patient (Interviewee 3; Interviewee 4, 2015). All these postnational process decisions contribute to uncertainty, as pharmaceuticals that have been part of the Orderly Introduction might not be used in practice. Furthermore, all of these problems contribute to a serious societal problem - the time until the new pharmaceuticals reach the patient is prolonged. LIF (2015) argues that the current limit for the number of pharmaceuticals that are to be prioritised for inclusion into the Collaboration Model is insufficient. A majority of new pharmaceuticals will continue to be handled on a local, county council level. The long-run goal should be to include more, if not all, new pharmaceuticals in some kind of national process, if the goals set out on the national level are to be reached and competitive neutrality is to be upheld. Many companies have reported that the current system is not transparent and foreseeable enough, e.g. they do not know for a long time whether their products will be included in the Orderly Introduction or not, nor is it transparent how their products are assessed in the evaluation and pricing parts of the introduction process (Interviewee 1; Interviewee 4; Interviewee 8; Interviewee 6, 2015). A probable reason behind the lack of transparency and official process descriptions is that the actual introduction process is continuously changing. 6

Change initiatives come from all actors involved and the division of roles between county councils, SALAR and TLV is currently not clear and up for continuous debate (SKL; Interviewee 6, 2015). Another very important aspect is that most pharmaceutical companies in the Swedish market are part of large global companies, and most other countries in Europe base their pricing of pharmaceuticals on reference prices in other European countries (including Sweden). This means that Swedish subsidiaries do not have the freedom to negotiate prices without considering the effects on the business of subsidies in other European countries. This problem has led to a new trend in the Swedish market, namely high so-called list prices (i.e. official prices), but lower launch prices, set through confidential negotiations and agreements with county councils (Vårdanalys, 2014). This trend is fuelling the uncertainty, since especially new companies in the Swedish market have a very hard time assessing where their final prices should end up in comparison to competitors’ prices. It is also difficult for companies to anticipate which competitors’ drugs their products will be compared to in the health-economic assessment. This means that companies’ own models for health-economic assessment might differ completely from the assessments in the introduction process (Interviewee 5, 2015). Furthermore, a detailed description of the different sub-processes in the introduction process is yet not present and contributes even more to the non-foreseeability. The updates about the process are not frequent enough (Interviewee 5, 2015), and what is said and described officially is not always what is done in practice, which means that in order for companies to truly understand all the processes, they need to be constantly present at the ‘negotiation tables’ (Interviewee 1; Interviewee 6, 2015). 1.3. Problem Description After all information screening and company interviews, some problems have emerged as the most prominent in the examined situation. First, the process for introducing pharmaceuticals into the Swedish market, from a company perspective, is highly resource demanding. The companies need to be involved and active long before the actual introduction of their products, e.g. engage in convincing county councils about products that will not be launched for years to come in order to secure budgetary space (Interviewee 5; Interviewee 6, 2015). Also, in the current situation, companies need to invest in many manhours in order to stay up-to-date with all the shifts in the introduction processes. Consequently, the problem is that companies need to invest a lot of resources in projects with highly unsecure payoffs, as the Swedish market is characterised by high uncertainty and system complexity. The uncertainty and complexity comes from the fact that the new introduction model is yet not completely crafted, but in a trial-and-error period. The continuous changes make it hard for the companies to keep updated and fully understand what is expected from them, and how they will be evaluated once they enter the process. The complexity comes from the fact that the system is not completely new, but a result from years of adding new features onto the old system. This has contributed to involvement of many actors simultaneously; both 7

those already immersed in the system and those trying to influence the future design of the introduction processes (Interviewee 5, 2015). Another problem faced by companies, which is maybe the most flagrant problem of all, is the pressure from two sides – the complicated Swedish system on the one hand and restrictions from the headquarters on the other. The system results in a very strong counter party for companies, especially when the different parties, i.e. county councils come together with the explicit goal to put pressure on prices (SKL, 2015). The constraints from headquarters come mostly from the fact that headquarters have hard time understanding the Swedish system, which means that the local subsidiaries need to put a lot of resources into explaining the Swedish circumstances and justifying continued business in this market (Interviewee 2, 2015). Furthermore, due to the European reference pricing, it is important for companies (headquarters) to secure prices in Sweden equal to or above the European average. Therefore, since the new Swedish introduction system represents significant price pressures, and as it requirements for documentation are higher than in many other countries, there is a substantial risk that headquarters prioritize other countries before Sweden (Interviewees 1; 2; 4, 2015). All these issues contribute to high market uncertainty and thereby diminish the attractiveness of the Swedish market for large international players in the pharmaceutical industry. While some companies feel obliged to introduce new and powerful drugs in all markets regardless of the circumstances, business considerations are still predominating. Even though the probability for companies to leave Sweden completely is small, many companies prioritize other markets before the Swedish market, which, of course, entails huge societal losses. Therefore, in order to keep Sweden on top of the list as one of the best healthcare systems in the world, Swedish authorities need to consider the long-term implications and consequences of having a system that deter companies from entering or staying on the Swedish market. 1.4. Research Questions In earlier reports on the subject, focus has mostly been on consequences of the new system for county councils and other involved authorities. Less focus has been on implications for pharmaceutical companies in Sweden. Since these companies are the only actors who can provide innovative, life saving drugs to Swedish patients, we believe that it is of great importance to try to map their perspective, how they affect and are affected by the introduction system. In order to capture this perspective, our focus in this thesis will be to investigate which strategies companies choose in order to handle the introduction of new pharmaceuticals in Sweden and how these strategies can be improved, given the current situation and opportunities.

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Research Question 1: How do pharmaceutical companies in the Swedish market handle the current market processes for introducing new pharmaceuticals? Research Question 2: How can the companies improve their strategies given the current situation? As a smaller and much less profound perspective of this thesis, we will try to contribute to the public debate in the Swedish market by answering how the introduction process can change onwards to facilitate market processes for companies and ensure faster patient access to innovative pharmaceuticals. This analysis will however only be shallowly built on the insights from the findings of research questions 1 and 2, and some suggestions given by the companies themselves. Research Question 3: How can the process itself be changed to facilitate the introduction of drugs for companies? 1.5. Delimitations The focus of this thesis is the Swedish pharmaceutical industry, with complementing discussions about what possible implications global/international strategies, set by global headquarters, might have for Swedish subsidiaries. When discussing ‘the market’, we will refer to aspects that affect, and are affected by, the introduction process itself. The introduction processes of both prescription and in-patient drugs will be discussed, but also the necessary company preparations prior to the process, and the closest succeeding steps after the introduction will be covered. Last but not least, the paper will cover only the introduction process for pharmaceuticals that are completely new to the market, i.e. not the updated variants of products already present on the market.

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2. LITERATURE REVIEW Initial findings in this research have indicated that the market for new pharmaceuticals in Sweden is characterised by high uncertainty, due to constant modifications and many actors pulling the development in different directions. The following pages will therefore map current literature about strategies under conditions of uncertainty. However, since applied strategies under uncertainty are with high probability affected by the relationship with headquarters, we will start with this aspect before continuing on to the subject of market uncertainty. The strategic options available to an organization are constrained by certain degrees of “strategic freedom” (Clark, Varadarajan and Pride, 1994). The most common reasons for restricting subsidiary independence are headquarters’ desire to maintain power and control, and to facilitate the ability to benchmark between subsidiaries. In this way, headquarters can develop a standardized way of evaluating, rewarding and punishing subsidiaries. In order to maintain control and reach own objectives, headquarters most commonly transfer practices, people and resources to subsidiaries. However, different headquarters vary in the degree to which they intend to control their subsidies. In the same way, subsidies are willing or able to resist to different degrees. The institutional context is a strong factor in these processes. If the subsidiary’s local institutional context is very different from the local context of the headquarters, the problem will be enhanced compared to the situation in which the local contexts are similar (Morgan and Kristensen, 2006). Depending on the both the pressure from above (headquarters), but also on the resistance of the subsidiary, Morgan and Kristensen (2006) divide subsidiaries into ‘boy scouts’ and ‘subversive strategists’. While boy scouts are more prone towards following the demand of headquarters, subversive strategists continuously seek more independence and extension of their decision mandate. Subversives are often more locally embedded, for example by depending largely on local skills and relationships, since strong local institutions demand this, and they are also able to argue for resources and strategic freedom on the basis of this demanding “institutional configuration” of the local context (Morgan and Kristensen, 2006). It is argued that over-controlling subsidiaries, turning them into boy scouts, can reduce innovation, as different subsidiaries become clones of each other and the headquarters over time. As the distinctive features of these boy scouts slowly disappear, they become more and more useless for the multinational company (MNC), which is why they risk being discontinued. For subversives, on the other hand, it is highly important to be able to engage in efficient micro politics, as it is important to balance between meeting the performance requirements set by headquarters and protecting distinctive capabilities. Traditional business and management studies have long adhered to an assumption that market environments are dynamic, but for the most part controllable (Howard, 1957; Gartner, 1985). Assuming that the future is predictable and can be controlled, it only takes a collection of robust market analysis tools to develop a clear strategic direction. An alternative presumption in the business and management literature holds that strategic contexts of the firm are always uncertain, meaning that it is impossible to tailor the strategy 10

accurately enough (Wenerfelt and Karnani, 1987; Leavy, 2007). Leavy (2007:43) calls it a strategy paradox, stating that “[…] commitments cannot be adapted should predictions prove incorrect, and predictions are never reliably or verifiably correct’’. Making any of those extreme assumptions is precarious. If managers believe environments to be utterly uncontrollable, they will be encouraged to completely disregard all kinds of analysis and planning, and will start making strategic decisions primarily following their gut instinct (Courtney, Kirkland, Viguerie, 1997). On the other hand, ignoring possible effects of turbulent market environments is also unwise. Without staying alert, a firm might fail to mitigate threats brought by changing market conditions, and to take advantage of the opportunities these conditions can provide (Wernerfelt and Karnani, 1987). Thus, firms need to avoid seeing the uncertainty in a binary way – strictly predictable or completely uncertain. To make compelling business strategies a firm needs to understand the level of uncertainty it is facing and evaluate its sources (Courtney, Kirkland and Viguerie, 1997). The degree of uncertainty can vary for different firms, depending on the industry, political and economic climates, firm characteristics and competitive landscape (Wenerfelt and Karnani, 1987). Wenerfelt and Karnani (1987) suggest that uncertainty arises from four main sources – demand and supply structures, and competitors’ strategies and externalities. Demand fluctuations, changes in supplier industries, new technology, and competitors’ response to firm’s strategy are all contributing to greater market volatility. Some industries are characterized by more pronounced market imperfections, e.g. greater seller concentration, product differentiations and information asymmetries, or dominant market players with power to impose their interests (Arndt, 1979). In some cases governments are intervening to market practices unpredictably by introducing various economic policies, offering selective subsidies and privileges, or, on the contrary, constructing barriers to entry and restricting market access (Scherer, 1970). The combination of all these factors contributes to the overall level of uncertainty in a given market. When uncertainty is minimal, it might not affect strategic decisions of market actors at all, as it is easier to predict the likely response of the industry to each strategic move by relying on market research data (Courtney, Kirkland and Viguerie, 1997). As the level of uncertainty increases, it becomes more and more difficult to rely on predictions, as there might be a range of possible futures and no obvious discrete scenarios following the effective strategy. In some markets and industries, high uncertainty is constant, which is why traditional approaches for developing strategies tend to prove inapplicable – market changes are too rapid and analysis of the available market data quickly becomes out-dated. Businesses operating in such markets increasingly find themselves in the environments where data is anecdotal, ill-defined or even non-existent, as the market, its attributes and actors are constantly changing (Read, Dew, Sarasvathy, Song, Wiltbank, 2009; Courtney, Kirkland and Viguerie, 1997). According to Wenerfelt and Karnani (1987), depending on the level of environmental uncertainty in a concerned market, a firm faces trade-offs between focus and flexibility. The authors argue that, when the future is unpredictable, one strategic option is to focus the firm’s existing resources, i.e. exploiting economies of scale and avoiding high risk, and wait 11

until the uncertainty is resolved. Furthermore, the benefits of such a capability strengthening strategy would be preserved even after the period of uncertainty is over. Another option is to react immediately while the market has not yet stabilized and develop multiple scenarios for managing company’s resources in a more flexible manner and hence adjust to highly dynamic environment. However, in reality, firms usually have much more options in between focus and flexibility along the strategic continuum (Wenerfelt and Karnani, 1987). Storbacka and Nenonen (2011) argue that the strategic course of actions a company chooses to pursue under conditions of uncertainty depends on its “mental model”, i.e. “deeply ingrained assumptions, generalizations, or images that influence how market actors understand the world and how they take action” (Storbacka and Nenonen, 2011:246). Everything ranging from managers’ perception of the established relationships and the market configuration, to firm’s position in the market and in the network of relevant stakeholders, can form mental barriers and constrict them from the ability to comprehend and shape the market (Clark, Varadarajan and Pride, 1994). These mental models, or, in Courtney, Kirkland and Viguerie (1997) terminology, posture of the firm, define the firm’s strategic intent relative to the state of the market. Certain firms’ mental models (or postures) may cause managers to choose a rational approach, which is to adapt to the opportunities present in the environment. Others choose to apply effectuation (influencing) logic, which inverts the predictive rationality by seeing opportunities as outcomes of company’s attempts to co-create and influence the market (Read et al., 2009). However, adapting and influencing strategies are not mutually exclusive – an influencing company can show the characteristics of an adapter, and vice versa (Courtney, Kirkland and Viguerie, 1997). Yet, sometimes some companies can lean more towards one of these strategic postures (Courtney, Kirkland and Viguerie, 1997). Courtney, Kirkland and Viguerie (1997) define the companies that adjust to changing market conditions and take industry’s future evolution as given as adapters. Jarowski, Kohli and Sahay (2000) call this approach to market orientation market-driven. Adapters do not attempt to modify the behavior of the existing market players – they accept the roles of the market actors, current market structure and composition (Jarowski, Kohli and Sahay, 2000). In order to execute their strategies under the conditions of uncertainty and deal with probable constraints erected by other market players, they tend to have several contingency plans (Luthans and Stewart, 1977). With this perception of the market and their role in it, adapters entrust their success to identifying the positions and relative power of the current players, recognizing current developments and reacting to them as quickly as possible (Courtney, Kirkland and Viguerie, 1997; Jarowski, Kohli and Sahay, 2000). Regardless of the uncertainty level in the market, adapters tend to rely on the predictions based on available market data and calculated forecast of risk-adjusted expected returns to choose their strategies (Read et al., 2009). They are likely to gain their competitive advantage from effective execution of a marketing plan, and successful differentiation from competitor offerings on attributes that have been long considered important by the customers. Adapters tend to play on the safe ground and do not allocate too much resources on product innovations and providing new-to-the-world offerings that change customers’ perception of important product attributes (Jarowski, Kohli and Sahay, 2000). Even if they 12

decide to invest in novel practices or product development, adapters are more likely to try securing pay-offs, and thus tend to make only incremental investments to hedge the company for the possible losses (Courtney, Kirkland and Viguerie, 1997). They commonly choose to focus on actions the effect of which is easy to calculate, and execute only those that are less likely to bring losses, such as building skills, gathering competitive intelligence or cutting-costs initiatives (Courtney, Kirkland and Viguerie, 1997). Leavy (2007) suggests that certain companies are simply unable to influence the market situation, and therefore can only adapt to mitigate the possible threats of changing environment. Successful adapting firms are doing it by anticipating the change, building possible scenarios of future development and formulating optimal strategies for core elements of possible futures. They accumulate operating tools for executing the portfolio of strategic options and then adjust the use of such tools and options as the future unfolds (Leavy, 2007). Such companies adapt not only their operational, but also organizational structures to capture the shifting market opportunities. They make small process and operational changes, re-organize and add business units to create as much value as possible given certain markets conditions (Eisenhardt and Brown, 1999). Thus, when dealing with uncertainty and turbulent markets, adapters tend to have a reactive, rather than proactive attitude, as they adjust their plans in response to the changes in environment. Effectuators (Read et al., 2009) or shapers (Courtney, Kirkland and Viguerie, 1997), on the other hand, are taking the proactive approach. These actors try to take advantage of turbulent market environments to control and devise the market structure to best suit their business needs. Shapers try to influence the market and co-create it through building commitments with other network actors such as investors, customer stakeholders, suppliers, political bodies, etc. (Sarasvathy, 2008; Read et al., 2009). According to Storbacka and Nenonen (2011), such market orientation is possible when actors’ positions in the network, their mental models and business models are powerful enough to configure the market in their favor. Jarowski, Kohli and Sahay (2000) call this approach to market orientation market-driving. In turbulent times, shapers are building their strategies with the aim to re-shape and stir up the industry’s status quo, and thereby take (or maintain) a leading position in the market (Courtney, Kirkland and Viguerie, 1997). Such firms refuse to be passive victims of uncertain environments, but rather attempt to form this market environment themselves (Brennan, 2006). The number or magnitude of changes caused by these shapers are usually big enough to influence the behavior of other market players. They do this through cognitive change, alteration of functions performed by other market players, or through reengineering industry value chain (Jarowski, Kohli and Sahay, 2000). They do not necessarily try to modify the market by solely relying on own organizational skills and resources. Shapers often attempt to influence market structures by attracting cooperation and joint efforts with other market actors. Storbacka and Nenonen (2011) suggest that actors who try to influence the market under the conditions of uncertainty look beyond the market boundaries, engage in strategic experiments, and develop collective sense-making strategies striving to involve as many 13

actors as possible in the change processes they are devising. Thus, shapers embark on the strategic path that Arndt (1979) defines as “domesticating” of markets, i.e. involving as many different actors as possible on various levels in the design, implementation and maintenance of inter-organisational marketing systems. In other words, influencing actors are usually highly embedded within the context of their operations (Arndt, 1979, Storbacka and Nenonen, 2011). To achieve domesticating, shapers make use of their best managers who can stabilize a situation by sharing their market definition and thereby getting others to agree with this definition (Storbacka and Nenonen, 2011). In general, the strategic focus of shapers is usually concentrated on this and other various kinds of representational practices that help influence the network of actors and create the foundation for dialogue about value-creation and pricing. They take the role of vision-creators that drive the industry towards new structures, sometimes establishing new standards that help to achieve more stable and favourable conditions for the own company (Courtney, Kirkland and Viguerie, 1997). The importance of being flexible goes as a red thread throughout the literature about strategy under high levels of uncertainty, regardless of the firms’ ability to choose an adaptation or an influencing strategy (Courtney, Kirkland, Viguerie, 1997; Eisenhardt and Brown, 1999). Adapter’s posture involves ensuring the quickest access to the best market information and act on several strategic options, depending on how the future unfolds. Thus, adapters always need to be ready to adjust their actions, operations and follow-up strategic choices (Courtney, Kirkland and Viguerie, 1997; Eisenhardt and Brown, 1999). For shapers flexibility is not less valuable, as they need to navigate in the different fields to make other market actors accept their market definition and shape the direction of market development in their favour (Storbacka and Nenonen, 2011; Read et al., 2009). Hence, independent of whether the firm chooses the posture of a shaper or an adapter, or combines both strategies in turbulent markets, flexibility is the key for the strategy’s success (Read et al., 2009; Wenerfelt and Karnani, 1987). In summary, there are different levels of uncertainty, and different strategic options available to an organization, which are contingent upon a multitude of factors, including the degree of “strategic freedom” a company has in relation to its headquarters and the company’s mental model.

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3. THEORETICAL FRAMEWORK From the literature review it follows that uncertainty levels in a market can vary to a great extent, depending on a range of factors and the intensity of their influence. The Swedish market is characterised by high levels of market uncertainty, high need for local embeddedness and a two-sided pressure facing companies present in the market. Thus, for the purposes of this case research, articles for the theoretical framework are chosen to narrow down the focus area and address specific issues in the Swedish introduction process for new pharmaceuticals. The suggested framework will be used in two ways. First, the framework will be used to evaluate the current situation the examined companies are facing. In the next step, the framework will be used to give recommendations on how strategies can change in order to better suit the current situation. Note that research question 3 is not handled in this framework. 3.1. Two-sided Pressure The pharmaceutical industry is highly globalized (WHO, 2015), and the companies participating in this study are subsidiaries of multinational companies (MNCs). Hence, in addition to an uncertain market environment, local companies’ strategic freedom might be constrained by MNC’s policies. The question is, then, whether subsidiaries are given space to manoeuver their actions in the local contexts and thereby “develop distinctive advantages which they build out of their relationships with the institutional context” (Morgan and Kristensen, 2006, p. 20). Therefore, to even start considering current and prospective strategic actions and practices of local subsidiaries in the Swedish market, the degree to which companies have the freedom to choose and adapt their actions to the current situation needs to be investigated. Since Sweden has strong institutions that affect the local pharmaceutical industry, it is of crucial importance for subsidiaries to become locally embedded. For that reason, as a first step, Morgan’s and Kristensen’s (2006) framework “Types of micro-politics in MNCs”, will be used to evaluate the level of pressure from headquarters that companies are subjected to and the amount of freedom they possess to choose their strategic posture in the local market. 3.2. A Framework for Analysing the Degree of Strategic Freedom The first step in this theoretical framework is based the article by Morgan and Kristensen (2006), which, inter alia, includes intensions of multinational companies (MNCs) to restrain subsidiaries’ space for independent development and local embeddedness. Given the reasoning of Morgan and Kristensen, it ought to be advantageous for a subsidiary in Sweden to be a subversive strategist, as companies with this posture tend to be more locally embedded – something that is crucial in the Swedish context. Therefore, our first step of analysis is to estimate whether the studied subsidiaries are subversives or boy scouts. In this analysis, it is highly important to note that the extreme classifications of companies as either boy scouts or subversives are used to enable theorizing and clarification of 15

arguments. In reality, companies can take multiple other postures on the continuum in between a subversive and a boy scout. Due to the built-in presumption in this framework that companies leaning towards a boy scout posture will have little or no power to either adapt to or influence the market processes, recommendations will first turn towards addressing how they can become more subversive. Then, all companies, independent of whether they are assessed to be boy scouts or subversives, will be assessed also in the next step of analysis – adapting versus influencing postures. This is done to investigate whether there is a connection between strategic freedom and the choice of strategic posture. Graph 2: Summary of the Framework for Analysing (and Recommending on) the Degree of Strategic Freedom

3.3. Framework for Analysing Strategic Posture In the Swedish market, a certain level of local embeddedness is inevitable, regardless of whether a company is a boy scout or a subversive, since the introduction process e.g. requires relationship building with authorities long before actual payoffs. However, the question is whether a company has a mental model, which allows them to go beyond that minimum required local embeddedness. Therefore, after the analysis of the strategic freedom, the second step in the framework is used to assess what constitutes a strategic posture of influencing and a strategic posture of adapting. The second step in the framework, which investigates companies’ strategic posture, is used to analyse strategies that companies are currently pursuing and to give recommendations on how these strategies can be improved in the given situation. A summary of the framework for analysing the strategic posture is presented in Table 3. 3.3.1. Influencing If a company has a mental model of an influencer, it will attempt to influence and co-create the market structure by focusing on intangible resources (Storbacka and Nenonen, 2011; Read et al., 2009). The literature on strategy under the conditions of uncertainty shows that a company is likely to influence a turbulent market if it is capable of i) building relationships with other stakeholders, ii) having external stability, market power and resources and iii) having flexible management and strategy (Storbacka and Nenonen, 2011; Read et al., 2009; Clark, Varadarajan, Pride, 1994; Arndt, 1979, Jaworski, Kohli and Sahay, 16

2000; Brandenburger and Nalebuff, 1995). i) Relationship-building A company that intends to influence the market is less likely to develop marketing strategies based on market research data and to use traditional marketing tools for predicting demand patterns. Instead, influencers tend to co-create the market through building direct relationships with stakeholders, thereby securing first-hand knowledge about the market. One of the most effective approaches to build and maintain these relationships is to have an experienced market access manager (Read et al., 2009). Influencers also need to have a very proactive approach in business, which is usually reflected in the structure of their operations. It is very common for an influencer to have dominating so-called boundary-spanning functions or units, i.e. units with the specific purpose to link organisational members with non-members, and facilitate their interaction (Clark, Varadarajan and Pride, 1994). Boundary-spanning units help a company to build coalitions and close cooperative relationships with other actors and interest groups (e.g. suppliers, customers, distributors, customers, government agencies, labour unions, etc.), and to have implicit agreements. Thus, these companies can collect valuable knowledge about all exchanges between the company and its environment. Therefore, the relatively higher importance of boundary-spanning organisational units is a sign of deeper embeddedness of a company into its business- and institutional environment (Arndt, 1979; Clark, Varadarajan and Pride, 1994). Deeper embeddedness, in turn, allows the company to be better prepared for environmental disturbances, as the company has more information about certain market contingencies and can use resources pooled through interaction with other actors as a buffer (Clark, Varadarajan and Pride, 1994). Close relationships also grant influencers a more central position among its stakeholders and give them a higher level of “clout” (or social capital), which makes it easier to influence the stakeholder network. Through representational practices, such as interactions with stakeholders and various “below-the-line activities” (e.g. special deals, discounts, incentives directed to certain interest groups), the influencer can disperse own perceptions of a certain market onto other actors (Arndt, 1979; Storbacka and Nenonen, 2011). ii) Market power and resources The central position in the network mentioned in the previous sub-section also gives influencers access to and control of resource flows, such as skills and information. It allows influencers to pool these resources across organizations, which often results in synergies. This further enhances perceptions of the company as powerful and increases the company’s ability to promote own compelling denotations about the market (Storbacka and Nenonen, 2011; Jaworski, Kohli and Sahay, 2000). When a company is successful in promoting its subjective perception of the market in question, it is also in a better position to shape the structure of the market according to its best interests, i.e. change functions performed by market actors, eliminate or add actors, or build new webs of players (Jaworski, Kohli and Sahay, 2000). An influencer might use its 17

central position to remove market constraints (e.g. certain regulations or competitors), to set new standards for the industry using the advantages of close cooperation with all market actors, and to affect mental models of other stakeholders (Storbacka and Nenonen, 2011). As a consequence of the above mentioned market construction activities, a company can widen its pool of organizational resources through influencing the market. Sometimes, however, the causality is reversed. Extensive resources that a company already possesses can make it easier for it to influence the market configuration. Moreover, if the company enjoys the frill of slack (excess) resources, it can direct those towards creating more compelling representational practices and relationship building. Yet, having slack resources is not a major prerequisite for gaining influence. Some companies are able to engage in relationship building and market construction practices by simply being efficient in using the resources they have under conditions of uncertainty and by combining them in a way that directs market development towards personal interests (Clark, Varadarajan and Pride, 1994). iii) Flexibility in management and strategy As already mentioned, in order to influence an uncertain market, it is of crucial importance to manage a company’s resources in flexible manner, and be able to transfer own market definitions onto other market actors. This requires flexibility in strategic goal setting, as well as in management processes. Decision-makers in flexible companies therefore need to be risk-takers and “internals”, i.e. they see any environment as controllable (Clark, Varadarajan and Pride, 1994). These managers are commonly not aiming to achieve the highest possible returns on investment and market share, but rather calculate “affordable loss”, i.e. they evaluate what the company can afford to lose in a worst-case scenario. In this way, they focus less on short-term returns. Instead, they prefer to make greater long-term commitments and solve immediate problems “on-the-go”, by making decisions that are roughly right, but in accordance to their long-term goals (Eisenhardt and Brown, 1999). 3.3.2. Adapting Companies that choose an adapting strategic posture create a continually shifting mix of tightly aligned businesses that could respond to dynamic and turbulent markets. When the market is constantly changing, corporate executives of adapting companies tend to routinely remap their businesses by “adding, splitting, transferring, exiting, or combining chunks of businesses” (Eisenhardt and Brown, 1999, p.74). Literature suggests that companies are likely to effectively adapt to uncertain market conditions if they i) adjust its investments strategies, ii) make marketing and sales adaptations, ii) adjust operating strategies, and iv) adjust strategic decision-making processes. i) Adjust investment strategies As opposed to companies that have their mental model set for influencing the market, adapting companies focus on investments that bring the greatest returns short-term. They tend to concentrate on the best opportunities at the expense of less promising ones and are more reluctant to make big bets and invest into risky projects (Eisenhardt and Brown, 1999). 18

ii) Make marketing and sales adaptations An adapting company often attach greater importance to maintaining and increasing sales when demand and other market conditions are highly uncertain. Therefore, they are less likely to bet on risky product innovations and adhere to well-defined product offering. Instead, they are more likely to constantly change and adapt value propositions and product offerings to shifting market conditions until the product is accepted by the market (Read et al., 2009). Hence, it is crucial for adapting companies to employ an experienced sales person, who is able, even under the conditions of uncertainty in market preferences, to clearly define elements of a product’s value, quantify it, and communicate it efficiently to potential buyers (Storbacka and Nenonen, 2011). iii) Change/adjust operating strategies The competitive edge of adapting companies’ is usually built around their agility, i.e. around the ability to quickly respond to changes in the environment with fast, wellcalculated decisions. This agility often requires making small-scale, but frequent changes through rapid operational re-structuring. This includes developing routines that allow constant change and realignment, and creating new business units (either from scratch or through acquisitions). Furthermore, adapting companies try to capture the opportunities in various niches of the changing local market, and thus segment the markets geographically or/and based on operating peculiarities. Such companies continuously work on creating an as flexible infrastructure as possible, and thus promote change as a norm within the organizational culture (Eisenhardt and Brown, 1999). iv) Adjust strategic decision-making processes The need for constant adaptation of product offerings requires adapting companies to have a highly flexible strategy, that can be adjusted according to changing market conditions as often as the context might require. Therefore, adapting companies perform best when their strategy is seen as a set of small, constantly changing goals (Eisenhardt and Brown, 1999).

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Table 3: Summary of the Framework for Analysing Strategic Posture Influencing

Adapting

CP* 1: Building relationships with other stakeholders: • Having a market access manager able to build necessary relationships with stakeholders • Generating first-hand market knowledge through relationships • Having boundary-spanning units/functions • Lobbying, coalitions with all stakeholders • Engaging in below-the-line activities • Engaging in representational practices CP 2: Having external stability, market power and resources: • Having a central network position: power to author compelling meanings related to the market • Building collaborations to pool the skills and resources across organizations • Shaping market structure through changing the functions performed by market actors, eliminating or adding actors/building a new web of players/ removing market constraints • Setting new standards for the industry • Having slack resources and/or being proficient in securing resources under the conditions of scarcity CP 3: Having flexible management and strategy: • Having decision-makers that are risk-takers and “internals” • Focusing on “affordable loss” • Making decisions that are roughly right and then settling the problems “on-the-go”

CP 1: Making marketing and sales adaptations: • Continuously changing/adapting value proposition and product offerings to shifting market conditions • Having experienced sales person able to quantify and communicate value CP 2: Changing/adjusting operating strategies: • Creating new business units from scratch or through acquisitions • Developing new routines that allow for constant change and realignment • Segmenting the markets geographically and based on operating peculiarities CP 3: Adjusting strategic decision-making processes: • Seeing company’s strategy as a set of small, constantly changing goals • Focusing on the best opportunities at the expense of less promising ones

*CP = Constituent Point

The constituent points (see Table 3) are used as analytical tools to identify company activities that are characteristic for the two different strategic postures. However, it is notable that the dimensions of adapting and influencing are not mutually exclusive. A company can pursue both influencing and adapting strategies simultaneously.

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3.4. Empirical Research Questions Given the literature review and the framework used in this paper, empirical research questions are formulated and will be the basis for structuring the empirical results and for answering the research questions. To assess subsidiaries’ strategic freedom, two main questions will be answered in the analysis: Empirical Research Question 1: To what extent do headquarters try to control local subsidiaries? Empirical Research Question 2: To what extent do subsidiaries resist control efforts by headquarters? To assess subsidiaries mental models and strategic postures, two main questions will be answered in the analysis: Empirical Research Question 3: To what extent are companies using strategies to influence the Swedish introduction process for new pharmaceuticals? Empirical Research Question 4: To what extent are companies using strategies to adapt to the Swedish introduction process for new pharmaceuticals?

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4. METHODOLOGY 4.1. Research Approach In this paper, research is based on a context-bound phenomenon, the introduction process for new pharmaceuticals in Sweden and its implications for business strategies, and is therefore a case study. To apply a case study method enables description of a phenomenon, and facilitates understanding of patterns in a real-life context (Kaipia et al., 2013). Given the lack of secondary data and the dynamic character of the studied process, a case study is the most powerful approach to investigate the current situation. The research approach adopted for this specific study is qualitative, since the study is conducted with the aim of describing and analysing the circumstances in a particular situation, rather than with the aim to quantify and generalize (Bryman and Bell, 2007). However, in order to categorize the participating companies, and thereby in order to identify improvement potential, elements of quantification have been used, but again without the ambition for generalization. 4.2. Approach for Choosing Theoretical Framework, Data Collection and Analysis Given the specific nature of case study research, an integrated approach called “systematic combining” is most suitable for building a theoretical framework, setting up the data collection and analysis. This approach allows reorientation of the analytical framework and redirection of the research problem according to what is gradually discovered through empirical fieldwork (Dubois and Gadde, 2002). Data obtained during initial interviews with LIF and through official industry and governmental reports, was used to identify the scope of the problem, served as guidance for choosing articles for the literature review and gave initial ideas for the theoretical framework. Then, empirical findings from interviews conducted with pharmaceutical companies called for slight adjustments to research questions, as well as expansion of current theoretical framework to include another level of analysis. However, according to Dubois and Gadde (2002), the gradual “evolution” of the theoretical framework and overlap of data analysis with data collection are frequent in case studies. Continuous matching, i.e. going back and forth between framework, data sources, and analysis is, thus, inevitable in a case study research. 4.3. Sampling The selection of companies in the study was purely a matter of interview access possibilities. However, the current sample provides a broad variety in a number of aspects. Some of the companies are smaller subsidiaries of big MNCs, others are bigger, and one company acts as one of the decision-making bodies within the MNC. All companies interviewed are important market players in the Swedish market with varying sizes and strategies. Most of the included companies are only marketing companies in the Swedish market, whilst two have R&D departments and production in Sweden. Some of the companies have already been part of the new introduction process, whilst others are yet to experience it (Antonov and Holmberg, 2015). The selection of companies with varying 22

relationships with headquarters, strategies, sizes, and experience of the introduction process allows for proper comparison and pattern identification. 4.4. Data Collection and Analysis The interviews with pharmaceutical companies were semi-structured and lasted for around one hour. The interview questions were designed based on a previous literature review and on a preliminary theoretical framework. The questions were sent to interviewees in advance. A majority of questions were open-ended in order to allow for a broader understanding of the respondent’s view on the phenomenon and identify what they see as most important (Bryman and Bell, 2007). Some follow-up questions were structured in a way to allow respondents to convey their answer using a scale from 1 to 10. This was done to facilitate the analysis of particular issues and achieve comparable results. In the analysis, each company is assessed on a three-degree scale based on their answer in each of the interview questions from the first step of the framework, which involves an assessment of companies’ strategic freedom. One end of the scale represents a boy scout posture, while the other end represents the subversive strategists posture, and there is one inbetween position. To finally determine a company’s posture, an aggregate assessment is made on the outcomes of all six questions. For example, if a company leans more towards the subversive posture on a majority of questions, this company will be assessed as leaning towards the subversive end of the scale overall (see Appendix, 11.2). The three first questions (Q1-Q3) indicate how much headquarters tries to control the subsidiary, whereas Q4-Q6 indicates how much a subsidiary is able to resist headquarters’ control efforts. Both dimensions are weighted equally. Furthermore, all six questions are weighted equally, since all of them are presented, by Morgan and Kristensen (2006), as individual indicators for assessing the strategic posture of companies. Since, as discussed earlier, reality is not as clear-cut as theory, approximate assessments are made and instead of claiming that any company is either a boy scout or a subversive, the assessment is about determining the dominant inclinations of a certain company. In the second part of the framework, which assesses the tendencies of companies to lean towards adapting or influencing postures, companies are also assessed based on three constituent areas in both the influencing and adapting dimension. In the influencing dimension, the constituent points are building relationships with other stakeholders, external stability, market power and resources and flexible management and strategy. In the adapting dimension, the constituent points are making marketing and sales adaptations, changing/adjusting operating strategies and adjusting strategic decision-making processes. As can be seen in Table 3, the constituent points consist of some sub-points. When a company fulfils a majority of these sub-points, or has a highly compelling fulfilment of one or a couple of sub-points, they are also assessed to have fulfilled the constituent point. All sub-points are equally weighted in the assessment. Then, the companies are finally assessed on whether they are leaning more towards an adapting or an influencing posture based on how many of the constituent points they fulfil. The general rule is that if a company fulfils 0-1 constituent points, they are not leaning towards adapting/influencing, if they fulfil 2, 23

they are in the middle and if they fulfil three out of three they are definitely leaning towards either an adapting or an influencing posture (see Appendix, 11.3). All constituent points are equally weighted in the assessment. Companies’ flexibility in terms of relationship building and operational strategies are part of the assessment described above (influencing/adapting postures), and are first and foremost based on constituent points 3 in each dimension. Notable is that companies can also be assessed to score negatively on some constituent points, which contribute negatively to the overall score, i.e. that point is withdrawn from the company’s overall score on that particular parameter. For example, if one constituent point is about building relationships with other actors in the market and a particular company indicates the opposite, i.e. that they never have and never will build relationships with other actors, they will score negatively on that constituent point. The analysis and recommendations that will be given on how the system itself can be changed to facilitate company processes will solely be based on the comments given by companies and is completely disconnected from the analysis framework.

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5. RESULTS 5.1. Relationships with Headquarters The following section is structured in accordance to the sequence of questions, found in Appendix 11.2, that concern the relationships with headquarters. The responding companies differ a lot when it comes to how much freedom they have, and hence to which degree they need to seek permission from headquarters for making decisions and for engaging in new practices. Most companies have highlighted that they are quite free and decentralized, except when it comes to pricing issues (Interviewees 1; 2; 3; 7, 2015). Interviewee 4 (2015) reported that when it comes to reorganizations to better meet the environment, they are highly restricted. Most companies also reported that they are tightly measured on financial indicators, and often benchmarked against other subsidiaries in other countries (Interviewees 2; 6; 7, 2015). Interviewee 3 reports, however, that they are part of building product strategies, as they are part of the decision-making headquarters. Therefore, they set their own performance indicators. Interviewee 5 and 7 specifically highlight the commonplace transfers of people in managerial positions to the local Swedish subsidiary, rather than the transfer of ‘specialists’ (Interviewee 5; 7, 2015). All, but one, of the remaining respondents have also confirmed that headquarters oftentimes send personnel (Interviewees 1; 2; 3; 5; 6; 7, 2015). Even interviewee 4, who indicated that it does not happen often, reported that it happens from time to time that business units heads or finance directors get transferred from headquarters (Interviewee 4, 2015). The degree to which HQ strategy affects local strategy also differs in different companies. Interviewee 7 reported that headquarters have some influence on the local level, a 3 on a 10degree scale (where 10 is that HQ strategy translates perfectly), but that the subsidiary mostly adjusts to the very specific circumstances of the Swedish market (Interviewee 7, 2015). Other companies report that different parts of HQ strategy translate to different degrees. For example, Interviewee 2 said that HQ strategy translates perfectly when it comes to product descriptions, but that they adapt locally to a much larger extent when it comes to how they interact with customers. The interviewee also added that the subsidiary has specific strategies for convincing HQ about the relevancy of activities performed in Sweden (Interviewee 2, 2015). Interviewee 3 reported a high number on the 10-degree scale, i.e. the strategy from above translates perfectly, but remarked that this is mostly due to the fact that the subsidiary is part of the strategy formulating force on an international level (Interviewee 3, 2015). Generally, all but Interviewee 7 reported a number over 5, i.e. closer to perfect translation rather than little or no strategy translation (Interviewees 1; 2; 3; 4; 5; 6, 2015).

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Two of the interviewees reported that they argue for more resources from headquarters based on a ‘business rational’, often through referencing to their financial performance, e.g. through presenting ROI or NPV calculations for the future (Interviewees 5; 6, 2015). Interviewee 4 explained that they argue for resources based on resources needed to accomplish the assigned tasks (interviewee 4, 2015). Interviewee 1 reported that they base their arguments to HQ on the impact the company has on the market, while Interviewee 7 argues based on the properties of the Swedish market, e.g. that Sweden wants to invest in innovation and be the front leader in healthcare (Interviewees 1; 7, 2015). When it comes to the perceived importance of conforming to official performance measures, all companies but one score 8 or higher on a 10-degree scale which, where 10 is that performance measure are highly important (Interviewees 1; 2; 3; 4; 6; 7, 2015). Only Interviewee 5 scored themselves with 5 on that scale (Interviewee 5, 2015). 5.2. How Companies Handle the Introduction of New Pharmaceuticals? The following section is structured in accordance to the sequence of questions, found in Appendix 11.3, that concern the ability of companies to influence and/or adapt to market conditions. The interviews showed that all companies need to build cost-effectiveness models when introducing new pharmaceuticals to the Swedish market. Moreover, none of the interviewed companies have the freedom to officially set locally adapted prices on new pharmaceuticals, due to the European referencing practices. Instead, international prices are set by headquarters (Interviewees 1-7, 2015). In order to manage the price-setting difficulties, many companies are involved in separate negotiations with individual county councils to reach regional agreements (Interviewees 6; 5; 1; 2; 7, 2015). Several company representatives admitted that these confidential discounts and dialogues with each individual county council “gives [them] some freedom to deal with local differences” (Interviewee 6, 2015), while others state that it is hard to “strike the balance between providing the best treatment and addressing individual interests of county councils” (Interviewees 2; 7; 4, 2015). Most companies in the sample have handled the changing processes for drug introduction in the Swedish market in a similar way, by introducing similar operational changes (Interviewees 1-7, 2015). According to interviewee 4 (2015), the Swedish subsidiary is “[…] changing from having a traditional product-marketing-sales-force organisation to a customer-focused organisation”. Most of the companies have gone from “[…] having a lot of sales representatives” to removing all of them or keeping only few and “[…] forming an entire department responsible for market access, that works specifically with county councils and politicians” (Interviewee 6, 2015). Some also introduced new, or removed old, support functions within their companies, and introduced account manager positions (Interviewees 4; 5; 6, 2015).

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As the processes in the Swedish market are becoming more complex, companies have also adjusted their operational routines to tackle certain market access challenges and to adjust to constantly changing conditions (Interviewees 1-7, 2015). They now allocate more resources to processes devoted to market and stakeholder understanding (Interviewees 4; 1, 2015), to processes predicting drug comparators (existing pharmaceuticals against which new pharmaceuticals are benchmarked) in the cost-effectiveness evaluation (Interviewee, 4, 2015), and to communicating with TLV, county councils, politicians, patient organisations etc. during the various stages of introduction process (Interviewees 2; 1; 5; 6, 2015). For instance, interviewee 1 (2015) mentioned that they “… constantly recruit new market access people” and “have brand teams – groups that are responsible for making introduction plans and marketing activities”, which include medical, safety, and legal functions, and which composition is changed depending on the type of product being introduced and the general situation in the market (Interviewee 1, 2015). Some companies coordinate marketing and business activities among regions, i.e. county councils (Interviewees 6; 2, 2015), and even have different reporting lines for regional groups (Interviewee 6, 2015). The market process changes are also reflected in altered functions of managers responsible for the drug introductions. Before, managers were more similar to salespeople, whereas now, their responsibilities have shifted to include management of external affairs, i.e. working with authorities, TLV, county councils, SALAR, etc. (Interviewees 1-7, 2015). The company represented by Interviewee 2, for instance, has two different managerial positions, one of which mostly presupposes dealing with pricing and reimbursement, whereas the other is about policy formulation and external communication (Interviewee 2, 2015). Managers in some of the interviewed companies seem to attach greater importance to “keeping the prices stable” (Interviewee 5, 2015) or “securing access to our products for patients that need them” (Interviewee 2, 2015), while others are more concerned with “promoting the benefits of the product” (Interviewee 3, 2015) or communicating with politicians, Ministry of Health and TLV (Interviewees 2; 7; 3, 2015). Interviewee 2 (2015), for instance, highlights the growing importance of having negotiation skills and “…understanding the customer’s perspective rather than pointing at diagrams to sell the product”. Managers of companies involved in the study also have varying span of responsibilities, understanding of, and access to information about the introduction process (Interviewees 17, 2015). The interviewed manager in company 1, apart from being responsible for market access, public affairs, price application process with TLV, and negotiations with county councils, also deals with helping foreign members of the company to adapt to the Swedish system, works very closely to LIF and “has a network from parliament and down” (Interviewee 1, 2015). Thus, some managers are able to keep themselves well informed (Interviewees 7; 1; 3, 2015), whereas others have limited access to information about continuous changes in the introduction process and about different stakeholder agendas. Colleagues responsible for the introduction process in company 5, for instance, even have a commonly used term “IWIK (I Wish I Knew)” to reflect on some of the developments in the Swedish market for new pharmaceuticals (Interviewee 5, 2015). 27

Many companies report that they need more resources in order to properly introduce all new drugs currently in their pipelines in Sweden (Interviewees 7; 1; 6; 3, 2015). According to interviewee 1, “there are too few resources and [he] needs to clone [himself] to have time to work with all the counties”. Interviewee 7 (2015) agrees that more resources would help, admitting that “my Danish colleagues have nothing to do compared to me” and company 7 told that they “[do not] have the manpower to track all the county councils down” (Interviewee 7, 2015). Yet, both these companies admit that they manage to launch everything they want in the Swedish market even with scarce resources (Interviewees 7; 1, 2015). Other companies are accentuating even more how resource consuming the introduction process is. They are indignant about the fact that they can only get resources after they have shown some profits, but most often the resources are needed earlier in order to achieve those profits (Interviewees 4; 6; 5, 2015). Some companies also mentioned that both insufficient resources and the new processes focused on lowering prices of pharmaceuticals affect their decisions about which drugs to introduce (Interviewees 6; 4; 1, 2015). Company 4 stated that they always analyse the resources needed in relation to the expected sales, emphasising that they are trying to focus on “true” cost of the drug, but also mention that “if [they] have to give away a lot [in the negotiation with county councils], it is not going to end up well [for the company’s business]” (Interviewee 4, 2015). Company 2’s representative also highlighted the business rationale: “We want [the process to change] to allow patients to get the health benefits and make sure companies get paid for the benefits the drug offers” (Interviewee 2, 2015). Interviewee 5 stated that they “will always launch in Sweden, but […they] won’t launch anything that county councils will not have” (Interviewee 5, 2015). For them, making decisions about the launches and strategic flexibility in general, is strictly framed by company’s values, and according to Interviewee 5, “it is not easy to be flexible with those values” (Interviewee 5, 2015). Company 6, on the other hand, stated that they learn from each launch and try to adapt to the processes to make sure the next launch is successful (Interviewee 6, 2015). Interviewee 7 (2015), on the other hand, while admitting that “it is hard to work against the system”, stated that her company has to compromise to stay in the Swedish market. She says that “instead of seeing all the threats and complaining, [we] tried to be part of [the changes]”, and maked an analogy: “the train is leaving - either we jump on the train or we are lost” (Interviewee 7, 2015). The intention of company 7 is to launch all new drugs in Sweden, even if this presents major struggles for the subsidiary. The struggle arises since the decision to launch is not always logical from a business perspective. To handle these difficulties, the subsidiary is trying to be as flexible as possible. Interviewee 7 also stated that before the process changes, they “…used to have one main strategy for market access, now [they] have several plans. However, managers underline that they are taking big risks by fighting to launch some drugs, as they take personal responsibility for potential failures (Interviewees 7; 1, 2015). Many companies are trying to ensure a successful introduction of a drug by generating firsthand market knowledge through an unceasing interaction with relevant stakeholders. 28

Interviewee 7 stated that their company communicates with county councils and other actors every week and comes up with constructive change suggestions for the processes (Interviewee 7, 2015), while Interviewee 3 claims to have pragmatic discussions with TLV regarding the cost-effectiveness assessment, which results in less frustration in price negotiations for the company, compared to other companies (Interviewee 3, 2015). Company 1’s strategy is to recruit people that already have established contacts within the industry to ensure more successful introduction of the new drugs (Interviewee 1, 2015). Others try to predict whether a drug will be appreciated by TLV and county councils based on the assumed budget impact and level of innovativeness of their drugs (Interviewee 6, 2015). Some companies try to be involved by taking part in the horizon scanning process (Interviewee 5, 2015) or by engaging directly or indirectly in discussions with relevant politicians (Interviewees 1; 7; 3; 5, 2015). Interviewee 2 (2015) stated that their managers are trying “[…] to make counties move out from the “box” of thinking in terms of procedures and pills, and rather think of the overall health benefits”, and to do that they “need to talk to top guys in the county councils”. Interviewee 4 admitted engaging in similar activities: “[Company 4] uses a wide arena to get access to councils; through doctors, drug committees, health economists and politicians (specific persons within the county councils)” (Interviewee 4, 2015). Many companies recognize the importance of collaborating with other actors involved in the introduction process apart from county councils (Interviewees 1; 7; 3; 2, 2015). Interviewee 1 (2015) states that company 1 “[…] work[s] on all levels; has a lot of collaboration projects with different regions and county councils, as well as regional and political decision-makers, hospitals and TLV”. Although companies are not allowed to collaborate directly with competitors, some still cooperate on the process level, mainly through task forces and committees at LIF (Interviewees 7; 2, 2015). Yet, not all companies want to, or are able to, collaborate with other actors to the same extent. Company 5, for instance only collaborates through LIF meetings, and healthcare meetings, but does not cooperate with other parties; “… we are different companies; and it’s not so common to cooperate with patient organisations either” (Interviewee 5, 2015). Moreover, Interviewee 5 (2015) added that “it is difficult for [his] company to arrange a meeting with TLV, which would help clarifying some peculiarities of the new processes, because TLV will have to do similar stuff for all companies” (Interviewee 5, 2015). Other companies not only have good contact with other actors involved in the introduction process, but are also contributing to different aspects of it. For instance, scientists in company 3 update people responsible for writing national treatment guidelines about recent evidence generated in the pipeline development. Moreover, company 3 mentioned that they “through discussions and writing official queries, try to influence stakeholders’ opinion to suit [its] processes”. They often collaborate and are able to give input to SALAR, and differentiate what patients are to be treated, and contribute with other knowledge” (interviewee 3, 2015). The same company also claims to have more internal decisionmaking power and bigger acceptance among the actors involved in the introduction process 29

compared to other companies, and is even able to influence the structure of the process and discussions on price within EU. Company 4 stated that they “have a say in Sweden”, and that they have initiated many discussions about how the process of introduction should be configured (Interviewee 4, 2015). Both company 7 and company 2 mentioned their efforts to give constructive suggestions to relevant authorities about possible procedure improvements (Interviewees 2; 4, 2015). According to company 7, their impact was most palpable when they succeeded in convincing TLV to start product assessments earlier, in parallel with the EMA processes. This company also reported that they are in continuous contact with the Ministry of Health and Social Affairs (Interviewee 7, 2015). Company 1 is no less active. According to Interviewee 1, “when TLV needed a frame contract [which was then used by all other companies to work with county councils], it was [Interviewee 1] who wrote it”, and the same person has been internal in many LIF activities (Interviewee 1, 2015). 5.3. Suggested Improvements for the Introduction Process In paragraph 1.2. it became clear that the current system for introducing pharmaceuticals in Sweden causes many problems for companies. Therefore, most of the companies have during their interviews indicated many different ways of how the system can change in order to facilitate their processes and motivate them to stay and invest in this market. Interviewee 2, 3 and 7 have all pointed out that, in order for the current system to become better, someone should have overall responsibility for the process (Interviewees 2; 3; 7, 2015). Interviewee 3 suggested, for example, that the Swedish government should have all the responsibility to allocate the money for pharmaceuticals countrywide. Interviewee 7 argued that Ministry of Health and Social Affairs, which is the governmental body in charge of healthcare in Sweden, should also be in charge of this process (Interviewee 7, 2015). To increase predictability and transparency, Interviewee 1 suggested a common information platform, which is constantly updated with updated information and descriptions of the process, and the much-needed clear guidelines for companies and other actors (Interviewee 1; 2, 2015). Decision-support systems and information should also be available to doctors, which today sometimes miss out on information about the new pharmaceuticals that have undergone the national process (Interviewee 3, 2015). Interviewee 2 argued that if an agreement with a county council is reached on the value of a certain product and how it should be used, the developers (i.e. the companies) should play an important part in training and supporting doctors in how to use the products. Which comparators will be used by authorities also needs to be more predictable in advance for companies, which today build cost-effectiveness models based on pure guesses about future comparators (Interviewee 5, 2015). In general, predictability and transparency in the cost-effectiveness evaluation done by the authorities should be highly prioritized in the process (Interviewee 3, 2015). Belowthe-line activities, such as secret rebates, are not helping to create a predictable environment and should be prohibited (Interviewee 4, 2015). 30

Given that county councils play a very important part in the decision-making processes, many interviewed companies think that their role and processes should be improved. Some companies, for example, feel that there are too many districts dividing a 9 million population (Interviewee 3; Interviewee 7, 2015). Additional price negotiations with county councils after the cost-effectiveness evaluations are furthermore illogical (Interviewee 3; Interviewee 4, 2015). Interviewee 7 also argued that there are too many people, often new people, in the processes, which contribute to inefficiency through constantly repeated discussions (Interviewee 7, 2015). Consequently, county councils should streamline the working force involved with this process. Furthermore, Interviewee 1, 5 and 7 have argued that the personnel in the county councils should be more knowledgeable and experienced in the area in order to handle the process more professionally (Interviewees 1; 5; 7, 2015). For example, Interviewee 1 believes that many people within the county councils do not have enough knowledge to assess the health-economic documents (Interviewee 1, 2015). Another highlighted problem is that country councils focus too much on budgets and price, and that they do not always recommend products even when they have been assessed as health-economically efficient on the national level (Interviewee 1; 2; 3; 6, 2015). Interviewee 5 suggested that decisions should be made based on statistics and equal care reports (Interviewee 5, 2015). Interviewee 7, in turn, propose that there should be a steering mechanism in place, in the form of incentives, for companies to follow national guidelines (Interviewee 7, 2015). According to the last mentioned respondent, county councils should have a joined budget, since this would give a more holistic view of the countrywide needs of patients (Interviewee 7, 2015). Interviewee 1 added that if the end goal is to have good healthcare with innovative and efficient treatments for patients, it is crucial that county councils start including space for new pharmaceuticals in their budgets (Interviewee 1, 2015). In order to have a better match between actual needs and what the companies have to offer, county councils should be easier to reach (Interviewee 4, 2015) and give continuous feedback to companies about their pharmaceuticals that are currently used (Interviewee 2, 2015). According to Interviewee 7, in order to speed up the process even further, all local processes should be completed before the EU assessments (Interviewee 7, 2015). Moreover, the currently very manual process can also be more standardized and digitalized (Interviewee 3, 2015). Swedish authorities involved in making decisions on pharmaceuticals should also ensure that the decision horizons internally are longer than an election period (Interviewee 2, 2015). The costs for developing new pharmaceuticals are huge for companies and the benefits for patients cannot be immediately evaluated, which further increases the need for longer time-horizons among decision-makers (Interviewee 3, 2015). Authorities should also have a more global view, putting Sweden as a market with all its circumstances in a global context. In this context, Sweden is a small country that is seldom among the most important markets for multinationals in terms of turnover (Interviewees 3, 7, 2015). This implies that Sweden should ensure that companies would want to stay and invest long-term in this market (Interviewee 3, 2015).

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6. ANALYSIS 6.1. Level of Strategic Freedom Most companies have highlighted that they are freer when it comes to decisions that are not connected to pricing. This is due to the fact that prices in many European countries are based on references prices in other countries, including Sweden. For this reason, we are treating this fact as a minimum requirement, i.e. an inevitable restriction, in this market, and focus on the reported freedom on other aspects. The summary of the analysis is presented in the Table 4 and the rationale behind the interview questions for this part of the framework and examples of classifications are presented in Appendix 11.2. Interviewees 3 and 7 are the ones assessed to be leaning more towards a subversive strategists’ posture. For Interviewee 3, four out of six questions are indicating a more subversive strategy. Two of the questions in which the subsidiary scores as subversive are indicating that headquarters (HQ) do not try to steer, while the other two indicate that the subsidiary is good at resisting HQ’s control. This company reported that the Swedish subsidiary is part of the strategy formulating body within the multinational company (Interviewee 3, 2015). For this reason, they can influence the overall strategy in the multinational and ensure the resources and adaptation needed for the Swedish context. They are the only company in the sample that has reported that pricing in Sweden is not an issue for them, i.e. that they are not restricted by the international price referencing (Interviewees 1-7, 2015). Furthermore, this company only scores ‘boy scout points’ in one question, in which they report that it is common for other offices to send professionals, especially managers, from headquarters (Interviewee 3, 2015). However, all companies score in the middle or on the boy scout part of the three-degree scale in this question. Naturally, rotating personnel internationally is getting more and more common and might not necessarily be another method for headquarters to control the subsidiary. The subsidiary represented by Interviewee 7 is a less clear-cut subversive strategist. This company scores more towards a subversive strategist posture on three out of six questions, but on the other half of the questions it scores more towards a boy scout posture on the three-degree scale (Interviewee 7, 2015). This subsidiary scores one out of three subversive strategist points on how much the HQ tries to steer. They score two out of three subversive scores on how much the subsidiary tries to resist. This implies that, in this case, HQ is trying to steer, but that the subsidiary is better at resisting. The respondent reports that the Swedish subsidiary is highly decentralized and that they can make many decisions without any contact with HQ. The decision maker within the subsidiary is then fully responsible for the consequences of the decisions independently made. Interviewee 7 also reported that they fight hard for their strategic freedom to locally adapt and their resources (Interviewee 7, 2015). They score themselves with a three on a 10-degree HQ strategy translation scale, where 1 is that HQ strategy does not translate at all, and 10 is that it translates perfectly (Interviewee 7, 2015). This indicates that there are traces of the HQ strategy in the subsidiary, but that they work to adjust to the Swedish circumstances. Given all this, company 7 both scores as, but above all feels as, a very determined and separated unit from 32

their headquarters. For this reason, they are assessed to be leaning more towards a subversive strategists’ posture, as opposed to a boy scout. Interviewees 1 and 2 have scored in between the two extreme cases. Company 1 scores towards the subversive strategist in two questions, one indicating that HQ is not trying to influence a lot and one indicating that the subsidiary is good at resisting (Interviewee 1, 2015). They score in the middle in two questions, one in the HQ steering dimension and one in the subsidiary resisting dimension. Last but not least, they score on the boy scout end of the scale on two questions, one in the HQ steering dimension and one in the subsidiary resisting dimension. On the one hand, the company reports that, apart from pricing, it is free to engage in new practices without HQ’s permission (Interviewee 1, 2015). Also, strategy translation goes both top down and bottom up, which means that they also are part of formulating and changing company strategy (Interviewee 1, 2015). Furthermore, when the subsidiary is able to build strong business cases, they are able to attract additional resources outside of budget restrictions. On the other hand, the company reports that HQ tries to influence and control the Swedish subsidiary a lot, mainly through tight financial performance indicators (Interviewee 1, 2015). For this reason, this company is classified as a case in between a subversive and a boy scout. For Interviewee 2, question 5 remains unintelligible. Otherwise, the subsidiary has three boy scout points, one subversive point and one middle ground. Two of the boy scout points are in the HQ steering dimension, one in the subsidiary resistance dimension. They have reported high freedom to try new practices without HQ’s permission, but at the same time they report high demands on “meeting numbers” and “readiness for new introductions”, and that they are frequently benchmarked against other subsidiaries (Interviewee 2, 2015). They also reported that they are highly dependent on HQ when it comes to which products to introduce and product specifications, but that they have freedom to determine how to interact with customers, which gives them freedom to adapt to the demand of the local market. Also, the subsidiary has functions in place to convince HQ about own beliefs. For that reason this company is seen to be quite in the middle of the continuum, as they are able to resist pressure from HQ. Three of the companies, companies 4, 5 and 6, are classified as more leaning towards a boy scout posture. Interviewee 4 reports that their subsidiary is not free to reorganise to better meet the environment. They need to build a very strong case every time they want to diverge from HQ’s set strategy, which indicates that HQ is eager to control the subsidiary. The subsidiary is mostly measured on discrepancies between budget and actual outcomes, and argues for more resources based on their needs to “accomplish assigned tasks” (Interviewee 4, 2015). The company scores two boy scout points on how much HQ is trying to steer and two on how much they are able to/want to resist – four in total. Therefore, the company that the Interviewee 4 represents is classified as more leaning towards a boy scout posture, since HQ is trying to steer and the subsidiary seems quite unable to resist. Company 5 is also leaning more towards a boy scout posture, as Interviewee 5 reports high dependence on HQ in general (Interviewee 5, 2015). Company scores five out of six boy 33

scout points, two of which are on the HQ steering dimension of the spectrum, while three (out of three) are in the subsidiary resistance dimension. This means, above all, that the subsidiary is highly unable to resist HQ’s attempts to influence and control them. They need approval for most new practices and HQ closely monitors new launches (Interviewee 5). Company 5 also bases their arguments for more resources on NPV calculations, and local managerial positions are often filled by people from HQ. The respondent explicitly explained that the subsidiary “doesn’t have much to say” (Interviewee 5, 2015). Therefore, this company is assessed to be leaning more towards a boy scout posture. Interviewee 6 scores very similar to Interviewee 5, with five out of six ‘boy scout points’. They also score three out of three boy scouts points in the resistance dimension, indicating inability to resist. However, the respondent reports that the Swedish subsidiary has freedom to act without permission from HQ, but that HQ indeed tries to influence local actions immensely. Furthermore, the subsidiary is benchmarked against other subsidiaries based on financial/budget performance, strategy from HQ translates highly to the local context and it is very common for managers from HQ to be transferred to the Swedish subsidiary (Interviewee 6, 2015). Therefore, company 6 is also classified to lean more towards a boy scout posture.

Resistance

HQ Control

Table 4: Classification of Companies in Terms of Strategic Freedom Question Comp. 1 Comp. 2 Comp. 3 Comp. 4 Q1 Sub Sub Sub BS Q2 Mid BS Sub BS Q3 BS BS BS Mid Q4 Sub Mid Sub Mid Q5 Mid Sub BS Q6 BS BS Mid BS Extra Part of HQ Only Need to Decision formula- decides company have a Support ting what to that strong company introduce decides business strategy, but local case in but HQ subsiprices. order to tries to diary has Has in diverge influence strategies general a from HQ through for lot to say strategy tight convinwithin controls cing HQ the MNC Overall Mid Mid Sub BS assessment Sub = leaning more towards a subversive strategists’ posture BS = leaning more towards boy scout posture Mid = in the middle/not clear

Comp. 5 BS Mid BS BS BS BS “Do not have much to say” [within the MNC]

Comp. 6 Mid BS BS BS BS BS HQ tries to influence a lot and the subsidiary complies

Comp. 7 Sub BS BS Sub Sub BS Can make independent decisions and are responsible for outcomes

BS

BS

Sub

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6.2. Strategic Posture As mentioned earlier, all companies in the Swedish market are constrained by reference prices in other European countries. This, apart from indicating inability to resist HQ strategies, has implications for the ability to adapt. Therefore, this phenomenon is treated as an inevitable restriction in this part of the analysis too. Moreover, all companies have reported that they have to build price models to pitch cost effectiveness of new pharmaceuticals that they introduce. Hence, this will also be treated as an additional minimum requirement. The rationales behind each interview question for this part of the framework and examples of classifications are presented in Appendix 11.3. The literature suggests that influencing and adapting strategies are not mutually exclusive (Courtney, Kirkland and Viguerie, 1997). The findings in this study provide support for this argument. Some actions taken by companies can be interpreted as both adapting and influencing at the same time. For example, all companies in the sample have recently formed market access units and, therefore, score on the constituent point changing and adjusting operating strategies. This can be seen as an act of adjustment and is hence characteristic for the strategic posture of adapters. At the same time, the new market access/external affairs units have also gradually become the dominant units within pharmaceutical companies – something that is characteristic for the strategic posture of influencers. Other actions that are more purely adapting can be taken in parallel with actions that are more purely influencing. After the recent changes in the introduction process for new pharmaceuticals, the need to be locally embedded and build relationships with authorities long before actual payoffs has become important for companies operating in Sweden. For this reason, many companies have indicated that they are continuously interacting with different politicians, TLV representatives and patient organisations. Building relationships in this manner is particularly characteristic for the strategic posture of influencers. At the same time, all companies have developed new routines, e.g. formed product introduction teams with constantly shifting composition that allow constant realignment. This helps them to adapt to constantly evolving introduction processes in Sweden. Hence, most companies in the study are simultaneously engaging in both influencing and adapting strategies. All of the interviewed companies score both along the influencing and adapting dimensions, yet, to a varying degree (see Tables 5 and 6). Two of the participating companies have shown mixed results with regards to their strategic posture. Companies 2 and 4 score two out of three constituent points within the adapting dimension and score two out of three constituent points within the influencing dimension. Company 2 has scored very high on the influencing constituent points building relationships with other stakeholders and flexible management and strategy. These scores are assigned since the company seems to engage in various representational practices, has a market access manager that is active in building relationships with opinion leaders, and is good at promoting the company’s interests throughout the market. Currently, they mainly focus on convincing decision-makers in authorities to introduce a longer-term perspective in all aspects of the new process, so that it 35

matches the long-term goals of the company. Interviewee 2 stated, “long-term, ‘philosophic’ lobbying helps our company to influence the process. […] you can talk to politicians or to your neighbour, you just need to have a consistent message”. This indicates that company 2 tries to have large flexibility when building relationships, especially due to their long-term focus, and is thus able to influence the market through these relationships. However, company 2 also scored high on the adapting constituent point making marketing and sales adaptations, as the company still has managers who are solely focused on quantifying the value of new drugs and communicating it to company’s main customers – county councils and physicians. The respondent admits that company 2 “push[es] on physicians” and attaches a big importance to “mak[ing] sure companies get paid for the benefits the drug offers” (Interviewee 2, 2015). Moreover, company 2 scored high on the adapting constituent point changing and adjusting operating strategies. As mentioned earlier, to create new market access departments is common among all companies, yet, company 2 is in addition segmenting the market based on the operating peculiarities and geographical localities, as it “coordinate[s] marketing and business activities among the regions and has regional groups responsible for introduction of the drugs” (Interviewee 2, 2015). All in all, since company 2 score high in both dimensions, it is neither a clear-cut influencer nor an adapter. Company 4 shows a similar pattern. On the one hand, the company seems to be quite influential. According to interviewee 4, the company “has a say in Sweden”, initiates a lot of discussions within TLV and LIF, and is able to promote its ideas about the market mainly through collaborations with LIF, other companies and through communication with politicians (Interviewee 4, 2015). On the other hand, when making launching decisions, managers in company 4 are more likely to prioritise launching drugs that promise solid returns, i.e. have high expected sales in relation to resources invested (Interviewee 4, 2015). This, together with the creation of new units and routines, which indicate flexibility in operational strategies, makes this company score quite high in the adapting dimension as well. Companies 1, 3 and 7 show a clearer tendency to lean towards an influencing strategic posture. According to Storbacka, Nenonen (2011) and Read et al. (2009), a company which has the mental model of an influencer will attempt to influence and co-create the market structure by focusing on intangible resources. Companies 1, 3 and 7 are explicitly highlighting their intentions to co-create the introduction process of new drugs in Sweden through building direct relationships with stakeholders, and thereby securing first-hand knowledge about the market (Interviewees 1; 3; 7, 2015). All of these companies scored three out of three constituent points in the influencing dimension. Companies 1, 3 and 7 are also well informed about continuous changes in the process for introduction of new pharmaceuticals. This is mostly due to their already dense networks within the industry, which gives them central network positions. The central position, in turn, gives these companies access to important information flows and power to author compelling meanings about the market. Interviewee 7 contacts county councils and other 36

actors frequently and offers constructive suggestions on how to improve the introduction process. Other parties involved in the process, according to the interviewee in question, appreciate these suggestions, since their efforts led TLV to start drug assessments earlier i.e. in parallel to EU processes. This proves the company’s flexibility in building relationships and their central position, which allows them to spread own market perceptions. Due to the compelling intentions and actions of this company, they are assessed to be leaning more towards an influencing strategic posture. Similarly, due to its widely established relationships and high flexibility in relationship building, company 3 is able to pool information from relevant market actors seemingly without much effort. Therefore, the company has access to first-hand knowledge about the developments within the industry (Interviewee 3, 2015). Moreover, company 3 also participates in creating this knowledge both on national and regional levels through writing national treatment guidelines about recent evidence generated in the pipeline development. The company is even able to influence price setting on EU level (Interviewee 3, 2015). So, company 3, through these representational practices, below-the-line activities and continuous involvement in collaborations with major parties in the process, is able to set industry standards and promote a market image that suits its own interests. Clearly, this company is leaning more towards an influencing strategic posture. The market access manager in company 1 “has a network from parliament and down”, which allows him to obtain necessary first-hand knowledge and influence the process from many different angles. This manager, with all current contacts and relationship building capabilities, provides his company with flexibility in terms of relationship building, e.g. gives them ability to secure the right contacts at the right time. Thus, company 1 is a perfect example of Storbacka and Nenonen’s (2011) argument, stating that influencers make use of their best managers to stabilize the situation by sharing their market definition and thereby getting others to agree with that definition. The fact that Interviewee 1 has been working for LIF and once designed the frame contract for TLV and county councils (that was later used by all companies) indicates that company 1 has enough influence to create certain industry standards, and to promote its interests and its own market definition within the industry (Interviewee 1, 2015). Compared to other companies, managers in companies 1 and 7 seem to be bigger risktakers, who struggle to introduce as many pharmaceuticals as possible to the Swedish market, even if it might have a negative impact on their own careers. This enables them to score very high on the flexible management and strategy constituent point of the influencing dimension. Moreover, the fact that companies 1 and 7 are able to launch almost all drugs they intend to and that they are able to establish influential positions even with scarce resources, are additional indicators of their influencing abilities. This is supported by Clark, Varadarajan and Pride’s (1994) reasoning, who argue that influencing companies use resources, which they have under conditions of uncertainty, proficiently, and combine them in ways that directs the market development in accordance with their interests. For a compilation of the analysis on the influencing dimension, see Table 5. 37

Contrary to companies 1, 3, and 7, companies 5 and 6 show a pattern that indicates that they are leaning more towards the strategic posture of adapters. This is, however, not as clearly pronounced for company 5 and 6. Both companies score some sub-points within the constituent point building relationship with other stakeholders within the influencing dimension. This is due to the fact that they are involved in certain below-the-line activities, such as offering hidden discounts to county councils, and that they have market access managers who are building relationships with other market actors (Interviewees 5; 6, 2015). However, their representational practices and ability to promote own definitions of the market within the industry, through these relationships, are much less pronounced. Company 5, in particular, stressed that getting in contact with some key actors in the process in question (such as TLV) is difficult, and that they hardly cooperate with other actors outside of the LIF-arena (Interviewee 5, 2015). This suggests that the company’s access to first-hand knowledge through relationships is limited, and the fact that the company uses the term “IWIK” proves that they are often faced with uncertainty due to lack of knowledge (Interviewee 5, 2015). On some sub-points in the influencing dimension, such as being proficient in managing resources under conditions of scarcity, these companies even scored negative (their answers disproved the factor sought after). As for the constituents of the adapting dimensions, the situation is quite different for companies 5 and 6. According to Eisenhardt and Brown (1999), when the market is constantly changing, adapting companies tend to routinely remap their businesses by “adding, splitting, transferring, exiting, or combining chunks of businesses” (Eisenhardt and Brown, 1999, p. 74). Just like other companies, companies 5 and 6 score quite high on changing/adjusting operating strategies due to the formation of new market access units and a larger focus on external affairs (Interviewees 5; 6, 2105). Interviewee 6 also indicates that his company segments the market geographically and based on operating peculiarities, as it does business differently with each county council and each region even has separate reporting lines (Interviewee 6, 2015). Moreover, company 6 scores on the constituent point adjusting strategic decision-making processes and investment strategies in the adapting dimension, as the interviewee accentuated the importance of being flexible, and adapting launching strategies depending on the outcomes of previous launches. Moreover, company 6 tries to predict whether the introduction of a certain drug will be successful, based on the available market data, level of innovativeness of the drug and the drug’s impact on county councils’ budgets. This shows that company 6 tends to rely on a calculated forecast of risk-adjusted returns to choose their strategies (Interviewee 6, 2015). Company 5, on the other hand, seems to be more restricted in its flexibility due to strong corporate values. Therefore, it is assumingly harder for this company to create a flexible infrastructure, and promote change as a norm within the organisational culture – something that is necessary in order to adapt to turbulent market conditions. Due to its restricted flexibility, company 5 cannot be classified as clearly leaning towards the adapting posture, which is also evident from the fact that they only score on a few sub-points in the adapting dimension compared to e.g. company 6. Hence, company 5 does not score high neither on the adapting, nor the influencing dimensions. For a compilation of the analysis on the adapting dimension, see Table 6. 38

Table 5: Scores for an Influencing Strategic Posture Constituent points (CP)

Company 1

Company 2

Company 3

Company 4

Company 5

Company 6

Company 7

3/3 CP Towards influencing

2/3 CP Towards mid/ influencing

3/3 CP Towards influencing

2/3 CP Towards mid/influencing

-1/3 CP Towards noninfluencing

1/3 CP Towards noninfluencing

3/3 CP Towards influencing

CP 1 Market access manager Generating market knowledge Boundaryspanning units Lobbying, coalitions Below-the-line activities Representationa l practices CP 2 Central network position Collaborations to pool skills and resources Shaping market structure Setting new standards Slack resources

CP 3 Decisionmakers are risktakers Focus on “affordable loss” Settling the problems “onthe-go” Total assessment

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Table 6: Scores for an Adapting Strategic Posture Constituent points (CP)

Company 1

Company 2

Company 3

Company 4

Company 5

Company 6

Company 7

1/3 CP Towards nonadapting

2/3 CP Towards mid/adap ting

0/3 CP Towards nonadapting

2/3 CP Towards mid/ adapting

2/3 CP Towards mid/nonadapting

2/3 CP Towards adapting

1/3 CP Towards nonadapting

CP 1 Adapting value proposition Experienced sales person CP 2 Creating or acquiring new business units Developing new routines Segmenting markets CP 3 Focusing on the best opportunities Seeing company’s strategy as a set of small goals Overall assessment

Criteria not fulfilled/no information available Indication that criteria is not fulfilled, instead the opposite is true* Criteria fulfilled with at least one indication * The company has indicated that they e.g. actively avoid collaborations with other actors in the market, why the assessment is that they not only not fulfil the criteria but also score negatively in the parameter

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6.3. Connections Between Strategic Freedom and Strategic Postures At this point, a pattern begins to form. As can be seen in table 7, there is a link between being a subversive strategist and an influencer, and being a subversive and a non-adapter. Companies that are in the middle between boy scouts and subversives and companies that are subversives (companies 1, 2, 3 and 7) are all leaning towards an influencing posture and almost all, with the exception of company 2, are non-adapters. On the contrary, companies who could be classified as boy scouts (companies 4, 5 and 6) are also those that lean more towards an adapting posture. Company 5 does not even score high on the adapting dimension, i.e. since they are very restricted by their headquarters, it is also hard for them to adapt to the local circumstances in the Swedish market. Company 2 is quite unique in the context, as they are not clear subversives, but score high on both the adapting and the influencing dimension. A plausible explanation behind these patterns is that local embeddedness, e.g. to have a very central network position in the Swedish pharmaceuticals industry, is a prerequisite in order to influence the Swedish processes. At the same time, it is notable that the most embedded companies with the most ‘internal’ managers are (companies 1, 3 and 7) are also those that are most subversive, just as Morgan and Kristensen (2006) predicted. Hence, in order to influence the market, the company must be a subversive rather than a boy scout. When it comes to the characteristics of companies 1, 3 and 7, the only pattern that can be identified is that all the companies are quite small internationally, which might contribute to higher flexibility in terms of both relationship building and operational strategies. Results show that this is especially true for flexibility in relationships building. Moreover, part of company 1’s strategy is to actually recruit people that already have established contacts within the industry (Interviewee 1, 2015). Company 3 is special in the context, as they have comparably more strategic influence internally within the multinational. They are also a company, which was started in Sweden, which in turn means that they have an edge in the local context. Not only do they have relational advantages, but they also produce in Sweden, which means that they contribute to the local economy more and, hence, might receive relatively more attention from authorities. However, company 4, which also has producing facilities in Sweden, is on the contrary, leaning more towards an adapting rather than an influencing posture. This might be a direct consequence of them leaning more towards a boy scout rather than a subversive posture. Companies that are already locally embedded, might have a long-term advantage, since it is likely that established local embeddedness contributes to a circular effect. Through their embeddedness, companies also have an easier time to build new relationships and project own perceptions of the market to other market actors. For a compilation of the analysis on the connections between strategic freedom and strategic postures, see Table 7.

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Table 7: Strategic Freedom vs. Strategic Posture Company Company Company Classification 1 2 3 Strategic Mid Mid Sub Freedom Influencing CP 3/3 2/3 3/3 Adapting CP 1/3 2/3 0/3 Posture NonBoth Non(leaning adapting adapting towards…) influeninfluencer cer Flexibility in relationships (influencing)

Manager with high relationships building capabilities

Flexibility in operational strategies (adapting)

-

Building longterm relationships and initiating discussions -

Highly ‘internal’ managers in the local context

-

Company 4 BS

Company 5 BS

Company 6 BS

Company 7 Sub

2/3 2/3 Both, but more towards adapting -

-1/3 2/3 Midadapting noninfluencer -

1/3 2/3 Adapting noninfluen cer

3/3 1/3 Nonadapting influencer

-

Many relationships and channels for influencing

Base investment strategies on expected sales

-

Base strategies on previous actions

Has multiple plans

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7. RECOMMENDATIONS 7.1. How to Become More Subversive? The main goal with the recommendations that will follow is to ensure that pharmaceutical companies will stay long-term in the Swedish market and that new companies will be attracted, offering Swedish patients innovative and efficient drugs. Another goal is to ensure faster patient access to these innovative drugs. This can, as earlier implied, be achieved through adjustments of companies’ strategies and through improved processes within the introduction process itself. In order for companies to make necessary adjustments, subsidiaries in the Swedish market need to have strategic freedom. This is true and highly relevant for any market and industry, especially since the world is globalizing and large multinationals are becoming the norm. Consequently, headquarters and subsidiaries need to be embedded in different institutional contexts (Morgan and Kristensen, 2006), Morgan and Kristensen (2006) argue that most companies establish businesses in institutional environments, which fit their own practices well or where the institutional constraints on the focal company are weak. It is likely that, at the time when many pharmaceutical companies established businesses in Sweden the institutional context was different – more suitable to their practices and less requiring. This context has been changing rapidly to become more complex and regulated, and might have become less similar to the home context of headquarters. The environment now requires much more adjustments and local embeddedness from the present companies. Earlier, the environment might have been suitable for high headquarter interference. However, this is not the case anymore. Today, a subsidiary that is a boy scout in the highly demanding Swedish market context might not survive long-term, especially if the Swedish system has become more dissimilar to the home context of the company. For this reason, we highly recommend subsidiaries, which do not already lean towards a subversive posture, to try to become more subversive. In order to become more subversive, subsidiaries should present the Swedish market context in a positive manner, give reasons for receiving more resources and freedom, and point out the need to adjust headquarters’ benchmarking practices. As many of the problems facing subsidiaries today came from the fact that many companies felt that they had too scares resources to handle the complexities of the Swedish market, but at the same time companies need to stay, at least in part, strategically disconnected from their headquarters, companies need to learn how to argue for resources more efficiently. When requiring more resources, Swedish subsidiaries should base their arguments on the benefits of the Swedish institutional context (Morgan and Kristensen, 2006). Sweden is known to be a very innovative country in general, with a lot of start-ups and new inventions, which also applies to the pharmaceutical industry. By operating and investing in this country, present subsidiaries can take advantage of the clustering effects, which might also push their own innovativeness. This, in turn, can favour the multinational as a whole. Also, the Swedish 43

process configuration in itself promotes innovativeness, since only some elected products are included in the favourable national process, which puts pressure on the companies to invent innovative, highly demanded and efficient pharmaceuticals. Furthermore, the very compelling arguments built around the cost-effectiveness models, that are inevitable in the Swedish market, can also be used in other markets to sell the products. By arguing this way, subsidiaries can ensure more resources without necessarily locking itself into meeting more ‘numbers’ in return. Instead, they would communicate that in the local context, resources could be used to be cutting edge and a role model within the multinational. Furthermore, the Swedish process trains good negotiators and relationship-builders, which can be positive from an MNC perspective, as these skills can be transferred to other subsidiaries or headquarters. Another argument that a subsidiary can use to require more resources, especially in terms of human capital, is the fact that the Swedish processes require additional skilled personnel to ensure that prices in Sweden are held at a level that is beneficial to all units in Europe. Generally, international transfers should be encouraged, but the subsidiary should push to receive more experts, which can contribute to knowledge accumulation in the Swedish market, rather than managers that are sent to control and align the Swedish subsidiary. The subsidiary in Sweden needs to ensure that headquarters fully understand the realities of the Swedish market. This way, they can argue for more freedom more easily, as headquarters will be able to understand that the situation demands, among other things, fast decision-making. It is also favourable for the overall performance of the subsidiary that it has enough freedom to accentuate the development of practices that facilitate embeddedness in the local context, instead of focusing on the processes/routines required by HQ, which might be irrelevant for performing well in Sweden. Subsidiaries need to be free to e.g. build relationships and be in spontaneous contact with any market actors, and present their companies and products in any way suitable for the Swedish context (as long as this is within legal and ethical boundaries). By allowing subsidiaries this freedom, headquarters will ensure that all of their subsidiaries keep their competitive edge in the local context. A subsidiary, or a specific person within the subsidiary, can also ensure more freedom by guaranteeing that personal responsibility will be taken for e.g. the decision to launch a drug, meaning that managers should go beyond performing managerial duties given to him/her by headquarters. This way, headquarters will be reassured that the local experts are sure and serious about a decision. Subsidiaries should also firmly push to prioritize fulfilment of internal (local) goals and performance measures, as opposed to only conforming to global measures. The subsidiary should furthermore ensure that headquarters sees these internal measures as more relevant, as they are more suitable for measuring performance given the context. If global benchmarking between subsidiaries is non-negotiable, the subsidiary should ensure that they only are benchmarked towards subsidiaries that operate in a very similar market context. Otherwise, there is a large risk that Swedish subsidiaries would have a disadvantage in global comparisons, even if they were performing well given the circumstances. All of this will help to mobilize institutional resources and gain economic importance in the local 44

context, which will most certainly, at least in the long-run, be appreciated by headquarters as well. 7.2. How to influence and adapt to the Swedish market? The nature of the pharmaceutical industry in Sweden, with high level of innovation, in combination with a specific political climate, and recent changes in the process of introducing new pharmaceuticals has contributed to a high level of uncertainty. The literature suggests that companies that choose an adapting posture under conditions of uncertainty, mainly rely on predictions, based on available market data and calculated forecast of risk-adjusted expected returns, to choose their strategies (Read et al., 2009). As we have seen from the findings, the changes in the market for introduction of new pharmaceuticals in Sweden are very rapid, which means that any analysis of the available market data quickly becomes out-dated. Moreover, the necessary data is usually ill-defined or even non-existent. Given such characteristics of the market, we recommend that pharmaceutical companies should prioritise influencing strategies in the Swedish market. By choosing this strategic posture, companies are less likely to become victims of the uncertain environment, and have a better chance to co-create the market environment. As the introduction process is evolving, companies should take the chance to contribute to the final outcome by influencing the direction of future changes. In order to gain more influence in the market in question, companies are advised to put a greater emphasis on the relationship-building practices. The current structure of the drug introduction process in Sweden presupposes certain collaborations and contacts with multiple actors, such as TLV, SALAR, NT, LIF, etc. This is a minimum necessity to be able to operate in the Swedish market. However, in order to influence, the companies are encouraged to go beyond that minimum necessity and make frequent interactions, with a larger number of involved actors at all levels of the market, a company norm. This can, for example, be fulfilled by recruiting market access managers that are already embedded in the Swedish pharmaceutical market and have a wide network of contacts among decision-making actors. Moreover, it is desirable for these managers to have prior experience of working within the public organisations involved in the process, and to be knowledgeable about the internal structure of their procedures. It is also important that a market access manager has well-developed negotiating skills, the ability to convince other market actors and has flexibility enough to cooperate and communicate with a multitude of actors with different interests. In general, the company should focus on recruiting and training personnel in a way that ensures ultimate flexibility and expertise, relevant for the market. We also recommend that companies engage more in different kinds of representational practices. This can be done by writing more reports for the industry-specific information portals (e.g. LIF and Ministry of Health and Social Affairs) and by publishing informative or debate articles in general media. This way, the company can highlight existing problems in the industry and raise general public awareness. When doing this, companies should 45

ensure to give constructive suggestions about how particular problems can be solved, and how the company can contribute to solving it, while highlighting the societal benefits of the proposed suggestion. Furthermore, the best way to pool necessary knowledge about the current developments in the market is to be internal within the community of relevant actors and be present in as many meetings and negotiations as possible. Also in these encounters, it is of high relevance to give constructive suggestions instead of only pointing out the negative aspects. These activities can be a powerful tool to turn the development of the introduction process in a way beneficial to both companies and patients. Further, the companies should make sure to contribute to LIF’s activities as much as possible and use it as an arena for cooperation with other relevant actors and competitors. Cooperation with competitors on the process level will help finding a common ground in the view of how the process should be developed, and most importantly, make it easier to influence county councils and other decision-makers. As for the interactions with county councils, it is advised to identify a specific contact person within each county council and keep a constant dialogue with him/her. This way the company can minimize the need to continuously build relationships with new people within the councils, and instead only interact with one person who has a history of working with the company. If the company succeeds in building relationships and engaging in the representational practices described above, it is more likely to be successful in selling drugs in the Swedish market. This will lead to a higher acceptance of the company’s activities by HQ, which will in turn be more willing to allocate resources to the subsidiary. Moreover, recruiting personnel with the right set of skills would help the company to proficiently manage the process even with scarce resources. As mentioned above, influencing strategies should be prioritised in order to achieve longterm strategic goals. However, in order to mitigate the immediate threats of the changing environment in the Swedish market for new pharmaceuticals and to achieve shorter-term tactical goals, a company is not recommended to neglect adapting strategies either. Given the current characteristics of the Swedish market for new pharmaceuticals, it is important for the company to be agile in order to adapt. The major prerequisite for agility in this case is to fundamentally understand the system and to have different alternative plans for the introduction of drugs. For example, if a drug is not reimbursed, the company should have knowledge about how it can introduce the drug through other channels. As the system is hard to predict, the company is advised to set smaller goals that are achievable given the current situation, and adjust companies’ processes to meet these goals, e.g. ensure that the data required by TLV is sent in advance, even if it means only having a preliminary price of a pharmaceutical at that point. The company can, for instance, create product teams with constantly changing compositions depending on the needs of the product being launched. Also, in order to decrease uncertainty in the process, it is recommended that the company has a responsible person or a project group that specifically works with collecting information about changes in the introduction processes, with predicting how pharmaceuticals are currently selected to and assessed in the process (e.g. current demands 46

for certain pharmaceutical features can be very indicative), and also work with collecting information and indications about which other drugs their own new drugs will be compared to in the process. Agility will also be facilitated if the company is able to create a much flatter organizational structure, i.e. cut as much as possible on the internal approval activities at different managerial levels (although ability to do this is very dependent on the level of independency from HQ). A decreased number of reporting activities will speed up the decision-making process and will allow the company to allocate more time to crucial relation-building activities. Following the above suggestion about recruiting the managers that will be able to build necessary relationships, we also suggest that the responsibilities for introducing new drugs should be split between two managers to decrease the workload of one person, enable each of them to specialise in specific issues, and therefore increase effectiveness. One manager should be responsible only for pricing and reimbursement, and the other – for managing market affairs. The division between responsibilities of these two managerial positions should be clearly defined. Moreover, it is important that one of these managers has a background in sales and is skilled or trained to, not only quantify the value of the product, but also communicate it to county councils. In summary, we recommend that companies focus most on influencing the market, as this is the time to influence the introduction processes in the Swedish market. Needless to say, it is advantageous to try to influence any market in accordance to long-term goals of the own company. However, it order to manage everyday challenges and follow the development of the market, which might depend on many other factors than only the influencing efforts of individual actors, companies should also not forget that adaption is important. To for example see the company’s operations and strategy as a patching and re-patching process, e.g. through reorganization depending on the current needs of customers, instead of a static process is most definitely advantageous in a dynamic environment. In short, we consider the influencing part as more strategic, while the adapting part more as operational. In any case, resources are needed to keep flexible both when it comes to adapting and influencing processes, why companies also need to find a proper way to ensure resources from the MNC while not giving away any autonomy. 7.3. Recommendations for Process Improvements The more complex and demanding the Swedish process is, the larger is the risk to loose current companies and to discourage new companies to establish presence in Sweden. As the market is small and very complex, it might not be worth for present actors to introduce certain new pharmaceuticals, which could have a negative impact on the patients’ health in Sweden as compared to other countries. The European price referencing also clearly contributes to this problem. Moreover, given that Swedish subsidiaries are often directly benchmarked against subsidiaries in other countries, the very resource-demanding process in Sweden can contribute to relatively lower performance by the Swedish subsidiaries. This, in turn, might contribute to lower investments in or even shutdowns of Swedish units. To have a healthy competition in the market is crucial to ensure innovativeness and a 47

reasonable price level of pharmaceuticals – the latter is also one of the main goals of the recently introduced introduction processes in Sweden. Therefore, we highly recommend that authorities in Sweden to reconsider some aspects of the current process. The most important areas of improvement, given the goal to ensure that companies would want to stay and invest more in Sweden and that patients get faster access to innovative drugs, are to make process responsibility more clear, to improve process predictability and transparency, to have improved and longer-term process goals and improved processes within county councils. First and foremost, one entity should take full responsibility for the process and this responsibility division should be very clear to all parties involved. As it is today, few people know who has this ultimate responsibility, and many actors are pulling the process in different directions. Moreover, the importance of having a connection between the actors deciding the price and the actors having budget responsibility should be pushed even further. The best-case scenario would be to have the same actor deciding the price of and actually paying for the pharmaceuticals, since this would ensure that drugs that successfully went through the process would actually be used. This would favour both companies and patients. Therefore, the idea to include county councils (which today have the budget responsibility) in the evaluation processes is very good, and should be implemented even further. In this way, countrywide equality in healthcare can be truly and efficiently ensured. The fact that many companies feel confused about what the new processes entail for them, might imply that companies have not been as involved in the development of these processes, as was initially intended. In order for the new processes to become more efficient, companies and other actors in the market must be well informed and be able to prepare all the material needed for assessment in time. We recommend creating a common information platform that includes clear guidelines about the process, continuous updates about different developments in the market, and the continuously changing long-run goals for the system. This platform should also contain a public forum for questions surrounding the process and for general debates about the developments. All parties involved must be well aware of the platform and have incentives to use it frequently. Especially doctors should be encouraged to use it, since some of the interviewed companies in this study have indicated that many doctors are not aware of the latest drugs that have passed through the Orderly Introduction process. The platform should include clear and official criteria for the cost-effectiveness evaluation and companies should, in advance, be able to predict which other drugs their own new drugs will be compared to in the processes. Generally, in the development of the Orderly Introduction, the process goals should be formulated based on a global view and longer-term goals. Swedish actors should keep in mind that Sweden is a very small country and that the healthcare ratings for Sweden have been dropping during the last decade. Therefore, authorities must continuously keep in mind that the development of especially highly innovative drugs is very expensive. While it is of clear interest on a societal level to keep the pharmaceutical prices as low as possible, it must also be considered that some prices must be paid in order to ensure faster and better cure for 48

patients, which, in turn, will lead to lower costs for society. From this aspect, the costeffectiveness assessments are very good, but it should be ensured that all actors in the market use this assessment in their decision-making processes. To pressure prices too much might easily lead to even more postponed introductions of drugs to the Swedish market compared to other markets, as Sweden is in the basket of referenced countries for many other European countries. Then, companies would prefer to launch their products in countries where they can collect revenues more easily, before they introduce the same drugs in Sweden. Some companies might even in the long run withdraw operations completely, if it becomes too unprofitable to launch drugs in Sweden. Some companies have recommended that below the line deals should be forbidden by law, so that market conditions become more transparent. However, we do not see this happening anytime soon as this is the only tool for authorities to keep prices as low as possible. Another overall process goal should be to speed up the introduction process as much as possible. We recommend that the process should become more standardized and digitalized, which will also ensure higher predictability and transparency. To have a common information platform is a first step. Another step could be to ensure that companies are able to continuously follow where in the process their pharmaceuticals are, e.g. which authority is currently handling their application errand. Also, all actors, but first and foremost county councils, should be given incentives to follow the recommendations from the national process. As heard from many of the interviewed companies, county councils often want to do own assessments - an act which undermines the thought behind the national process, which is to ensure equal healthcare in the country. Last but not least, since county councils are such important decision-makers in the context, and most of the interviewed companies have indicated that they are the biggest problem in the current process, some practices should be reconsidered within these authorities. As mentioned above, county councils assessments and price pressures after the national process are inefficient, as the same work is done at least twice. This also means that patients’ access to new pharmaceuticals are delayed and some county councils might even assess that they do not want to invest in a certain drug, which is why the countrywide inequality for patients persists. Furthermore, it is not official what these extra assessments include, which decreases the predictability for companies. It is very important also to include space for new pharmaceuticals in the county councils budgets, especially if the ambition is to ensure that patients in Sweden should have the best and most innovative healthcare possible. Another recommendation is to make sure that the communication between companies and county councils is continuous. County councils should have time set aside to give companies feedback about their products, in order to ensure a good match between patients’ needs and new drugs. Also, it would be advantageous to have employees within the county councils that have experience from the pharmaceutical industry and to have incentive systems to keep the same people in the procedures, so that they become specialist in their areas. Today, new people are employed to manage certain procedures within the process continuously, which results in repeated discussions and waste of time. In the long run, the ambition should also be to include as many as possible pharmaceuticals in the Collaboration 49

Model to ensure that all therapeutic areas are equally attended to. A summary of all recommendations is shown in Table 8 below. Table 8: Summary of Recommendations How to become more subversive? How to influence and adapt to the market?

How to improve the introduction process itself?

• Present the Swedish market context in a positive manner -­‐ Sweden is an innovative country – clustering effects -­‐ Process pressures to be innovative and responsive to current demand -­‐ System trains negotiators • Give reasons for receiving more resources and freedom -­‐ Need to be more embedded; build relationships and spontaneous contacts -­‐ Need freedom to present and sell products in locally suitable manner -­‐ Need personnel to ensure reasonable pricing in Sweden (effects on entire Europe) -­‐ Encourage transfers of specialists -­‐ Promote that managers should go beyond normal duties with personal responsibility • Point out the need to adjust benchmarking practices -­‐ Push internal performance goals -­‐ Push that benchmarking should be against similar contexts

• Have one responsible party -­‐ Price deciding party should have budgetary responsibility • Improved process predictability and transparency -­‐ Common informational platform -­‐ Generally standardized ad digitalized process • Improved overall process goals -­‐ Have global perspective -­‐ Have more long-term goals when it comes to cost of drugs -­‐ Include more drugs (than today) into the Collaboration Model processes -­‐ Have well-staffed processes -­‐ Give incentives to all actors to follow international guidelines • Improved processes within county councils -­‐ No local assessments -­‐ Include budgetary space for new drugs -­‐ Have continuous communication with companies -­‐ Well-staffed with experienced personnel

Influencing • Have a skilled and internal market access manager and other personnel which is embedded in market • Attend all meetings possible with relevant actors • Write reports in industry portals and debate articles in general media • Offer constructive change suggestions and help to implement changes in procedures • Be more proactive in LIF activities • Have one specific contact within county councils • Train new personnel in negotiation techniques Adapting • Keep updated about the system • Have alternative plans for drug introduction • Adjust procedures -­‐ Create flexible product teams -­‐ Have units to continuously collect data about national assessment process -­‐ Create a flatter organizational structure -­‐ Have two market access managers with different responsibilities

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8. LIMITATIONS In addition to limited generalization possibilities, this semi-qualitative study might also suffer some limitations in its scope and method. As earlier mentioned, companies in this study are chosen based on interview accessibility, and LIF helped us to choose and contact these companies. This is, of course, in itself a problem if generalization would have been the end goal. However, generalization has not been our goal, but bias problems might persist as the companies that are part of LIF and have accepted to be part of the study might e.g. have a too negative or too positive view about the process. This could have, in the next step, contributed to a bias in the problem description and especially the recommendations about how the process could change would be affected. However, we have in a very shallow analysis tried to identify suggestions that are of pure interest only to the companies and not included these in the recommendations. Due to the limited scope of this study, we furthermore chose to interview only companies and no other market actors, which might have also contributed to the problem description bias. Another problem might lie in the fact that some of the interviewed companies do not have any real experience of the process they were discussing at the time of the interview. The one company that had most experience from being part of the new introduction process (company 7) had also the most positive opinions about it. This might, but do not have to, indicate that our description of ‘reality’ is limited. Last but not least, we only interviewed one (in some cases two) representative from each company. The opinions of these employees might not coincide with the general opinion of the company, but the opinion might also depend on the position the interviewee has in the company. However, all interviewees hold some kind of managerial position, which contribute to higher comparability. The study is, as stated, a qualitative study and our interview method has been open-ended. This contributed to less exhaustibility and comparability of answers, since participators choose to share different aspects and turned the conversation in different directions. Therefore, a statement that one company acts in a certain way, does not rule out that other companies does this as well. Even if we chose to present the answers anonymously, some companies might have been reluctant towards sharing too much of their strategy in general, which makes our conclusions and recommendations shallower. Furthermore, some indicators used in the framework (see Graph 1) to assess companies in one dimension, might be a consequence of some other factor than the one sought after. For example, in the first part of the framework, based on the framework of Morgan and Kristensen (2006), one indicator sought after is whether headquarters send people to the local subsidiary. This act is seen as an indicator of controlling behaviour from headquarters. Naturally, this act might just be a consequence of e.g. increased internationalization or intended as an act to ensure synergies between subsidiaries and the headquarters. For this reason, conclusions in this paper are drawn with caution.

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8.1. Suggestions for further research This research has only focused on how companies choose their strategic posture, accounting for the degree of strategic freedom. Further research should focus on analysing what impact different degrees of strategic freedom and influencing or adapting strategic postures have on the companies’ actual performance in the market.

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9. DISCUSSION AND CONCLUSION This study is majorly focused on investigating company strategies in the Swedish market, which includes exploring how pharmaceutical companies handle current market processes for introducing new pharmaceuticals, and how companies can improve their strategies given the current situation. The findings of this study show that the introduction process for new pharmaceuticals in Sweden is characterised by high uncertainty and complexity. Many companies are unable to foresee whether or not their products will be included in the Orderly Introduction, nor do they have sufficient information about how their products are assessed once included. This is mainly due to the fact that the introduction process is still ‘under construction’. Currently, multiple actors are involved in the process simultaneously; some are already immersed in the system while some are trying to influence the future design of the introduction processes. Consequently, companies need to invest a lot of resources in projects with highly unsecure payoffs. The operations in this uncertain market is further exacerbated by the fact that pharmaceutical companies often are constrained in their strategic freedom by their headquarters. Hence, they are not completely free to make strategic and operational adjustments. The analysis of companies’ current strategies suggests that pharmaceutical companies in the Swedish market show various tendencies in between adapting and influencing strategic postures. It is, however, notable that it ought to be highly challenging to both adapt to and influence the Swedish processes. Due to lack of official information about the process, it is highly challenging for companies to adapt to the situation, as it is not clear what they should adapt to. Furthermore, since companies are constrained by local anti-trust laws (which constrain collaborations) and are now faced with an increasingly strong counterparty in the face of Swedish authorities (due to increasing collaboration between different decisionmaking parties), it is becoming harder to influence as well. Not to mention the difficulties to both adapt and influence in the face of pressuring headquarters. To our knowledge, previous research about possible strategies under market uncertainty has not accounted for these constrains. Given the major impact of the relationships between the subsidiary and headquarters on strategy, shown in this study, our main contribution to literature is to incorporate the analysis of how strategic freedom of the subsidiary might affect its ability to choose either an influencing or an adapting strategic posture. The conducted analysis shows that subsidiaries found to be more subversive, also lean towards being influencers and non-adapters, whereas those that lean more towards being boy scouts are at the same time leaning more towards an adapting posture. The suggested reason for that pattern is the fact that local embeddedness in the Swedish pharmaceutical industry is a prerequisite for influencing the introduction processes. Therefore, those companies that are deeply embedded locally, i.e. are subversives, are more likely to influence the market and shape the market structure in line with their interests. This argument is the base for our recommendation for companies to aim to be more subversive. 53

Further, in order to handle the turbulent conditions in the Swedish pharmaceutical market, we recommend making use of both influencing and adapting strategies, while prioritising the former. An influencing posture is not only relevant under the conditions of uncertainty, but also in the context of change, as changing conditions open up possibilities to turn the market development in the focal company’s favour. However, in order to mitigate the immediate threats from the changing environment and achieve shorter-term tactical goals, a company is not recommended to neglect adapting strategies either. Last, but not least, we discussed the currently evolving process for the introduction of new pharmaceuticals in Sweden. While it is defendable from a societal perspective to have the goal to push prices of pharmaceuticals down as far as possible, there needs to be a balance between pushing prices and be willing to pay for a price that companies are willing to accept. Given that the Swedish market is becoming increasingly less important in the global context and that pharmaceutical companies have larger international agendas, Sweden as a market risks to be disregarded by companies due to the difficulties in market access processes. Even though the probability for companies to leave Sweden completely is small, many companies already prioritize other markets before the Swedish market. This may result in huge societal losses; Swedish patients will receive innovative drugs much later than patients in many other countries, or not get access to them at all. Therefore, in order to keep Sweden on top of the lists for having one of the best health care systems in the world, Swedish authorities need to consider the long-term implications and consequences of having a system that deter companies from entering or staying in the Swedish market. Therefore, in the last section we draw some recommendations on how the process could be changed to accommodate companies’ and patients’ interests, including e.g. increasing predictability and transparency, having longer-term horizons and goals, introducing process responsibility, and improving the processes within county councils. In short, our main contributions to literature in this paper have been to include an assessment of strategic freedom before assessing strategic posture, to provide an insight that an influencing posture is not only relevant under uncertain conditions in general, but also in the context of change, and to provide a perspective that influencing ought to be considered a strategic long-run focus, but that adapting is important ‘here and now’.

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10. SOURCES ANTONOV, K., 2013. Flera bedömningsnivåer ger inte patienterna snabbare tillgång till ny behandling. www.life-time.se: LIF - De Forskande Läkemedelsföretagen. ANTONOV K., Head of Strategy at LIF, The Swedish Association of the Pharmaceutical Industry ABPhone: +46 8 462 37 61, e-mail: [email protected], interviewed 2015.01.23, 2015.03.05 and 2015.05.12. ARNDT, J., 1979. Toward a concept of domesticated markets. The journal of marketing, pp. 69-75. ASTRAZENECA, 2015. Remissvar: Slutrapport klinikläkemedelsprojektet, dnr 142/2014. www.astrazeneca.com/Home: Astra Zeneca. CLARK, T., VARADARAJAN, P.R. and PRIDE, W.M., 1994. Environmental management: The construct and research propositions. Journal of Business Research, 29(1), pp. 23-38. COURTNEY, H., KIRKLAND, J. and VIGUERIE, P., 1997. Strategy under uncertainty. Harvard business review, 75(6), pp. 67-79. DUBOIS, A. and GADDE, L., 2002. Systematic combining: an abductive approach to case research. Journal of business research, 55(7), pp. 553-560. EISENHARDT, K.M. and BROWN, S.L., 1999. Patching. Restitching business portfolios in dynamic markets. Harvard business review, 77(3), pp. 72-82, 208. GARTNER, W.B., 1985. A conceptual framework for describing the phenomenon of new venture creation. Academy of management review, 10(4), pp. 696-706. GOVERNMENT OFFICES OF SWEDEN, 2014. National Pharmaceutical Strategy Action Plan 2014. www.lakemedelsverket.se: Läkemedelsverket. HOLMBERG C, Access strategy lead at Bristol-Myers Squibb AB, e-mail: [email protected], interviewed 2015.01.23 and 2015.03.05. HOWARD, J.A., 1963. Marketing management: Analysis and planning. RD Irwin. JANUSINFO, 2014. Janusinfo, Stockholms Läns Landsting [Homepage of Janusinfo], [Online]. Available: www.janusinfo.se [27/04, 2015]. JAWORSKI, B., KOHLI, A.K. and SAHAY, A., 2000. Market-driven versus driving markets. Journal of the academy of marketing science, 28(1), pp. 45-54. JONNY SÅGÄNGER, 2015, 02/05/15. Myndighet satte världsrekord i snabb hälsoekonomisk bedömning. Läkemedelsmarkanden, www.svenskanyhetsbrev.se/Lakemedelsmarknaden/. LEAVY, B., 2007. Managing the risks that go with high-impact strategies in uncertain markets. Strategy & Leadership, 35(4), pp. 43-46. 55

LIF - DE FORSKANDE LÄKEMEDELSFÖRETAGEN, 2015-last update [Homepage of LIF], [Online]. Available: www.lif.se [30/04/15] LIF - DE FORSKANDE LÄKEMEDELSFÖRETAGEN, 2014. Kommentar – Avrapportering NLS 6.1 (OtIS projektet). www.lif.se: LIF. LUTHANS, F. and STEWART, T.I., 1977. A general contingency theory of management. Academy of Management Review, 2(2), pp. 181-195. MORGAN, G. and KRISTENSEN, P.H., 2006. The contested space of multinationals: Varieties of institutionalism, varieties of capitalism. Human Relations. READ, S., DEW, N., SARASVATHY, S.D., SONG, M. and WILTBANK, R., 2009. Marketing under uncertainty: The logic of an effectual approach. Journal of Marketing, 73(3), pp. 1-18. SARASVATHY, S.D., 2009. Effectuation: Elements of entrepreneurial expertise. Edward Elgar Publishing. SCHERER, F.M. and ROSS, D., 1990. Industrial market structure and economic performance. University of Illinois at Urbana-Champaign's Academy for entrepreneurial leadership historical research reference in entrepreneurship. SKL - SVERIGES KOMMUNER OCH LANDSTING, 2014. Ordnat Införande i Samverkan - Slutrapport från Nationella Läkemedelsstrategin, delproject 6.1. www.skl.se: SKL. SKL - SVERIGES KOMMUNER OCH LANDSTING, 2013. Nationell samordning för strukturerat införande och uppföljning av nya cancerläkemedel - Ännu Bättre Cancervård, Delrapport 9. www.skl.se: SKL. SKL - SVERIGES KOMMUNER OCH LANDSTING, [Homepage of SKL], [Online]. Available: www.skl.se [4/27, 2015]. STORBACKA, K. and NENONEN, S., 2011. Markets as configurations. European Journal of Marketing, 45(1/2), pp. 241-258. TLV - TANDVÅRDS- OCH LÄKEMEDELSFÖRMÅNSVERKET, 2015-last update. Available: www.tlv.se [30/04/15] TLV - TANDVÅRDS- OCH LÄKEMEDELSFÖRMÅNSVERKET, 2015. Slutrapport för klinikläkemedelsprojektet. www.tlv.se VÅRDANALYS, 2014. Värdefullt men inte fullvärdigt - Om nyttan med hälsoekonomiska bedömningar av klinikläkemedel. 2014:4. www.vardanalys.se. WERNERFELT, B. and KARNANI, A., 1987. Competitive strategy under uncertainty. Strategic Management Journal, 8(2), pp. 187-194 WORLD HEALTH ORGANIZATION (WHO), 2015. Trade, foreign policy, diplomacy and health: Pharmaceutical Industry. www.who.int/trade/glossary/story073/en/ 56

11. APPENDIX 11.1.

General Survey Questions

Please present yourself and your position in the company? Is your company a subsidiary in Sweden? Who are your primary customers? Please describe the current process to introduce new pharmaceuticals to the Swedish market? At which point (in the process) a. Do you get involved in the process? b. Do you get paid for your products? Do you find that any part of the process is especially challenging and why?

• • • • •

•

11.2.

Survey Questions and Answers, Subversives vs. Boy Scouts

Question

Connection to literature/explanation

Example of (real) answer

Example of interpretation in analysis

When you want to engage in new practices, to which degree do you need to seek permission by headquarters on a scale from 1 to 10 (where 1 is that you need no permission and 10 is that you need to have complete support)? As a subsidiary, which performance indicators do you have? Are you benchmarked against other subsidiaries by headquarters in a systematic way?

Morgan and Kristensen (2006) classify different companies into either strategic subversives or boy scouts based on among other things how much they need to seek permission. The more the subsidiary needs to seek permission for its actions, the less independent and locally embedded they are. An indicator of how much HQ is trying to steer its’ subsidiaries. Morgan and Kristensen (2006) argue that subsidiaries, which are strictly controlled with financial measures and benchmarked against other subsidiaries, tend to be less subversive and with time they become more similar to each other and HQ. An indicator of how much HQ is trying to steer its’ subsidiaries.

”In agreements which do not involve price 2 if price impacted 10” (Interviewee 1, 2015).

Since discretion regarding price is an industry wide phenomenon, this is disregarded and the company is interpreted as being highly independent from HQ based on the number it provides for situations not including price. This company is classified as more of a subversive strategist in this particular question. In this case, the classification is based on the fact that the subsidiary has indicators that ensure “meeting numbers” and “readiness for new introductions”. Furthermore, they are “compared”. This company is classified as more of a boy scout in this particular question.

Is it common that headquarters transfer professionals, especially for managerial positions, to your subsidiary directly from global headquarters?

According to Morgan and Kristensen (2006), one way of controlling a subsidiary is to send people, especially managers, from HQ to work on a local level. An indicator of how much HQ is trying to steer its’ subsidiaries.

“A set of different indicators that includes meeting numbers, compliance to ethics and regulation and readiness for new introductions. And yes they are compared with other subsidiaries” (Interviewee 2, 2015). “Well, only for GM (general manager, VD) positions, not for specialists (like me)” (Interviewee 5, 2015).

Since transfers of people in managerial positions are more indicative, this company is classified as more of a boy scout on this criteria.

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How much of the intended strategy and practices of headquarters translate into actual implemented strategies in Sweden on a scale from 1 to 10, (where 1 is that they do not translate at all, and 10 is that they translate perfectly)? How do you argue for more resources from headquarters? What are the arguments usually based on?

Connected to question 1., but more of an indication of how much the subsidiary is able to resist the pressure from HQ. If the strategy translates perfectly, the subsidiary is classified as a boy scout. Also based on the article by Morgan and Kristensen (2006).

“8, mostly due to us being part of defining the strategy” (Interviewee 3, 2015).

In our scale, an 8 would indicate that the subsidiary implements the strategy from HQ almost without question. However, in this particular case, the respondent indicated that they are part of building the strategy, why this company is classified as more of a subversive strategist in this particular question.

Morgan and Kristensen (2006) argue that subversive subsidiaries mostly argue for more resources based on the local institutional advantages. Boy scouts on the other base their arguments on financial needs. An indicator of how much the subsidiary is trying to resist the control from HQ.

This respondent focuses on the advantages of the Swedish context and based their arguments around this idea. Therefore, this company is classified as more of a subversive strategist in this particular question.

To which degree is it important to you to conform to official performance measures on a scale of 1 to 10 (where 1 is that performance measures are not the focus at all, and 10 is that performance measures are highly important)?

High conformance indicates more of a boy scout posture. An indicator of how much the subsidiary is trying to resist the control from HQ, but also to which degree subsidiaries perceive HQ as legitimate.

“That investments in Sweden makes sense, we try to argue that Sweden do care and want to invest in innovation/clinical trials and be in the front in health care and innovation in Europe” (Interviewee 7, 2015). Numbers based on scale.

Purely based on the number. 1-3 is interpreted as more subversive, 4-7 as in between, and 8-10 as boy scouts.

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11.3.

Survey Questions and Answers, Adapters vs. Influencers

Question

Connection to literature/explanation

Example of (real) answer

Example of interpretation in analysis

In which ways have the new regulation/changes to the process of new drug introduction changed your internal strategies/processes

Adapters make small process and operational changes, reorganize and add business units to create as much value as possible given certain markets conditions (Eisenhardt and Brown, 1999). Therefore the answer to this question helps to identify whether the company is leaning towards adapting strategic posture

“The company went from having a lot of sales representatives to keeping only few sales managers and key account mangers, and forming an entire department responsible for market access (including people who work specifically with county councils and politicians)” (Interviewee 5, 2015).

Given the fact that the company has radically adjusted its operations to adapt to environment, it is scored on certain sub-points on adapting dimension.

Externally, are there any e.g. regulation or other features of the Swedish market that constrain your strategic decisions?

According to Jarowski, Kohli and Sahay (2000), managers’ perception of the established relationships, market configuration, firm’s position in the market and in the network of relevant stakeholders, can form mental barriers and constrict them from the ability to influence the market (Clark, Varadarajan and Pride, 1994 Literature suggests that influencers can use resources pooled through interaction and form the central position in the network giving them access to and control of resource flows, such as skills and information (Clark, Varadarajan and Pride, 1994) Extensive resources possessed by the company can make it easier for it to influence market configuration, also, influencing companies are usually proficient in securing the resources they have under conditions of uncertainty and combine them in a way that directs market development according to their interests (Clark, Varadarajan and Pride, 1994).

“…there are so many barriers. […] Instead of seeing all the threats and complaining, [Company 7] tried to be part of this. We always come with constructive suggestions, and […] we have convinced TLV to start the assessment earlier” (Interviewee 7, 2015).

The answer indicates that although admitting the constraints of the market, the company has the mental model directed on changing the situation, rather then being a victim of it. Therefore, it scores subpoints on the influencing dimension.

“[Interviewee 1] understand[s] the entire process. [He] has been acting for LIF, has a network from parliament and down, met all people that influence the process. When TLV needed a frame contract, it was written by Interviewee 1” (Interviewee 1, 2015). “…introduction is very costly and men-driven work […] we would always like to have more resources, but pharma industry has declined dramatically when it comes to number of employees, we are not an exception[…] we do not introduce all the drugs,[…] competition might be too fierce” (Interviewee 4, 2015).

According to Jarowski, Kohli and Sahay (2000),

“…we collaborate with taskforces and committees at

The answer suggests a that Interviewee 1 has a central position and is able to use his network to pool the resources for organization and even influence decisions of other actors. This gives company 1 scores on influencing dimension. The answer indicates that the company does not have the slack resources necessary for extensive influencing, whereas inability to launch all the drugs indicates that company is not proficient enough to manage the scare resources in a way that directs market development according to its interests. Therefore, the company gets a negative score on the influencing dimension. The answer suggests that company is good at pooling

Do you have full information about the events/ legislation/processes involved in the coordination model of new drugs?

What share of organisational resources does your company allocate to the development and introduction of new cancer drugs in Sweden?

Have you ever cooperated with any

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of your competitors or other actors/organizations involved in the process, (i.e. with governmental organisations, etc.) in order to alternate the situation in the market? Which part of the company is responsible for the process of getting the pharmaceuticals through the system?  

pooling and coordinating skills and resources across organizations may be more effective way of [influencing] markets than a single organization attempting to do it by itself

LIF…LIF arena is the natural place to cooperate with competitors; We also cooperate with some patient organizations, although it depends on therapeutic areas. [Interviewee 7] talks to CCs and other actors each week” (Interviewee 7, 2015).

and coordinating skills across organizations, which makes it score on the influencing dimension.

Relatively higher importance of boundary-spanning organisational units is a sign of deeper embeddedness and therefore higher ability to influence (Read, et al., 2009)  

”Before we used to have departments, now we all work together in the market access department”(Interviwee 1, 2015).  

How do you manage the introduction of new drugs?

In order to direct the market development in their favour, shapers are required to make large commitments, by publically communicating intentions in order to shape their strategy in a way that will secure their credible position (Storbacka and Nenonen, 2011) Successful adapting firms are anticipating the change, building possible scenarios of future development and formulating optimal strategies for core elements of possible futures (Leavy, 2007) According to Read, et al. (2009), influencers try to see the bigger picture and are considering how current decision would impact a longer-term goal; whereas adapters are mainly concerned with successfully achieving immediate goals

“As we are the team of managing the external affairs, then we work with politicians and other decision makers, we are part of the horizon scanning, county councils are one of the main targets to communicate with” (Interviewee 5, 2015).

The company gets points on the influencing dimension as the boundary-spanning unit of their company has become dominant in the introduction/selling of new drugs.   As contacting the actors mentioned by the interviewee is minimum requirement for operating in the Swedish market, rather than the indication of the large commitment. Therefore, the company does not score on influencing dimension in this case. The answer indicates that the company is restricted in its flexibility and therefore does not score on the adapting dimension.

“…when launching the drug we are looking one stage at a time in the process. We have milestones: approval, product supply, sales representative availability, etc.” (Interviewee 5, 2015).

Company score points on the adapting dimensions in this case, as it is more focused on each milestone at a time, rather than on the final longer-short goal.

Adapters are forecasting the expected value and possible returns on investments, while influencers prioritise making greater long term commitments (Read, et.al., 2009).

“…we try to push it in a direction to provide the most benefit for the patients, […]Want to have product offerings that offer long term solutions” (Interviewee 2, 2015).

The company scores on the influencing dimension as it is more concerned with offering longer-term solutions for the patient, rather then carrying out an immediate sale.

How often does your company adapt its strategic course? How is change perceived in general in your company? When making a decision about introducing a certain drug, do you tend to focus on each isolated stage of the introduction process or do you try to visualize the whole process? How do you evaluate, in economic terms, whether a drug should be invested in/put through the process?

“We are very stubborn, not that flexible; - We have strong values and it is not easy to be very flexible with these values” (Interviewee 5, 2015).

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