May 18, 2012
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I found this chart to be very interesting. According to the latest CVS Caremark projections, over 60% of healthcare spending on drugs will be on specialty drugs by 2016. That’s a huge shift! A lot of it still sits in the medical side which no PBM has really figured out how to manage, but it creates great opportunity for those that can integrate medical and pharmacy claims to analyze the data and leverage it for cost and care management programs.
May 17, 2012
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This a Medco report (now Express Scripts) that they recently released. It lays out what’s on the minds of clients (payers) in terms of prescription management. Not a lot of surprises here. (But, if you’re looking at this, you might also note that the URL www.drugtrendreport.com is now up with the new branding and Express Scripts drug trend report.)
April 24, 2012
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A lot has changed to the PBM industry in the past year:
And, there will certainly be more (e.g., the rumor about Cigna’s pharmacy business). I also think that we’ve seen Walgreens become a lot closer to the independent pharmacies and would expect more changes from them.
So, while I still get people that call me and ask me whether they should start a PBM, I think it’s more interesting to think about this using the GE framework of destroymybusiness.com. To do that, we have to think about where are the profit drivers for the PBM and how can those be impacted:
So, if you wanted to destroy the PBM model, how would you replace it:
So, the new model in my mind would look very different:
I personally also think you’ll see the pendulum swing back to a closer relationship between the PBMs and pharma which I think is important as you focus on more and more orphan drugs and specialty conditions with genomics and high costs.
I think the key question is whether one of the traditional PBMs evolve and own this space or whether a new challenger comes in and shakes up the industry. Traditionally, the industry has been basically driven by consolidation with limited success by new entrants.
April 8, 2012
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Now that the Express Scripts’ acquisition of Medco was approved (surprisingly without any caveats), I’m going to guess that a lot of employees are in one of four positions:
The people in the grey area that are uncertain are the people that are probably the most anxious. And, of course, some of this is happening to the Express Scripts’ people also where there are overlapping jobs.
Since I’ve been out looking to move for my new job, I have some idea of the basic types of questions that those employees looking to move have, and I haven’t found the information that easy to get.
So, here goes with two caveats – (1) this is my biased view after 19 years here and (2) St. Louis is not NY:
Pharmacies: Generally, the majority of pharmacies in town are Walgreens, but you won’t have access to them. CVS is building a presence here, but you’ll likely go to the grocery store, big box, or independents.
Grocery Stores: The town is dominated by two local chains called Schnucks and Dierbergs. There is a Whole Foods and a Trader Joes. There are a few Shop and Saves.
Workout: There are lots of chain and small gyms around town. If you haven’t been to one, you should look at the Lifetime Fitness in West County.
Restaurants: St. Louis Bread Company (Panera to you) is headquartered here and is everywhere with free wi-fi. There are lots of Starbucks. Some of my favorites (non-chains) include Yia-Yia or Charlie Gittos or Cardwells or Bristols. You should try Crown Candy in the city and Ted Drewes for deserts. (I also really like Silky’s in West County.) [I'm obviously not a foodie.]
Places: You’ll hear people talk about “the Hill” which is an Italian area in the city. You’ll hear about Clayton which is the one business area outside downtown. You’ll hear about West County, South County, and North County which are just like the names (counties around St. Louis city). You’ll hear about 40, 70, 44, 270, and 170 which are the highways. You’ll hear about Forest Park (which is our version of Central Park).
Vacation: The two Missouri vacation places you’ll hear people talk about are Branson and Lake of the Ozarks.
Casinos: There are several casinos around town.
Smoking: Smoking in restaurants was banned a few years ago.
Other Big Companies: A lot of the big companies like Anheuser-Busch and Ralston have been bought, but they still have a big presence here. Emerson Electric is here. SSM Healthcare is here. Ascension Health is headquartered here. Centene is here. Enterprise Rent-A-Car is headquartered here. EdwardJones, AG Edwards, and Scottrade are all here. Citibank has a large presence here as does Mastercard. Build-A-Bear was started here.
Colleges: Washington University (WashU) and St. Louis University (SLU) are both here in town.
Areas to Live: I would say that many people from Express Scripts management live in West County (Chesterfield, Wildwood, Ellisville) which is where I’ve lived most of my time here. There are lots of transplants out here. Traditionally, most people from St. Louis will live east of 270 in Clayton, Ladue, Frontenac, Webster, Kirkwood, or in the city (see Delmar Loop area or Washington St. downtown). Some other areas where people will live include St. Charles or some people in Illinois. If you like a new house with lots of square footage, you can get that in West County or other areas farther. There are even a few new subdivisions being built by Pulte homes.
Golf: If you like to golf, there are lots of places to go. I really like Tapawingo and Peveley Farms. There are also many good clubs which can be joined for a reasonable fee like St. Albans or Forest Hills.
Schools: The public schools are very good (at least from what I know out here in the Wildwood/Chesterfield area). There are also a lot of private schools with a huge emphasis on Catholic schools.
Things for Kids to Do: There are lots of great places like Purina Farms, Six Flags, Dave & Busters, City Museum, The Magic House, Grants Farm, and of course…the Arch. Additionally, there’s the zoo and the Science Center.
Sports: Of course, you have the Rams, Cardinals, and Blues. There is no NBA. (Tickets are probably a lot easier to get here than in NY.)
Places to Shop:
Surprises:
More information:
March 29, 2012
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I found this chart fascinating. As we know, drugs don’t always work (and not just because people don’t actually take them). BUT did you realize in some cases it’s a coin flip of whether a drug will work for you?
Data like this is just more support for the case for personalized medicine. If a genetic test can help determine which drug will work in a patient, you can address their disease faster, avoid unnecessary side effects, and impact overall healthcare consumption and costs.
The key of course is finding tests that can be administered easily and at a low cost for which the economic benefits exceed the costs. Of course, addressing the education gap within the physician community and patient community to separate facts from myths is important.
February 24, 2012
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Apparently George Paz, the CEO of Express Scripts, had the following quote the other day that has upset NACDS:
“At the end of the day … Nexium is Nexium, Lipitor is Lipitor, drugs are drugs, and it shouldn’t matter that much who’s counting to 30.”
Are you offended by this quote? If I reverse this, then I guess it doesn’t matter which specialty pharmacy a patient uses, but we all know that pharmacy is a lot more than pill counting (or should be).
I’ve talked about my vision of the future before which is where pharmacists can leverage technology more for prepackaged drugs (especially with low cost oral solids) and long-term patients while their expertise is leveraged in counseling and helping patients understand their drugs and conditions. This is crucial to the healthcare system.
So, while I can exploit the quote to drive an emotional response, isn’t the point that counting doesn’t matter but delivery of the medication and interaction with the patient does matter?
February 24, 2012
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I keep thinking about the $4-$6B that the Visante Study estimated was being spent by pharma on copay cards and how that money could drive overall adherence.
Here’s my thought:
Based on work I’ve participated in and work I’ve seen my clients do, I know you could raise adherence by ~10 percentage points by some simple intervention programs that would cost much less than $10 per patient per year. At the same time, there is still lots more work to be done to address primary adherence and we know that not all people are non-adherent for the same reasons or will respond to the same techniques.
But, I’m pretty confident that the the remaining $32 per patient could fund a lot of POS interventions like Ashville, education programs, caregiver programs, incentives, and other tactics. Of course, this would float all boats (I.e., brand and generic Rxs) so the cost per manufacturer might drop and the ROI should go up. At the same time, this should create overall saving by cutting into the estimated $290B in costs associated with non-adherence.
Of course, most people are skeptical about this type of preventative health programs (aka primary preventation or public health) although 25 of the 30 years in additional life expectancy gained over the last century is credited to public health. Additionally, the Trust for America’s Health (TFAH) had estimated that an annual $10 per person investment in disease prevention programs could produce more than $16B in annual saving within five years.
The easy argument would be that ultimately interests aren’t aligned for pharma as prevention might reduce Rx utilization. I would hypothesize that the increased number of new starts and decrease in abandonment would more than compensate.
Of course, how do we pull this off? I’m not sure but it seems like a great HHS opportunity.
February 24, 2012
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Within the M&A landscape, “people keep returning to pharmacy. Pharmacy has always had long-term investment [interest] … and opportunities for growth and expansion are not difficult to imagine…. Pharmacy is sexy; it always has been, and, for the near future, it will continue to be.” — Dexter Braff, president of The Braff Group, a health care M&A company, told AIS’s Specialty Pharmacy News.
This was an interesting quote for me. While I agree that the fundamentals of pharmacy are good, there are lots of challenges.
From a positive perspective:
BUT, from a negative perspective:
So…on the one hand, I agree. Pharmacy is very interesting and ripe for innovation. On the other land, there are lots of big, established players fighting for the same margin dollar. I’m still betting money on the industry, but I know lots of companies are trying to sell out so that tells me there are some challenges.
February 23, 2012
2 Comments
Yesterday at the PBMI conference, I was listening to a presentation on the blending of pharmacy and medical data. This has been the Holy Grail for a while although companies have struggled to do it well and successfully use it to affect change. That being said, I think it’s one of the biggest focus area for differentiation in the market today. From a large PBM perspective, you can look at the Guided Health efforts at Prime Therapeutics. From a payer software perspective, you can look at Active Health.
Some of the examples from yesterday were interesting data points that you’d never see without digging into both sets of data. For example:
Of course, the challenge is not only to identify them but to engage the patient and the provider in the best course of treatment looking at cost, outcomes, and patient experience.
February 8, 2012
2 Comments
I’m giving my PCMA presentation in FL right now about copay cards. For those of you that can’t attend, here is my executive summary and a copy of some slides. (My actual slide deck was shorter for presentation but this gives more data to those of you looking online.)
I focused on three key points:
There doesn’t seem to be clear data (although another article says it is available) but the general data shows that availability and use of copay cards is growing rapidly.
Investing in copay cards seems to be based on four myths:
This topic’s not going away. For now, the easy PBM response is to close down the formulary, move more scripts to mail, and implement prior authorization programs. I would expect this will happen more often unless there is more transparency here around what’s happening and the benefits.
February 8, 2012
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We all know people don’t read labels on their medications or their over-the-counter (OTC) pills. If they did, their eyes would gloss over, and they would start to worry about all the side effects. Of course, this is a problem since some things can create drug-drug interactions or create an overdose.
I was reading an article in USA Today called “Read the labels because ‘all drugs have side effects’“. It lists out Tylenol, Advil, Motrin, Benadryl, Claritin, and Zantac as examples of OTC medications with overdose risks. It gives more details on these and provides several other examples. Here’s a quote from the article:
“It’s important for the public to realize that all drugs have side effects. It doesn’t matter if they’re prescription, over-the-counter, herbals or nutritional supplements. If they have active ingredients, they have side effects and can interfere with normal body functions.” Brian Strom, director of the Center for Clinical Epidemiology and Biostatistics and the University of Pennsylvania
The reality is that we’re making an unconscious choice about tradeoffs. Do the risks and probabilities of the side effects outweigh the probabilities of improvement? Of course, in many situations, they do.
I think this points to several things:
Ideally, once we have broad use of PHRs (personal health records) which are tied into our grocery bills to track purchases and use then computer algorithms can look for risk factors. And, with personalized medicine, we might one day know which things to avoid based on our genes.
February 5, 2012
3 Comments
I think we can all agree now that 90-day prescriptions are correlated with better adherence (and the percentage of retail 90-day scripts is going up). The latest study here is from Walgreens.
A new Walgreens study analyzing relative medication adherence of patients filling 90-day supplies of maintenance medications using retail and mail order channels over a one-year period concluded that patients who fill prescriptions via retail have as high or slightly higher adherence levels than those utilizing mail (77 percent vs. 76 percent). The study, “Medication Adherence for 90-Day Quantities of Medication Dispensed Through Retail and Mail Order Pharmacies,” was recently released in the November issue of The American Journal of Managed Care.
This reflects other studies from CVS Caremark, Express Scripts, Kaiser, and BCBSNC. (Although sometimes it shows mail order as better and sometimes retail.)
Of course, the data is slightly different in either case, but the general consensus is the same. So, the question is what’s next. How should you compare the two channels?
This issue won’t go away so it’s going to be important to continue to find ways to compare the channels and find populations that are similar for comparison or remove the bias.
February 2, 2012
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Based on new data from CMS as shared by CSFB in a report, the enrollment in Medicare Advantage through January 12th is up 1.2M to 13.3M. This is 27% penetration into the Medicare market. PDP enrollment was up to 19.69M a similar gain of 1.2M.
A quick summary of the big winners are:
This is also interesting in light of Kermit Crawford (CEO of Walgreens) comment yesterday:
“Based on our preliminary analysis of the Centers for Medicare and Medicaid Services (CMS) data, Medicare Part D plans with Walgreens in their network gained market share in the aggregate, while those without Walgreens lost market share. Importantly, we were very pleased to see that those plans that included Walgreens grew nearly twice as fast as those Medicare Part D plans without Walgreens. In fact, several health plans that partnered with Walgreens grew significantly faster. For example, Coventry, who partnered with Walgreens and introduced a low cost Medicare Part D option, grew five times faster than the overall market.”
The one obvious account that he’s talking about is Wellpoint which lost 2,000 (0.3%) members in MA and 73,000 (11.6%) members in PDP.
January 30, 2012
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Those of you that have heard me speak know that I look at this topic of predicting adherence both from an area of fascination along with the eye of a skeptic. While I love the concept of predicting someone’s adherence and therefore determining how to best support them from an intervention approach, I also believe that the general predictors are pretty straightforward:
And, this is a hot topic (see post on FICO adherence score). You can see my prior posts on some different studies, on the Merck Estimator, and some notes from the NEHI event on this topic. It generated a good dialogue on Kevin MD’s blog when I talked about paying MD for adherence.
I had a chance to talk with Josh Benner the CEO of RxAnte the other day. It sounds very interesting, and they have an impressive team assembled. In general, they’re focused on:
There are definitely some correlations to the work we do at Silverlink Communications around adherence. We’re helping clients determine a communication strategy that might include call center agents, direct mail, automated calls, e-mail, SMS, mobile, or web solutions. We’re looking at segmentation and prioritization. We’re looking at past behavior and messaging. The goal is how to best spend resources to drive health outcomes from primary adherence to sustaining adherence. This is a challenge, and we all need to build upon the work that each other is doing to improve in this area. We have a huge problem globally with adherence.
January 23, 2012
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I’m sure this is a little bit out there in terms of some of my ideas, but I like it. While a little Orwellian, I was talking with a retailer the other day about how to maximize the experience at the counter between the patient and the pharmacist. At a small independent pharmacy, the owner (pharmacist) probably knows a lot of this patients (customers) by name. On the other hand, this is a lot harder at the larger chains which are busier and with multiple pharmacists working different shifts.
I was thinking about how technology could address this. What if you had a camera that was monitoring customers as they came in the store (which most probably have today in terms of security cameras)? Could that be augmented by adding facial recognition software (which I have no idea how expensive it is)? Then, the pharmacy could know that George was in the store and tap into a CRM system that could remind Nancy the pharmacist that I have a dog and a fear of needles (for example). When I got to the counter, Nancy could greet me by name and ask about my dog. It would certainly make me feel welcome and should create some stickiness (although maybe less if I knew it was technology enabled).
January 23, 2012
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I was reading this article in Fast Company about neuromarketing with a focus on the CEO of NeuroFocus. Companies like PepsiCo, Intel, CBS, ESPN, and eBay have used them and many others are trying work in this area. But, I’ve never heard of a healthcare company doing anything in this space. I’ve talked about this before in my article about the book Buyology. It’s fascinating, and the mobile tool that NeuroFocus has created could create new ways of capturing data.
One interesting example he talked about was the expression of a person on a poster (for example). If the expression is too easy to decipher, we simply move on…BUT if it’s hard to decipher, it causes us to pause and think.
He also talks about always putting images on the left hand side of the screen and words on the right. (Seems applicable to direct mail and maybe my next slide presentation.)
Another example is that the brain loves curves not sharp edges.
Given the shifting pharmacy marketplace, I would think this is a study that the industry needs. The PBMs should better understand what the consumer thinks about when they hear the word mail order. Manufacturers should understand the reaction to brand names or copay cards. The retailers should think about how brand equity plays into choice. There are endless opportunities here. (A business opportunity perhaps!)
(They Have Hacked Your Brain by Adam Penenberg)
January 20, 2012
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This topic seems to be heating back up based on several posts on Adam Fein’s blog (Lipitor, adherence) and an article in Drug Benefit News where this quote appeared along with an AIS blog post questioning the PBM’s dislike of copay cards (from the same article that Adam mentioned).
“Copay offset programs [offered by brand-name drugmakers to compete with generics] mitigate the effectiveness of our tiered benefit design programs and [are] going against what we’re trying to accomplish for our members’ health and for employers.”
— Peter Clagett, vice president of pharmaceutical strategies and PBM oversight for WellPoint, Inc.
January 16, 2012
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Just revisiting what Adam Fein talked about last year as I work on my slides for this year.
January 16, 2012
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I found this chart from Cutting Edge Information a good summary of what metrics pharma uses in measuring ROI. (This was in the most recent PharmaVOICE magazine.) I would assume copay cards address most of these with a 4:1-6:1 ROI being quoted in the Visante study by PCMA.
January 16, 2012
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As anyone who follows the pharmacy industry knows (and now millions of consumers), Walgreens and Express Scripts have had an ongoing contract dispute since mid-2011. Most of us expected this to get resolved by the end of the year to minimize patient disruption, but it didn’t.
With that in mind, Walgreens has published several white papers to help articulate the results of their employer survey data and to help plans quantify the value of keeping Walgreens in the network. As this is a fascinating case study that will someday make a great Harvard case study, I reached out to Walgreens to get their thoughts on a few points.
Thanks to their PR team, I was able to get responses from Michael Polzin, their VP of Corporate Communications, to my questions.
As we’ve previously stated, we are now moving on without being part of the Express Scripts network. While we are open to any fair and competitive offer from them, we also are fine with continuing to operate our business without Express Scripts.
We intend to retain patients affected by this situation over time by reaching out on both a consumer level and a business-to-business level. To date, more than 120 health plans, employers and other Express Scripts clients have informed us that they have either changed pharmacy benefit managers (PBMs) or taken steps consistent with their contracts to maintain access to Walgreens pharmacies in 2012. That represents 10 million of the 88 million Express Scripts prescriptions we filled last year. We’re also in active negotiations with many health plans and employers to provide access to Walgreens in their networks as soon as their contracts allow. In addition to those 10 million prescriptions already retained, we also expect to retain many Medicare Part D patients who previously were in an Express Scripts-managed Part D plan and moved to a different plan during last fall’s open enrollment period. We will get more detail on those numbers when CMS announces the results of the open enrollment period later this month.
On the consumer level, they are very receptive to looking at options to continue using Walgreens pharmacies whenever possible. They want to retain their choice of pharmacy and are exercising that ability as best they can. For example, we’ve had great response this month with our Prescription Savings Club (PSC) promotion. The PSC offers savings on more than 8,000 brand name and all generic medications. During the month of January, you can get an annual membership in this program for just $5 ($10 for a family). We have seen more than 250,000 patients sign up for the club just since Jan. 1, and we continue to have record sign-up days. The interest we’ve seen in the club has been extraordinary.
As for differentiating the retail pharmacy experience, that is exactly what we are doing through our new Well Experience store format, which has piloted so far in about 20 Chicago area stores and the entire Indianapolis market. The pharmacy, health and wellness area of these stores are truly a game changer. The pharmacist is more accessible by bringing them out from behind the pharmacy counter to a desk in front of the pharmacy. As a result, patient interactions are higher than our pharmacists have ever experienced. The format also allows for tighter integration between our Take Care Clinic nurse practitioners and pharmacists to create a real community health corner.
We’ve had many CEOs of major health plans and large employers tour these Well Experience stores, and their No. 1 comment is, “This is exactly what we need. How fast can you make this happen?”
Our best ambassadors to consumers are our pharmacy staffs. They are the ones with the trusted relationship with our customers and are able to have individual, face-to-face conversations with them. They’ve done a tremendous job educating our patients, and that’s why we’re seeing so much interest in the PSC and have patients finding other ways to continue using Walgreens, such as using their spouse’s coverage, if available.
The same is true with physicians. Our pharmacy staff work with them every day and help them find the best options for their patients including generic alternatives that can be very competitive through the PSC card with a 90-day supply compared with the patient’s program under Express Scripts.
As for Wall Street, we’ve been quite active speaking at analyst conferences, addressing the issue on our earnings conference calls and at our recent annual shareholders meeting. The analysts also have found our white papers and other SEC filings to be helpful in understanding the situation.
Ultimately, payers/employers care about cost. If a PBM creates savings for them thru a limited network, can you summarize what they lose by not including Walgreens and how that transfers to hard dollar savings? Are Walgreens consumers more engaged with their health? Are they more satisfied with their healthcare?
Our research demonstrates the importance of Walgreens presence in a payers’ network in addition to the cost factor. A Walgreens proprietary survey conducted in December of 823 executives and managers who are key decision makers for pharmacy benefit decisions or provide input found that 82 percent of employers said that they would not exclude Walgreens for less than 5 percent savings on their total pharmacy spend. Sixty percent of employers would not exclude Walgreens for less than 10 percent savings, and 21 percent would not exclude Walgreens from their network regardless of the amount of savings. These findings on employer attitudes are consistent with recent research published by several leading equity research analysts. Clearly, employers value having Walgreens as a pharmacy option for their employees, but Express Scripts wants to take that choice away.
Now, add to that the small variation in costs among pharmacies. We believe that the vast majority of pharmacies, including Walgreens, receive reimbursements per prescription that fall within a narrow band, typically within less than 5 percent of one another. Therefore, excluding any pharmacy with our 20 percent market share from a 5 percent pricing band can only result in savings on the order of 1 percent or less. And that doesn’t take into consideration the additional savings Walgreens can provide through our leading generic dispensing rate or the 7 percent savings that payers can see by adding a 90-day refill option at our retail pharmacies.
It’s also important to point out that during negotiations, Walgreens offered to hold rates for a new contract flat and did not seek an increase in rates. The response from Express Scripts was to insist on being able to unilaterally define contract terms, such as what does and does not constitute a brand and generic drug. Express Scripts also proposed to slash Walgreens reimbursement rates to levels below the industry average cost to provide each prescription.
Walgreens is focused on helping payers with their total health care spend, not just the 10-12 percent of their health care costs that are spent on prescription drugs. While a patient with asthma can lower drug spend by not getting refills on their medication, the resulting emergency room visit that could result will be much more expensive overall for the payer. So we are focused on expanding the pharmacist’s role among health care providers to lower overall medical costs rather than focusing on drug spend alone.
Adherence is a big issue these days especially in Medicare where it is one of the key Star measures for PDP. One of the key value points in the paper is about adherence. How has Walgreens improved patient adherence and are you collaborating with payers to do this?
Walgreens pharmacies provide many medication adherence services, counseling and other assistance that lowers medical costs by improving outcomes. These include monthly adherence calls to inform patients about critical upcoming blood tests that are required to continue therapy; next-day home delivery for medications; assistance programs to help patients minimize risk resulting from economic circumstances that may negatively impact therapy compliance; and alerts for missed doses, at-risk patient behavior or serious adverse side effects that are communicated to a prescribing physician. We also offer 90-day supplies of medication, further promoting adherence. Walgreens pharmacists have consistently demonstrated increased adherence to chronic medicines for high-risk conditions for the populations that we serve. For example, for patients in one study who filled their statin and thyroid medications at community pharmacies and who consulted with a pharmacist, a significant improvement in first refill rates resulted (from 55.7 percent to 70.4 percent) after the adherence program was implemented.
While CVS has opted to own a PBM, Walgreens has sold their PBM. Has this experience with Express Scripts changed the way you interact and contract with PBMs? Do you think this will have broader implications on the industry?
I think it has helped us tremendously in terms of building closer relationships with other PBMs and payers. We’re moving forward with partners such as Catalyst Rx, Prime Therapeutics and SXC Health Solutions, and health plans such as Coventry and Humana. All of us see this as an opportunity to create a differentiated offering during the upcoming selling season.
See answer above.
See question 1 and our development of the Well Experience store and pharmacy format.
January 14, 2012
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I just got added to the agenda for the February PCMA event so look me up if you’ll be there. I’ve spoken on the topic of copay cards a few times for AIS in the past. Since then, there have been a few significant events:
As always, I welcome comments, articles, suggestions, or data to support this discussion. It is certainly one where there is limited data or facts. Thanks.
January 13, 2012
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This is either a massive validation of the perceived value of Twitter or a crazy distraction, but either way, it’s interesting to those of us who study the industry and/or study marketing and communications.
As part of the ongoing dispute between Walgreens and Express Scripts, Twitter has become one of the latest tools. (see June post and September post) In an effort to sway public opinion and thereby pressure Express Scripts and its clients, Walgreens turned to bloggers and Twitter to push their messaging…but these were in some case paid comments which was surprising. They already have strong messaging in their IChooseWalgreens website and whitepapers on the Value of Walgreens. I also thought they were demonstrating some success in converting people to their discount program which was part of their overall growth strategy shared at their shareholders meeting.
After Walgreens (with almost 84,000 followers) created a promoted hashtag of #ILoveWalgreens, Express Scripts (with 1,645 followers) countered back with several Tweets about the dispute (see below). I guess the question is whether with millions affected and decisions made by the businesses and not consumers…does this forum matter? But, journalists and analysts follow them so it’s important to keep the messaging up. (Other articles on this are here, here, and here.)
Conveniently, I found this infographic on how Twitter is changing healthcare. At the same time, this is an interesting fight because it’s a blend of B2C and B2B crossing paths. More to come since I’m sure this fight is long from over.
January 12, 2012
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As we all have known, healthcare costs are driven by the minority. According to the Agency for Healthcare Research and Quality, the top 1% account for 22% of healthcare spending in the US or about $90,000 per year. (USA Today article)
So, what are the characteristics of these people:
- White, non-Hispanic
- Female
- In poor health
- Elderly
- Users of publicly funded healthcare
Only about 20% of the high cost consumers stay in that bucket for two straight years…which I think is good. But, I guess you have to look at what percentage die during that period since a lot of costs are concentrated at the end-of-life.
Obviously it’s critical to develop solutions to engage and manage these patients earlier in the process. As data gets better, our predictive algorithms around conditions will improve and we’ll be able to intervene and prevent or delay cost in the system. The key of course is doing that in a way that fully engages the healthcare team and the caregivers.
January 6, 2012
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I am excited about the opportunity to present at PBMI in February. I hope many of you will be there. If you want to meet up, send me a quick note at gvanantwerp at mac dot com. Thanks.
Here’s the description of my presentation:
The PBM industry continues to consolidate through mergers and acquisitions. At the same time, new PBMs and niche PBMs continue to grow. While the majority of the green space is gone, there is increasing focus on the individual market through exchanges and the Managed Medicaid market. But, this maturing of the market has forced PBMs to look at more organic growth opportunities also. How do you retain business? How do you innovate? How can you increase profitability per member? With a few large market dynamics playing out in 2012, we’ll begin to look at what the future might hold and what we can learn from the past. It is an interesting time for all PBMs, pharmacies, and manufacturers as they embrace the role of pharmacy in improving overall health outcomes.
January 6, 2012
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While I certainly think the PBM market is going to evolve with increased use of generics, the Express Scripts acquisition of Medco, and the growth in specialty pharmacy, I have to disagree with Matthew Herper from Forbes and Richard Evans of Sovereign & Sector who talk about them as a short-term solution that will struggle (see point 5 in this article).
I think Mark Merritt from PCMA did a nice job of talking about this when I interviewed him last year about how PBMs have continued to change and will continue to evolve over time. I also think that Per Lofberg’s comments from earlier today reflect this. There is still a lot of opportunity around specialty spend. Certainly, the market dynamics put pressure on the traditional margin areas of generics and mail order for oral solids, but these companies are here to stay and I believe valuations will stabilize even if not at the highs of 5 years ago.
And, while in general specialty management has been a stagnant space for innovation over the past 5 years, I expect that to change. I think we’ll see more collaboration with manufacturers both around REMS programs and outcomes-based contracting. I think we’ll see continued evolution in the area of genetic testing and clinical support. I think we’ll see the traditional utilization management programs and formulary management programs show value with the growth of competitive products and bio-similars. I also believe that understanding how to help patients manage their condition and start to take a broader role in overall condition management will and should create PBM opportunities.
January 6, 2012
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After sharing my forecasts about the PBM industry for 2012, I reached out to several people to get their perspective. One person for which I have a lot of respect is Per Lofberg. Per’s now the President of CVS Caremark’s PBM and has an impressive background at companies like Medco, BCG, and Generation Health. Everyone who’s ever worked for him has nothing but great things to say.
Given the change we all expect to see in the industry, I was glad that Per agreed to participate. Here are his answers to some of my questions:
1. 2012 is shaping up to be an exciting year in the PBM industry. Do you think this will finally be the year that limited retail networks take off?
Payers are always looking for new savings opportunities, and limited retail networks provide another avenue to increase savings without compromising access or quality. I have always believed it is quite possible to service large nationwide customers with retail networks that are smaller than the large 60,000 plus networks that are so common today. The current debate in the marketplace will only draw further attention to the topic of limited retail networks, which may result in more PBM clients, including clients who have not previously considered a limited network, engaging in a dialogue about this approach. As a result, I believe that during the 2013 selling season, benefit consultants will be quite focused during the RFP process on understanding the types of savings payers can realize with smaller networks. PBMs like CVS Caremark will need to be able to address this topic clearly with our clients and prospects so they can accurately weigh the benefits and impact of narrowing their network and consider how best to manage the natural disruption factor that will occur.
2. As the generic wave passes in the next few years, how do you expect PBMs to differentiate themselves going forward?
We can’t discount the importance of taking advantage of the large number of blockbuster drugs that will be going generic in the next few years. Being able to deliver strategies designed to drive generic utilization and work with clients to ensure that they appropriately move members to safe and cost-effective generic alternatives should become a best practice standard across the industry. Increasing GDRs will no longer be differentiators, but rather will be expected by clients as a basic PBM offering. As a result, during the generic tidal wave, PBMs need to sit tight, refine their standard formularies and perfect the implementation of programs that drive generic utilization.
As PBMs continue to drive GDR, those that are also successful at offering clinical solutions that support adherence, effectively manage the growing costs related to specialty pharmacy and helping clients manage the intersection of pharmacy and medical benefits to reduce waste and improve health are the ones that will stand out from the competition. Now and in the future, a best in class PBM is one that can accomplish all the basics that used to define differentiation (e.g., GDR, MDR) effortlessly, while bringing value to their clients through an integrated approach to managing the patient’s pharmacy care across the entire spectrum of care. The hallmark of a best in class PBM will be one that effectively addresses access, quality and cost for their clients.
Another consideration for PBMs will be around stricter formulary management strategies to counter increasing, and increasingly frequent, price hikes by pharmaceutical manufacturers. Brand manufacturers are using two basic strategies to protect their market share and we are seeing increased activity as generics erode the profitability of drug blockbusters. Unfortunately, these strategies – brand co-pay coupons and high and frequent price increases — ultimately raise costs and undermine the cost-controls used by employers and health plans to effectively manage their pharmacy spend. To help our clients manage pharmacy costs in this environment, PBMs will need to construct clinically appropriate formularies that provide our clients with options to manage sky-rocketing drug costs without compromising access or outcomes. CVS Caremark is combating price increases by pharmaceutical manufacturers by tightening what is offered on our recommended prescription formulary. As you know formularies are the list of approved drugs that an insurer or employer makes available to beneficiaries and, up until now, the formularies have been quite broad, including most FDA approved drugs, so that doctors and their patients have choice. However, physicians and pharmacists have long recognized that many drugs within a therapeutic class are essentially equivalent, and a “narrow” formulary can be comprehensive while also providing for substantial cost savings.
3. The role of the pharmacist continues to evolve with vaccines and their involvement in more patient management. Given your unique set of assets within the industry, how do you see CVS Caremark leveraging your POS resources to strengthen your focus on clinical outcomes and partner with clients?
As a pharmacy innovation company, we will continue to further develop our unique clinical offerings that leverage the pharmacist interaction and intervention in order to improve the health of our PBM members and drive costs savings for our clients. Our flagship products, Maintenance Choice and Pharmacy Advisor, developed to build on the member’s relationship with their pharmacist, are gaining increasing traction in the marketplace. These programs leverage the clinical expertise and insights of our PBM business along with the broad reach and face-to-face engagement in our retail business to deliver innovative solutions that are unmatched in the marketplace today.
Moving forward we will continue to build on this model by finding ways to further expand member access to these programs. For example, in 2012 we are expanding on our successful Pharmacy Advisor program, originally launched to increase adherence and close gaps in care for diabetes patients, to encompass patients with chronic cardiovascular conditions who are at risk of becoming non-adherent. We are also enhancing Maintenance Choice to make our integrated capability more broadly available to the CVS Caremark book of business and easier for members to use. In addition to enhancing our existing programs we are also continuing to innovate as a PBM by piloting new programs, including one we are piloting in 2012 that leverages pharmacist counseling to better coordinate drug treatment for patients recently discharged from hospitals in order to reduce rehospitalization rates and finding ways to fully integrate our Specialty Pharmacy business so clients and members get the full benefit of the entire CVS Caremark enterprise—PBM, CVS/pharmacy and MinuteClinic.
4. Medicare has pushed quality to the forefront with some of the new Star ratings. Additionally, some PBMs are looking at outcomes-based contracting with pharma. How do you see the marketplace engaging and leveraging pay-for-performance structures within the PBM industry?
Pay-for-performance based on outcomes is an extension of the guarantees that most PBMs negotiate with their clients today. These guarantees are in place to specify a level of service that clients should expect from their PBM with regards to such activities as response time on calls to the customer care center and performance for measurements such as a minimum GDR or MDR to be achieved within a specified time period. Adding in a level of clinical accountability is in line with how the PBM industry is evolving from one focused on channel/access and pure pharmacy cost savings through generics to one that encompasses health outcomes, adherence and the resulting overall health care cost savings associated with these measures. As PBMs get even better at implementing clinical programs and managing adherence across the spectrum of care, I would anticipate we will see more requests by our clients for contracts that either reward or penalize PBMs for their performance in these areas.
5. There is lots of talk about the value of carve-in versus carve-out pharmacy and the integration of medical, pharmacy, and ultimately lab data to provide improved management and identification of at-risk patients. Given your relationship with Aetna and ActiveHealth, how do you see CVS Caremark leveraging these assets even when they work in a carve-out relationship to help clients?
In our current partnerships with health plan clients, our main objective is to find ways to smoothly integrate our pharmacy management activities with the health plan’s focus on solid medical management. This integrated approach—one that balances traditional utilization management with programs to improve adherence, close gaps in care, improve outcomes and reduce negative health events – can deliver better results than a carve-out model that simply focuses on minimizing pharmacy spend. As I mentioned earlier when talking about how PBMs will differentiate their offerings in the future, a best in class PBM delivers on more than increasing GDR or moving members to mail order, it is about managing the whole patient and delivering results that address access, quality and cost. Being able to integrate a full view of the patient and their health works because it makes pharmacy care an integral component of overall health management for the member
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January 1, 2012
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One thing that I often think about is the amount of change in the teams within rapidly growing companies (e.g., many PBMs). Does this have an effect on internal knowledge, productivity, and therefore success? It’s a great question. With that in mind, I found the infographic below very interesting.
At the same time, I looked back a few years to see how much change there has been in the management teams at each of the largest PBMs (Medco, Express Scripts, and CVS Caremark). [Honestly, it was less change than I had expected, and I didn't look at average age since I'm not sure that's a great proxy in business while it may be in sports.]
So maybe more change is needed? Certainly with the changes in the market dynamics, there is always a need for bringing in a fresh perspective…at the same time, the PBM industry is complex and continuity given long-term contracts is important.
December 22, 2011
1 Comment
With the Walgreens and Express Scripts dispute unresolved, you are certainly seeing more of an opportunistic attitude in pharmacies than one of solidarity. Maybe this shouldn’t be a surprise, but early on, I thought that the pharmacy groups would see Walgreens as their “leader” standing up to the large PBM. If the largest retailer can’t get negotiating leverage over the PBM, can anyone?
Now, if you go into my local grocery store (Dierbergs), you see signs about moving your prescriptions to them from Walgreens before it’s too late. You see and hear videos playing throughout the store talking about how to move your prescriptions and how easy it is.
CVS Caremark is predicting that it could see as many as 23M prescriptions move from Walgreens to CVS stores.
I’m certainly a fan of preferred or limited networks although I’m not sure I ever imagined a scenario where one PBM would totally exclude one of the big two retailers. I always imagined a scenario where you were playing them off each other and letting the client choose which one(s) to exclude.
You can see in the new whitepaper by Walgreens that they point out several things:
This brings up two other discussion topics:
December 20, 2011
0 Comments
First, I believe that the deal will happen without a doubt especially with the new specialty market share numbers from Adam Fein. While I understand the concerns of the independent pharmacies, I both disagree with them, and I don’t think that the FTC is focused on business protection but is looking at consumers.
That being said, the markets are still discounting the Medco stock which means they think there is some perceived risk. With the shareholder votes at both companies tomorrow, it got me thinking about what would happen if the deal didn’t happen.
If it didn’t happen, you’d have a much smaller Medco. They’ve lost United Healthcare, FEP, CALpers, BCBSNC, and I’m sure others. I’m sure you’d also have some change in the team with people’s resumes out in a tight healthcare executive labor market. You’d have a lot of clients wondering what they would do next. I’m also not sure if David would stay and his team has been together for a while so some of them would likely follow him. At the same time, I think Express Scripts would end up in good shape. They’ve paralyzed one of their big competitors for a year while they’ve continued several projects.
Medco would have to come out swinging in my mind. They would have to look at growth through acquisition putting several companies in play. They might also look at expanding beyond just the core PBM model which I think was always David’s perspective. Perhaps disease management or ACOs or exchanges or technology or maybe try to go vertical by looking at pharma or a wholesaler. I would think companies like IMS or inVentiv would also be interesting.
I’m not sure the FTC would disrupt the acquisition, but I did wonder if someone would try to be the spoiler like Express Scripts tried with the CVS acquisition of Caremark. I’m not sure who could do that but a United Healthcare could pull it off to support their services growth strategy with Optum. Or, Walgreens could take action to counteract their dispute with Express Scripts and follow the CVS Caremark success.
Interesting times.
[Note: I do own stock in many of the companies mentioned here.]
December 15, 2011
1 Comment
P2P or Peer-to-Peer healthcare is a common discussion topic these days. Patients want to go online and learn from others with their condition on sites like Inspire.com or PatientsLikeMe.com. The government has been one of the early adopters.
“The social media sites we have created show that the government can interact in a meaningful way with the public. We don’t just push information out; we strive to make the content relevant so people can act on it, share it with family or friends and ultimately change their behavior.” Amy Burnett, CDC (Tapping Into The Power By Getting Personal, Robin Robinson, PharmaVOICE, May 2011)
The question is how can traditional companies – pharmaceutical manufacturers, disease management companies, providers, managed care companies, pharmacies, and PBMs – interact in these discussions. On the one hand, they have a broad depth of experience and data to share. On the other hand, they can’t just jump in and drive their agenda. They have to add value to the conversation, demonstrate that they care, and add value.
Much like the idea that you can purchase things online and return them to the physical store, I think these virtual discussions need to eventually be tied to a physical experience for many patients. One group that I think could play significantly in this is local pharmacists. Imagine that a chain or an association created a social media team. That team could monitor and interact with patients especially in key conditions such as some of the specialty drug areas. As relevant, this could be linked back to a local store where a pharmacist could spend time consulting with the patient. I think this would be a great way to drive the retail specialty business and increase consumer brand awareness.
“The potential use of social media as a bellwether for identifying trends, informational gaps, support tools, even improved communications between providers, allied health professionals, and others could pave the way for a more collaborative approach to population mapping and patient care.” Michael Parks, Vox Media (Social Media: Paving The Way, Robin Robinson, PharmaVOICE, May 2011)
The CDC has even created a toolkit for people to use.
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Contact me at gvanantwerp @ mac.com.
