The PBM in 2010

Health Strategies Group is a good analyst group that focuses on healthcare. They produce good quality reports primarily for pharma.

In 2004, they put out one about the PBM in 2010. While I am on my way to the PBMI conference, I thought I would revisit it to see some of the interesting points and what has come true. They presented several scenarios (based on input from a panel of people from the industry) so some observations will run opposite each other. Panelists were from ACS State Healthcare, Caremark, Express Scripts, Medco Health Solutions, MedImpact, NMHCRx, Prescription Solutions, and RxAmerica.

1. Payers may increase their use of cost-control strategies regardless of consumer desires.
2. Improved market conditions my decrease focus on cost and trend management and shift focus to outcome quality.
3. Changes in power, skyrocketing costs, or inadequate funding my move Medicare from a public/private partnership to a government run program.
4. Consumers may reject their new role of taking on more healthcare responsibility due to lack of interest, cost, confusion, or a perception that it is the employer’s responsibility.
5. The scenarios they present are:
   1. Enlightened Health Improvement
      1. Quality over cost management
      2. Drug approval focuses on safety, efficacy, and value
      3. PBMs focus on health and disease management
      4. PBM market splinters to claims processers and formulary only PBMs
   2. Status Quo
      1. Continued increase in cost management
      2. Costs shift to consumers
      3. CDHPs grows slowly with only 10% of lives by 2010
      4. Fewer manufacturers and PBMs
   3. Race to the Bottom
      1. Economic downturn makes it even more of a cost decision
      2. Drive to generic formularies and mail service
      3. Reduction in staff at PBMs
      4. Diversification into long-term care and other areas
   4. Government as Primary Healthcare Payer
      1. Government administrator makes decisions and contracts directly with pharma
      2. Government influences drug pricing and development
      3. PBMs are tightly managed by government
6. How they interpret this for pharma:
   1. PBMs are here to stay
   2. Drug costs are important
   3. Value based decisions are not certain
   4. New players will emerge (Provider Synergies, ScripSolutions, Systems Xcellence, CatalystRx, ACS State Healthcare, First Health Services, and Innoviant)
7. They layout a few economic indicators to watch for:
   1. Unemployment
   2. CPI increases
   3. Health plan financials
   4. Specialty trend
   5. Drug trend
   6. Medicare Part D success and costs
   7. Marketshare movement to non-traditional PBMs
   8. CDHP adoption
   9. Rate of adoption of EMR and ERx

I think a key quote at the end about PBMs (which was a sign of the times) is as follows regarding segmenting the population. The segments proposed were Outcome Seekers, Lifestyle Optimizers, Cost Managers, and Non-Users. I think this has changed over the past few years.

“While PBMs believe they can segment consumers into these categories, they see little value in doing so; they do not identify consumers as a target segment.”