Enabling Healthy Decisions

With Walgreens announcing that they were going to sell off their PBM assets (something I’ve suggested was going to happen for a while), the attention is clearly on what United Healthcare will do with their relationship with Medco.

Right now, United operates both a captive PBM (Prescription Solutions) and has an outsourced PBM relationship (Medco). Together the two represent about $27B in spend – $16B for Prescription Solutions and $11B for Medco. This decision is significant in terms of several things:

• Which model is “better” (i.e., the logic, structure, and timing of their decision)
• Medco revenue
• UHG strategy

As I talked about a few weeks ago, the trend has been to shed the internal PBM assets and sign long-term contracts. Will that happen here?

There are several options which I think could be considered:

1. Renew a Medco contract and continue to operate both models while slowly migrating lives to Prescription Solutions;
2. Further segment the relationship with Medco by making separate decisions regarding PBM management, claims processing, mail order, and specialty thereby insourcing parts but not all of the Medco relationship;
3. Terminate the Medco contract and move all the lives to Prescription Solutions; or
4. Sell Prescription Solutions to Medco and sign a long-term agreement.

There are lots of things to weigh here:

• What, if any, are the implications of the MLR definition and health reform on the benefits of ownership versus outsourcing the PBM?
• Will health reform impact the mix of lives (group, individual, Medicare, Medicaid) and how will that affect the immediacy of the decision?
• How much money do they make on the PBM asset and is the cost of capital to transition clients and make infrastructure investments worth it?
• Is there some type of structural relationship (e.g., Wellpoint and Express Scripts) that offers them tax advantages?
• What is the value of the Prescription Solutions asset if sold?
• Are there underwriting benefits to ownership of the PBM (i.e., current Medco lives)?
• Can they get a price from Medco on managing the lives that is comparable to what it would cost them to run their PBM?
• Does the scale of adding the current lives from Medco into the Prescription Solutions model create such cost efficiencies that it makes them more competitive in their existing markets?

I’m not sure how this will play out, but this will certainly be a huge decision under any situation. Of course, all the other PBMs would like to play here to either get the contract instead of Medco or buy the Prescription Solutions assets, but I don’t see those as likely outcomes.

So, here’s my free idea on a PBM product which could be developed and launched. If you believe (as I do) that physician’s are likely moving patients to higher strength or stronger medications based on lab data (i.e., cholesterol is still high so drug must not be working) without asking about adherence, then you have to think about (a) how to get the data into the physician’s hands that the patient is non-adherent and (b) how do you see if this is a real issue. (See prior blog post)

So what do you do? Here’s my idea…

1. Select a few clients where you can get their lab data on a regular and timely basis.
2. Select a few classes where physicians regularly use lab data to monitor prescription effectiveness.
3. Integrate lab data into a data warehouse.
4. Query the database to identify patients who have a lab done and have a medication possession ratio of less than 80%.
5. Trigger a patient intervention to determine their barriers and/or other rationale for low MPR (e.g., perhaps they had samples).
6. Develop a point-of-sale (POS) edit which rejects for any new drug in the product category or any increase in dosage for those patients.
7. Develop messaging at the POS which tells the pharmacist to ask the patient about their adherence to the original medication.
8. Message the physician about the patient’s non-adherence and barriers (if collected) and see if they still want to increase the dosage or change the medication.

This would be an interesting study.

As I like to refer to us, we’re the “most medicated generation”, and that’s not likely to change. Our children are more obese. They have less economic options. They will live longer. All of these things will contribute to their use of medications.

Additionally, personalized medicine will take hold, and if reform creates a shakeout in the managed care industry, there will be less companies which means their likelihood of retaining a member longer is higher. With longer retention, they will be more interested in investing in adherence programs that drive lower long-term healthcare costs. Use of prescriptions as a predominant approach for initial therapy (versus diet and exercise for example) is likely to continue.

Let’s look at some charts from a recent NY Times article:

The increasing complexity of therapy when patients have numerous drugs is a serious consideration in managing their care.

Some of the other data points from the study by the National Center for Health Statistics were:

• If you’re older than 60, you’re likely taking a cholesterol lowering drug.
• If you’re between 20 and 59 and have a prescription, it’s likely to be an antidepressant.
• 22% of kids under 12 have a prescription…most commonly for asthma.
• Almost 30% of teenagers take a prescription…most commonly for ADHD or related conditions (6%).
• 88% of people 60+ were using at least one medication and more than 2/3rds were taking 5 or more.
• Women use more medications than men.
• White people used more prescriptions than non-Hispanic blacks of Mexican-Americans.
• Those with health insurance were twice as likely to use prescription drugs.

There are several devices that have been invented that can be installed in cars to lower your car insurance costs.

Would such a concept work in healthcare? Would we (as consumers) be willing to trade privacy for lower costs? Would we willing to have our calorie intact monitored? Our exercise tracked?

Certainly, there is lots of talk about incentives versus penalties in healthcare.  Should you use a carrot to incent people to stop smoking, lose weight, take their medications, etc.?  Or should you use penalties where they pay more when they don’t follow guidelines and physician’s advice?

With e-prescribing finally reaching some critical mass here in 2010, this is an important discussion point. A decade ago (in a different prescription environment), the manufacturers were very excited about the opportunity to help drive formulary choice and have messaging to the prescriber during the drug selection process. Now, I think there are two major impacts related to the manufacturers:

1. Formulary / Clinical Management
   

   From a PBM perspective, the “holy grail” of eRx is that they can push decisioning and information to the point-of-prescribing (i.e., the physician’s office). This should make it easier to drive formulary utilization (brand and generic) and also implement more utilization management programs (i.e., step therapy, prior authorization, quantity level limits).

2. New Rxs
   

   Depending on what research you look at, anywhere from 10-30% of prescriptions that are written are never filled (for a variety of reasons). Let’s assume all of those have a reasonable chance of being filled.

So, on the one hand, from a brand manufacturer perspective, I’m likely to have less and less ability to influence choice of prescriptions through detailing and DTC advertising…leading to a higher generic fill rate. Although if I am the drug on formulary, I’m more likely to be chosen.

On the other hand, I’m likely to get more claims.

So, how does this work out mathematically? I have no idea, but here’s my thoughts.

• 70% generic fill rate today
• 85-90% generic fill rate is probably clinically possible between today’s generics and those coming off patent in the next few years
• So, out of every 100 claims today, there would be 15 less brand Rxs. BUT, I would assume most of this would happen without eRx so let’s assume the technology either accelerates or drives an additional 5% generic fill rate. They lose 5 brand Rxs due to eRx.
• 100 claims today goes to 120 claims (taking the midpoint) when capturing all the Rxs written (and getting them to fill by addressing their barriers)
• They get 10% of the net new 20 claims…which is only 2 claims.
• So, they are down 3 claims.

BUT…Don’t forget that the brand manufacturers make ~50% of the generics in the US. So, of the 23 net new generics (5 + 18), they get 11 new claims. This is a net positive of 8 claims (per 100) although at a different profit mix.

So, assuming 3.3B prescriptions claims per year in the US, this means a growth of 264M claims per year (8%) but they are trading brand claims which should be more profitable for generic claims.

Someone will have to help me understand if this is good or bad.