Archive | July, 2014

Gilead’s Sovaldi Is The $5.7B Canary In The Coal Mine For Specialty Medications

In case you haven’t been tracking specialty drug costs for the past decade, the recent news with Gilead’s Sovaldi ($GILD) is finally making this topic a front page issue for everyone to be aware of.  I think Dr. Brennan and Dr. Shrank’s viewpoint in JAMA this week did a good job of pointing that issue out.  They make several points:

  • Is this really an issue with Sovaldi or is this an issue with specialty drug prices?
  • Would this really be an issue if it weren’t for the large patient population?
  • Will this profit really continue or are they simply enjoying a small period of profitability before other products come to market?
  • Based on QALY (quality adjusted life years) is this really quick comparable cost to other therapies?

If you haven’t paid attention, here’s a few articles on Sovaldi which did $5.7B in sales in the first half of 2014 and which Gilead claims has CURED 9,000 Hep C patients.

But, don’t think of this as an isolated incident.  Vertex has Kalydeco which is a $300,000 drug for a subset of Cystic Fibrosis patients.  In general, I think this is where many people expected the large drug costs to be which is in orphan conditions or massively personalized drugs where there was a companion diagnostic or some other genetic marker to be used in prescribing the drug.

The rising costs of specialty medications has been a focus but has become the focus in the PBM and pharmacy world over the past few years.  This has led to groups like the Campaign for Sustainable Rx Pricing.  Here’s a few articles on the topic:

Of course, the one voice lost in all of this is that of the patient and the value of a cure to them.  Many people don’t know they have Hepatitis C (HCV), but it can progress and lead to a liver transplant or even ESRD (end state renal disease) which are expensive.  15,000 people die each year in the US due to Hep C (see top reasons for death in the US).  So, drugs like this can be literally and figuratively life savers.  These can change the course of their life by actually curing a lifetime condition.

This topic of specialty drug pricing isn’t going away.

At the end of the day, I’m still left with several questions:

  1. What is the average weighted cost of a patient with chronic Hep C?  Discounted to today’s dollars?  Hard dollars and soft dollars?  How does that compare to the cost of a cure?
  2. What’s the expected window of opportunity for Gilead?  If they have to pay for the full cost of this drug in one year, that explains a lot.  If they’re going to have a corner on the market for 10-years, that’s a different perspective.  (Hard to know prospectively)
  3. For any condition, what’s the value of a cure?  How is that value determined?  (This is generally a new question for the industry.)

And, a few questions that won’t get answered soon, but that this issue highlights are:

  1. What is a reasonable ROI for pharma to keep investing in R&D?
  2. What can be done using technology to lower the costs of bringing a drug to market?
  3. For a life-saving treatment, are we ready to put a value on life and how will we do that?
  4. What percentage of R&D costs (and therefore relative costs per pill) should the US pay versus other countries?
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5,500 New Non-Medical Users Of Prescription Painkillers per day

The fact that there are 5,500 new users of prescription painkillers every day for non-medical purposes is a scary statistic, but the data gets even worse.

I could go on and on.  The reality is that we have a huge problem here in the US where we have 4.6% of the world’s population but we use 80% of the world’s opioids.  This isn’t a new problem.  We’ve been watching this get worse for the past decade.  I feel like it’s finally getting some attention among all our other issues.  The White House is focused on it.  The CDC has put out several pieces on it.  

One solution has been the creation of the PMP (prescription monitoring program) which all states except Missouri have.  A good source for information on the PMPs or the PDMPs (prescription drug monitoring programs) is the Brandeis COE (center of excellence).  But, there are challenges here.  It requires physicians and pharmacists to register and access it, but it’s not part of their workflow.  It’s typically not required.  

Separately, you have some scary data that says physicians may actually prescribe certain drugs including “vicodin goody bags” to improve patient satisfaction scores.   

I could list out dozens of great reports and sources, but here’s a few:

Opioid Abuse From CDC(Source: Graphic is from the CDC website – http://www.cdc.gov/homeandrecreationalsafety/rxbrief/) 

 

Leaving The Start-Up World To Join Deloitte Consulting

Several of you have read between my not so subtle hints on the blog.  Several of you have helped me in my search.  But, after 8 years of chasing that elusive start-up and turnaround bug, I’ve decided that going back into the corporate world is going to allow me to better contribute to transformation in healthcare.

I began my career in healthcare in 1999 when I was a manager at Ernst & Young and my mentor was running the managed care practice.  I got to play an exciting initial role which was convincing health plans why the Internet was going to change their business model and why they should have a website focused on members.

That member focused role changed my career path in an exciting way.  I went to a CRM start-up focused on helping health plans with product configuration.  I then ended up going to Express Scripts which at the time acted more like an $8B start-up driving changes in the marketplace. There I worked on lots of consumer facing solutions.  But, as the business grew and I enjoyed the thrill of new challenges, I left to work on my own idea – pharmacy kiosks.  That was 2006.

Since then, I’ve worked on kiosks.  I’ve worked on Business Process Management technology.  I’ve worked on healthcare communications, and I’ve worked on a care management platform.  They’ve all been great learning experiences.  But, as the private equity guys decided to exit my last business, I decided it was time to do something different and stop having to worry about raising money every year.  I actually want to focus on driving change in this very exciting time in the marketplace.  While I went back and forth between line management and consulting, I’ve decided that consulting offers me more of what I want right now.  I get to work across the industry.  I get to work on really complex problems.  I get opportunities to publish thought leadership.  I get to be part of a constant learning environment.  I get to work with great teams both internally and externally.  In short, it feeds my need for constant, new challenges.  And, it allows me to move the family back to St. Louis.

So, starting in August, I’m joining Deloitte Consulting where I’ll be part of their Strategy & Operations practice focused on payers and PBMs.  I’m really excited about it.  I’ve been excited by the people that I’ve met, the references I called about their work, and their approaches towards work-life balance and being part of the community.

I’ve always loved consulting and working with clients.  I think this time rather than being the fresh-faced MBA graduate (that I was at E&Y) that I’m looking forward to bringing a broad set of experiences to the table to help think through the challenges.  I’ll have to capture some of my lessons learned from this past role and share them in another post.  They can build on the prior lessons learned that I’ve shared.

Is McHealthcare Our Future Model?

Forbes magazine, which has become a great source for healthcare articles, has a story about urgent care clinics in the July 21, 2014 issue called “McHealthcare”.  It’s an interesting read saying that fast food is the model on which to reinvent the doctor’s office.  

Let me layout a few key points:

  • There is a lot of waste in the healthcare system with people mis-using the Emergency Room.  (A report by NEHI estimated this waste at $38B a year.)
  • Urgent care clinics and clinics in general (e.g., MinuteClinic) have become more easily accessible points of care for many people.
  • Consumers want easier access and lower out-of-pocket costs.
  • Telemedicine is growing with the recent support from the AMA likely to boost it significantly in the next few years.  

The article gives some facts about the industry and talks about two structures being used in the urgent care growth – franchising and private equity consolidation.

Some of the facts from the article include:

  • 10,000 urgent care clinics in the US
  • 160M visits annually
  • $16B industry
  • $1.5M / year in avg sales per location
  • $300,000 / year in avg profits per location

I also really liked the example they used of American Family Care simply following Walmart and Target to figure out locations.  As we know, location is king.

The questions of course are:

  • Will this industry grow at the forecasted pace?  (12,000 by 2019)
  • How will traditional physicians respond?
  • Will the costs be less than the ER?  (They are today per the chart from Forbes below)
  • Will the costs be less than PCPs?  Will they be less than other clinics?  How will costs compare to telemedicine?
  • Will the outcomes be better?  
  • Will they treat only acute or one-time visits?  How will they manage chronic conditions and repeat patients?  [One chain sees 20% of patients for chronic care and 75% are repeat customers.]
  • Will their be an IT infrastructure to link all their data together to create a coordinated care strategy?

Urgent care vs ER prices

Some of the companies they list in this space include:

If you think about The Triple Aim, clinics should be one of the first to really appeal to the consumer experience.  Cost should be able to follow.  It’s the third leg of the stool (clinical outcomes) that I think is still TBD.

Clinics as a proxy to fast food may work if you think about franchising, but I’m not sure about customer service.  (And the term “McHealthcare” can’t help but make me think about the movie Super Size Me.)  We don’t want the disconnected, unengaged worker treating us.  We want more of a Nordstroms model where they know us and engage us.  Can that happen in a clinic setting?  Perhaps.  

The idea of no appointments (see wait times), longer hours, weekend hours, technology savvy, comfortable wait rooms, free WiFi, and one-stop healthcare is appealing.  This is just one of the macro trends which will help lead the transformation and change within healthcare.

Why Unhealthy People Want Outcomes Based Wellness Programs

On the surface, the “Holy Grail” of sophisticated wellness and incentives programs are based on outcomes.  This means that the individual gets rewarded for achieving a goal.  For example, you can structure your incentives different ways.  You could have a reward for enrollment (i.e., I register for a program).  You could have a reward for activity (i.e., I talk to a nurse or watch a video online).  You could have a reward for an outcome (i.e., I lose 10 pounds).  

But, those have different implications in terms of structure.  [Note: I’m not a lawyer or an accountant so don’t take this as legal advice.]  I think Andrea Davis at Employee Benefit News did a good job of touching on this in her article “No Good Deed“.  

I did have a chance to implement a large outcomes-based rewards program for 1/1/14 where we had to address a lot of these changes from the ACA.  One of the key terms that she hits on is this idea of “Reasonable Alternative Standards”.  This basically means that if you implement an outcomes based incentive program that people have to be able to get the same incentive without achieving the outcome.  This seems to defeat the purpose in my mind.  

I always used to say that it was like having a guard dog with no teeth.  We implemented a very interesting program with lots of expectations, but there was a huge gapping loop hole.  Everyone could apply for a Reasonable Alternative Standard and achieve the same payout without really doing much.  Of course, most people don’t realize this, but this is why I would argue that people that aren’t healthy or engaged with their health programs at work would rather have these outcomes based programs.  

How Survival Statistics Can Be Misleading

Do you ever hear someone talk about how great our healthcare system is because survival rates for a particular condition have gone up?  Of course you have.  Here’s one that says that cancer survival rates have doubled over the past 30 years.  

This sounds great.  We all get excited about this.  

BUT…the key question that I have to ask is whether this is tied to better identification of cancer and early screening.  If you screen more people and identify them earlier, you will have more survivors that live longer.  That’s just a reality.  For some people, the disease never will have progressed which is what leads us to this screening dilemma.

You don’t have to believe me.  You can read it from H. Gilbert Welch in the NY Times.  You can read about this in JAMA.  

I got started on this topic based on two things – (1) my reading of Otis Brawley’s book and (2) an article about paleo-oncology.  

In the second article, they were looking for evidences of cancer in ancient societies to see what that might teach us about cancer.  What I found most interesting was the comment about people believing that cancer was a modern disease attributed to our environment so that it didn’t exist long ago.  I can see how all the articles about things leading to cancer could create that perception, but it seems like a big jump to me.  

So, for those of you that are in healthcare, this is a great lesson about understanding the measures you use and how they drive actions.  For those of you as consumers, this is a good reminder to understand the metrics that are thrown around and question them.  

Mars versus Venus – HDHP variation

Ideally, we’d all get individualized or personalized healthcare, but we’re still years away from that happening.  But, there are several basics about segmenting individuals which are relevant.  One of them is that men and women are different in how they experience healthcare.  Another one is that different plan designs drive different behaviors.

With those in mind, I found an article in the June 2014 Money magazine interesting.  It pointed out that while both men and women reduce their use of the emergency room with high-deductible plans that it varies.  As you can see from the table below, this is especially relevant for high-severity issues where men dramatically reduce their use of the ER which can lead to significant issues.

HDHP

You can see a few studies on this topic here:

How To Lead In A VUCA World?

This is a great question…once you know what VUCA means?

VUCA = Volatility, Uncertainty, Complexity, Ambiguity

In the April 7, 2014 issue of Fortune magazine, they have an article by General George W. Casey Jr (retired) who talks about giving a presentation at UNC about this. From his article, he mentions a few key things:

  • It’s really difficult.
  • Leaders need to “see around corners”
  • You need a clear statement of what needs to be accomplished

I think it’s a great framework for start-ups and healthcare in general.  We’re in a time of massive change in healthcare.  It can lead to people being paralyzed by a lack of a clear future.  Leaders need to help their team understand a future vision and give them a clear problem statement to solve.  This will help drive action which is critical.  

HBR had an article about VUCA also earlier this year with the following graphic:

 

Parkour Running And American Ninja Warrior

If you’ve never watched a video about Parkour running (aka free running), take a look at this video.

As a runner, I find this very interesting.  On the flipside as someone who can’t do a cartwheel, is afraid of heights, and has passed 40, this seems like a great way for me to hurt myself.

But, I find it really interesting that a TV show based on an obstacle course in Japan has really shined a light on this.  American Ninja Warrior is a very interesting show about athletes.  It’s like the Voice for sports.  They share the backstory and then have people compete on very difficult obstacles.  You see NFL players, Olympic athletes, trainers, stuntmen, and people from all walks of live.  I personally find it a great show to run on the treadmill with.  I feel very motivated.

I thought I’d share as this looks like a great type of program for kids to get them into obstacle course running and making exercise fun.  I know a lot of gyms around the country have started to offer these programs.

 


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