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The Specialty Pharmacy Elephant (2016)

I originally wrote this for the Deloitte Center for Health Solution blog. It was then republished in the HealthCare Consumerism Outlook 2016 publication.

The Jetson’s drugstore: Welcome to the digitization of the pharmacy sector

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]
Originally Posted by George Van Antwerp on September 28, 2017

A flying car that conveniently folds into a briefcase never materialized, but the digital revolution now underway in pharmacy could lead to a reality not far from the futuristic world envisioned by The Jetsons cartoon series of the 1970s.

As an industry, health care is often seeking ways to pay for and reward value rather than volume. While pharmacy often lags behind medical in this area, discussions are starting to focus more on consumer engagement, patient satisfaction, clinical outcomes, and collaboration across the ecosystem (i.e., retail, mail, and specialty pharmacies, distributors, manufacturers, and pharmacy benefit managers (PBMs)). Rather than creating value through scale to drive price negotiations, three primary forces will likely push companies across the pharmacy ecosystem to transform their business models:

  • Advancing technologies from the Internet of Things (IOT) to Artificial Intelligence (AI).
  • Growing expectations from consumers as other industries embrace them and make them the focus of their outside-in redesign of processes and technology.
  • Increasing data availability and technology that leads to new insights and predictive models that allow companies to personalize and engage with consumers (and their care teams) in new ways.

If we look to the future, will pharmacy companies be the delivery channel, the aggregator, the clinical care management company, the technology vendor or something very different? As pharmacy leaders ask themselves where they want to play and how they will win, defining the role of pharmacy within the health care ecosystem will likely be critical.

Technology: Imagine the following future scenario (all of which is in development).

As you start your day, your smart toilet detects abnormal sugar levels in your urine and alerts your physician. After a telehealth visit (from your couch) with an avatar of your physician, your physician gives you a prescription for a new medication. You fill your own prescription using a 3D printer. The generic drug is embedded with a smart chip that transmits clinical data back to the physician before dissolving in your stomach. The physician sends information about common side effects to your home monitoring system, which tracks your health and compliance. After a few days, your smart home recognizes you as you walk into the kitchen and asks how you are feeling. Your response about a rash correlates with a common side effect, and the monitoring system offers to schedule an appointment with your physician to determine if an alternative medication might be better.

While none of these technologies will see broad adoption any time soon, the pharmacy industry should consider investments now in preparation for the future. Such investments will likely help traditional players compete with start-ups and health-focused technology companies that will probably try to carve out the most profitable sectors (as we see in retail).

Pharmacy companies should be asking:

  • How should we work with smart devices and use that data to help manage conditions such as diabetes?
  • How can we more effectively share data and clinical insights with physicians?
  • How should we collaborate with pharmaceutical manufacturers to think about drug delivery and real-world evidence?
  • How can we use artificial intelligence and predictive models to enhance the customer experience?
  • How can we help consumers save time and money?
  • How can we simplify health care to improve engagement, adherence, compliance, and outcomes?

Consumerism: Today’s hypercompetitive marketplace often requires constant innovation and digitization. It commonly requires companies to look at their products and solutions through the eyes of the consumer, particularly as adoption of high-deductible health plans (HDHPs) continues to expand. One way to think about this is to follow the consumer journey. Here are four moments when consumers are often open to engagement:

Open EnrollmentWhat is the best health plan for me given my conditions and prior medication use? How can I save money? What is the likely progression of my condition?
DiagnosisWhat is wrong with me? What are my treatment options? How have other patients responded to this medication? What are the side effects? Is there a lower-cost medication?
Pharmacy Selection & Pick-upWhich pharmacy will save me the most money? Which pharmacy is most convenient? Where will I get the best service? What do I need to know about the drug and my condition? Will it interact with any food I eat, vitamins I take, or other medication? What is this prior authorization and why did I not know about it until I went to pick up my medication?
Ongoing Support & ManagementWhat should I be doing to manage my condition? Why was my copayment so high? How can I see the status of my order in real-time through an app? How do I know if the medication is working? Am I better or do I have to keep taking the medication?

Data: For many companies, it is still a challenge to integrate pharmacy and medical data. When you begin to look at lab data and unstructured data (e.g., patient reported outcomes, physician notes), the challenge can increase. At the same time, many technologies are creating new opportunities to leverage data and analytics to shift from reactive to proactive.

Data and analytics might help the pharmacy industry to:

  • Predict who will be adherent to a medication, and match that patient to an intervention.
  • Create a risk score around abuse that identifies at-risk patients and triggers an earlier intervention.
  • Develop a churn model that determines which patients are likely to switch pharmacies, and offer insight into how to retain them.
  • Create a one-to-one marketing approach to determine the right message in the right channel to the right person at the right time going beyond segmentation and personas.
  • Identify and route an inbound caller to the most appropriate agent using a predictive reason code.
  • Identify patients at risk for depression so that their treatment can be managed effectively.

Three drivers of change – technology, consumer, and data – will likely manifest themselves in different ways at different companies. As leaders think about business-model innovation and new product solutions using frameworks such as the Ten Types of Innovation or the Ambition Matrix, we will likely continue to see greater differentiation across the pharmacy market. I am excited about what this means for pharmaceutical manufacturers, wholesalers, PBMs, retail pharmacies, specialty pharmacies, and provider owned pharmacies.

This blog was first published in A view from the Center: Deloitte’s Life Sciences & Health Care Blog

Drug rebates will remain… but so will pressure to reduce drug prices and demonstrate value

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]

Published Date : July 29, 2019
Author: Deloitte
Categories : Biopharma, Drug rebates, Health policy, Life sciences

On July 10, the White House abandoned efforts to eliminate safe-harbor protections for drug rebates in Medicare Part D and Medicaid managed care due to concerns that the change would lead to higher premiums for beneficiaries. (For background on this issue, see our previous blogs.) While the rebate issue is now off the table, pressure to reduce prescription drug costs is not. But rather than waiting for the next round of regulations, we believe the pharmaceutical industry should consider developing its own business models that address drug prices and demonstrate value.

Recall in January, the US Department of Health and Human Services (HHS) proposed eliminating safe-harbor protections for rebates beginning on January 1, 2020. The Congressional Budget Office (CBO) estimated the proposal would have increased Medicare spending by $170 billion and Medicaid spending by $7 billion over the next decade (see the May 7, 2019 Health Care Current). It also would have increased the premiums that Medicare beneficiaries would pay under Part D.

Who’s to blame for rising drug costs?

The Pharmaceutical Research and Manufacturers of America (PhRMA) said the decision not to eliminate safe-harbor protections for rebates was “a blow to seniors who could have paid less” for prescription drugs. America’s Health Insurance Plans (AHIP), however, said that drug manufacturers are solely responsible for setting drug prices and determining price increases, and could decide to reduce prices. In February, a group of biopharmaceutical executives told a Senate committee that eliminating safe-harbor protections—and shifting toward a value-based drug-pricing system—might be the key to reducing drug costs (see the March 5, 2019 Health Care Current). However, at a subsequent hearing, executives from five large PBMs suggested that increased competition among drug manufacturers could help to reduce drug costs.

At the heart of the debate is whether drug prices are artificially high because of the rebate system, or whether this system helps to bring drug prices down. In 2017, rebates and discounts offered by brand-name drug manufacturers reduced list prices by an average of 44 percent.1 Several PBMs have said they keep 5 percent or less of the rebates,2 which means the vast majority of rebate dollars are transferred to health plans, self-insured employers, and Part D plans to help reduce premiums. While some PBMs say they send 100 percent of rebate revenue to clients, they usually charge administrative fees to plan sponsors.

Four strategies for helping ensure market access

The average older American takes 4.5 prescription drugs, often to treat a chronic illness.3 Between 2012 and 2017, the average annual cost of four widely used prescription drugs increased about 58 percent, according to AARP. Even with the rebate proposal off the table, pressure to rein in price increases is likely to increase, which could push pharmaceutical companies to compete more directly on value. This might require a shift in strategy toward more robust evidence generation, the continued use and expansion of support services, and greater competition in value-based contracts. As we have suggested in previous posts, here are a few ideas pharmaceutical companies might consider:

  • Use real-world evidence (RWE) to highlight clinical and economic outcomes: Pharmaceutical companies might want to evaluate clinical outcomes to demonstrate superiority in class, improvements in standard of care, or efficacy within specific patient sub-populations. As value-based contracts become more common, manufacturers should demonstrate the value of new products or product classes. Such contracts might also help to mitigate the clinical uncertainty of a high-cost treatment.
  • Differentiate products based on patient preference. Patient convenience, or strategies that help boost adherence, might help pharmaceutical companies make their products more appealing.
  • Expand patient-support services: Most (if not all) pharmaceutical companies offer some type of patient support. But they should consider making information available directly to patients to help them understand their illnesses, manage their medications, and navigate prior-authorization requirements (particularly in specialty areas).
  • Consider using targeted therapeutics: Manufacturers might try to reduce the impact on health plans and other payers by identifying target populations that are likely to receive the maximum benefit from a therapy.

Regulatory changes could accelerate use of value-based contracts

Over the past few years, we have seen an uptick in value-based contracts in several therapeutic categories. However, some barriers appear to be holding back widespread adoption. Some contracts have been abandoned before completion due to the amount of work required to operationalize them. While these contracts haven’t fully yet taken root, we expect the evolving regulatory environment could change that. The Deloitte Center for Health Solutions recently analyzed branded portfolios of the 19 largest biopharma companies (by revenue). From that list, we found 16 drugs that are (or were) included in a VBC.

While the rebate idea has been shelved, prescription drug costs will remain a top issue for the administration, Congress, and regulators as they advance policies outlined in the Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs (see the January 8, 2019 My Take). Moreover, value-based contracting will continue to alter existing business models. The status quo is unlikely to remain and pharmaceutical companies and PBMs should prepare for change now rather than waiting for change to be mandated.
1 Adam J. Fein, Ph.D., Drug Channels Institute, April 24, 2018 (https://www.drugchannels.net/2018/04/the-gross-to-net-rebate-bubble-topped.html)
2 As a PBM and an Employer, We Know Rebates and Innovation Lower Drug Costs, Morning Consult, October 3, 2018 (https://morningconsult.com/opinions/as-a-pbm-and-an-employer-we-know-rebates-and-innovation-lower-drug-costs/)
3 Press release, April 4 2019, AARP (https://press.aarp.org/2019-4-4-Rx-Price-Watch-Report-Generic-Prescription-Drugs

With drug rebates on the chopping block, stakeholders should prepare for change

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]

Published Date : April 17, 2019
Author: Deloitte
Categories : Drug rebates, Health care providers, Health IT, Life sciences

Early this year, the US Department of Health and Human Services (HHS) proposed eliminating safe-harbor protections for the rebates drug manufacturers pay to pharmacy benefit managers (PBMs), Medicare Part D plans, and Medicaid managed care organizations. At the same time, HHS proposed two new safe-harbor protections for some point-of-sale (POS) price reductions on prescription drugs and certain PBM service fees.

The proposed rules, which are slated to go into effect on January 1, 2020, would not affect commercial health plans…at least not yet. On February 1, HHS Secretary Alex Azar urged Congress to pass its proposal “immediately” and to draft legislation that would extend it to the commercial drug market. In March, Sen. Mike Braun (R-Ind.) introduced the Drug Price Transparency Act (S. 657), which would extend the rebate prohibition to the commercial market.

With the rule prohibiting rebates in Part D still under review, and more than 25,000 comments submitted, Part D plans have to create their bids for CY2020, which are due in June. On April 4th, the US Centers for Medicare and Medicaid Services (CMS) announced it would let Part D plans test a new payment model that would reduce the risk of large gains or losses through risk corridors under a two-year demonstration. Additionally, CMS provided clarity that Part D plans should submit bids “in a form and manner that is consistent with the Anti-Kickback Statute law and regulations in effect as of the bid submission deadline, including, for the purposes of bid development, the treatment of manufacturer rebates per our existing rules and guidance related to Direct and Indirect Remuneration.” At the same time, during an April 9 hearing before the Senate Finance Committee, executives representing six large PBMs warned that eliminating rebates could lead to higher drug prices for seniors and argued that changing the business model by January 1, 2020, was not realistic.

While we have been tracking this issue closely over the past several months, it continues to evolve. In my October blog, The future of drug rebates: Are they to be or not to be?, I explained how pharmaceutical manufacturers use rebates when establishing list prices for their products. In November, my colleague Joe Coppola outlined some of the alternative models that could emerge if safe-harbor protections are eliminated. This third installment of our drug-rebate blog series examines how the proposed changes could affect various stakeholders.

At the heart of the debate is whether drug prices are artificially high because of the rebate system, or whether this system helps to bring drug prices down. Critics argue that rebates are to blame for high drug prices, while PBMs and health plans contend that rebates are an important tool in keeping rising drug costs in check. Others note that the rebate system existed and worked when plan designs were based on flat-dollar copayments. However, now that health plans often tie patient out-of-pocket costs (e.g., deductibles, coinsurance) to list prices for drugs, this might no longer be a practical solution.

Here’s what we know…

Regardless of how rebate reform rolls out, most stakeholders will be affected. At this point, there are many questions and few detailed answers. If HHS’s proposed rule is finalized and survives any legal challenges that arise, we can make several reasonable assumptions:

  • Changes to the rebate model will begin with Medicare Part D and Medicaid managed care. Legislation, if enacted, could extend the changes to the commercial market.
  • Rebates will likely transition to upfront POS discounts for consumers that take place at the pharmacy.
  • Premiums are likely to increase for all affected lines of business.
  • Pharmaceutical manufacturers could face market pressure to reduce list prices to reflect current net prices.
  • Patients who take multiple brand and/or specialty drugs could see lower out-of-pocket costs.
  • PBMs will likely be affected but will survive.

Here’s what we don’t know…

A big question surrounding HHS’s proposal is whether it will help achieve the administration’s goal of reducing list prices for prescription drugs…and at what cost? Here are a few questions we can’t answer until we have more information:

  • How quickly will changes in Medicare and Medicaid spill over into the commercial markets?
  • Will pharmaceutical manufacturers and/or other entities have to maintain multiple price lists? If so, how will they be managed? And, how will this reimbursement be managed and paid at the POS?
  • Will changing the rebate model change the focus on value-based or outcome-based contracting around pharmaceuticals?
  • How much are premiums likely to increase?
  • Could the proposed changes really go into effect as soon as January 1, 2020 (as proposed by HHS)?
  • Will net prices be lower, and how will transparency influence future drug pricing?

Stakeholders will likely have to prepare for change in different ways.

Here is how we think various stakeholders could be affected by the elimination of the drug-rebate model:

  • Pharmaceutical manufacturers: Drug makers could face new operational challenges if they need to maintain a rebate-pricing strategy in the commercial market while developing a net-pricing strategy for Medicare and Medicaid. Pharmaceutical manufacturers will likely need to determine how much to change list pricing without rebates and/or whether to launch authorized generics. They might also have to build new connectivity with whichever third-party is responsible for paying the POS discounts (if not the PBMs). We would also expect to see an increased focus on competitive transparency and pricing analysis and greater emphasis on the value and efficacy of new therapies. This should also drive more focus on the comparative effectiveness of therapies.
  • PBMs: The transition away from rebates as a source of revenue will accelerate if the HHS proposal is finalized, and PBMs might need to redefine the services they offer. As brand prices are adjusted, PBMs will likely experience a drop in topline revenue and could see plan sponsors shift plan designs back to flat dollar copays. They will also likely need to re-contract with plan sponsors, especially around rebate guarantees, and might need to adjust the service fees they now charge pharmaceutical manufacturers.
  • Retail pharmacies: Retailers are likely to see a drop in topline revenue as brand prices are adjusted. Pharmacists might also need to spend more time explaining the new pricing model to consumers, and there could be changes to direct and indirect remuneration (DIR) from PBMs as rebates are replaced by POS discounts. Ultimately, the biggest impact will likely be the establishment of new payment mechanisms so that discounts can be received at the POS from a potentially new third-party.
  • Medicare and Medicaid plans: Retrospective rebates would likely be replaced by POS discounts. Given that copayments are already low in Medicaid, we anticipate supplemental rebates will be eliminated. By contrast, Medicare beneficiaries could see higher premiums as POS discounts show up as lower cost sharing instead of lower premiums. A more transparent model with the elimination (or reduction) of rebates and DIR fees will change PBM pricing and require new contracts especially around rebate guarantees.
  • Commercial health plans: We probably won’t see any immediate impact unless legislation is enacted to expand the rebate change to the commercial sector. However, we do expect health plans will start to use more POS rebates in anticipation of a future change. As with Medicare and Medicaid plans, commercial health plans also could see higher PBM fees and need to re-contract especially around rebate guarantees.
  • Self-funded employers: Self-funded employers won’t experience much of an impact if changes are limited to Medicare and Medicaid. However, we would expect employers to move to POS rebates so that they are prepared if Congress acts to eliminate rebates in the commercial sector. Self-funded employers could be asked to pay higher PBMs fees under a more transparent PBM model, and PBMs would need to re-contract with employers especially around rebate guarantees.
  • Consumers: People covered by Medicare Advantage and Medicare Part D are likely to see increased premiums. However, high-utilizers of heavily rebated brand or specialty prescription drugs, could wind up with lower total out-of-pocket expenses. The majority of consumers who fill generic drugs will not see any reduction in their out-of-pocket spending. With these changes, consumers are also likely to see increased transparency around drug prices.

Regardless of the shape the final rule takes, and the timing of the implementation, we are already seeing various stakeholders distancing themselves from drug rebates. In a letter to Office of Management and Budget Director Mick Mulvaney last fall, former House Energy and Commerce Committee Chairman Greg Walden (R-Ore.), and former Senate Finance Committee Chairman Orrin Hatch (R-Utah) noted that possible changes to the existing rebate model “could ripple across the health care sector, altering a major sector of the U.S. economy that Americans depend upon for their health and well-being.” Depending on where you sit, this is either worrisome, long overdue, or the natural evolution of the market.

The future of drug rebates: Are they to be or not to be?

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]

Published Date : October 18, 2018
Author: Deloitte
Categories : Biopharma, Drug rebates, Life sciences, Regulatory

Nearly half of all Americans (49 percent) have at least one prescription drug, and 12 percent of the population has five or more, according to 2017 data from the Centers for Drug Control and Prevention (CDC). In 2016, $329 billion was spent on prescription drugs—an increase of nearly 30 percent from 2010.1

With so much money at stake, drug pricing has become a front-page issue. But the sale of pharmaceuticals is based on a complex economic model that few people fully understand. It involves employers, health plans, pharmaceutical benefit managers (PBMs), pharmaceutical manufacturers, wholesalers, pharmacies, and the government.

As the administration looks for ways to reduce prescription drug prices, prescription drug rebates is one area that has come under scrutiny. Health and Human Services (HHS) Secretary Alex Azar recently said it was within his agency’s power to eliminate rebates on prescription drugs. A proposed rule from HHS, which could end or significantly alter rebates, is being reviewed at the Office of Management and Budget. This regulation could affect commercial health coverage and Medicare Part D, but might begin with an initial focus on Medicare.

How drug rebates work

Pharmaceutical manufacturers establish a list price for their products with an understanding that discounts and rebates will be used to reduce the list price employers or government programs actually pay. A clinical drug evaluation conducted by a PBM’s Pharmacy and Therapeutics (P&T) committee identifies which drugs have to be covered and which drugs are optional. Health plans and PBMs then consider rebates as they design their formulary (i.e., the preferred drug list used by health plans). This discussion considers the breadth of the formulary (i.e., number of drugs per therapeutic category), whether the formulary is open or closed, and the number of formulary tiers. Rebates typically increase as a formulary becomes more narrow (or closed) because it increases the likelihood that certain drugs will be prescribed.

In 2017, rebates and discounts offered by brand-name drug manufacturers reduced list prices by an average of 44 percent.2 Several PBMs have said they keep 5 percent or less of the rebates, which means the vast majority of rebate dollars are transferred to health plans, self-insured employers, and Part D plans to help reduce premiums. While some PBMs say they send 100 percent of rebate revenue to clients, they do charge plan sponsors administrative fees. PBMs also collect administrative fees from pharmaceutical manufacturers for managing the rebates. What is less clear is how consumers benefit from rebates. For example, do rebates translate to lower health insurance premiums for everyone versus directly benefiting only the patients who use the medications?

The administration views rebates as one lever that could have an impact on drug prices. At the heart of this debate is whether drug prices are artificially high because of the rebate system, or whether this system helps to bring drug prices down.

Antitrust litigation prompted drug-rebate model

Drug rebates became popular among PBMs after the antitrust litigation of the 1990s challenged the ability of drug manufacturers to offer up-front discounts. The courts determined such discounts ran afoul of antitrust law by favoring managed care providers over pharmacies. In response, drug manufacturers turned to rebates, which the courts indicated would be preferable.

Under current law, rebates are permissible because the anti-kickback statue—and implementing regulations—has a discount exception (also known as the safe harbor). The administration’s “blueprint” to reduce drug prices includes the removal of this safe-harbor protection of manufacturer rebates. The intent is to decrease out-of-pocket costs for consumers and reduce overall drug spending.

Over the past five years, the amount of rebates and discounts offered by pharmaceutical manufacturers has doubled to $153 billion in 2017, according to life sciences analytics firm IQVIA. This trend aligns with a growing number of high-cost specialty drugs and more aggressive cost-management tactics—such as closed formularies—among plan sponsors. Until the administration began focusing on drug costs, the gross-to-net bubble (i.e., the difference between the list price and the actual price paid after rebates) had shown no signs of decreasing.

The IQVIA data also indicates that while list drug prices have increased, net prices have remained relatively flat over the past five years. The higher list prices can lead to higher rebates, however one recent study suggested that there is no correlation.3 These higher list prices can result in bigger out-of-pocket costs for patients who have high-deductible health plans or coinsurance-based copayments, although they do help offset premium costs for all enrollees.

This issue of alignment, and how to contain drug costs, is at the heart of the issue. The ability to design formularies and negotiate rebates is a core value proposition for many PBMs. While the rebate model has existed in a bit of a black box for many years, from a business-to-business perspective, it has become less opaque (although not yet fully transparent). Consultants and sophisticated plan sponsors have increased their use of rebate audits and have called for greater transparency.

If the rebate model goes away, what will replace it?

Many groups have said it might be time to replace the rebate model. But what would replace it? Would all list prices need to be re-aligned to match today’s net prices or will a completely new model emerge? Will we see widespread adoption of value-based (or outcome-based) contracts between health plans, pharmaceutical manufacturers, and providers? At this point, there are no clear answers.

Several potential replacement models are being discussed that could take the place of rebates. A point-of-sale (POS) rebate model might be easiest to implement and could be an interim policy step. Under this model, the plan sponsor would have its PBM implement POS rebates so that members would pay the net cost of brand-name drugs. This could mean lower out-of-pocket costs for people who have high-deductible health plans or who are responsible for coinsurance. This would likely affect only a minority of members because rebates aren’t used for generic drugs, which make up almost 90 percent of all prescriptions filled in the US. It would not affect people who have flat-dollar copayments that aren’t tied to the net price of the drug (in a point-of-sale rebate scenario).

What can stakeholders expect if drug rebates are eliminated?

How would the list prices for drugs be affected if rebates are eliminated? Would pharmaceutical manufactures drop list prices down to the net price point, or would some alternative discounting program emerge? The other key discussion point is whether eliminating rebates will change the pricing trajectory and impact the industry’s economic model. If Average Wholesale Price (AWP) inflation slows, or reverses as a result, PBMs and other stakeholders that have some of their revenue streams tied to AWPs could need a strategy to replace lost revenue.

Eliminating rebates will not be like turning off a spigot. A PBM with a three-year contracting cycle, for example, might need a year or two to open and renegotiate thousands of contracts. Government bids, based on the existing system, are priced out almost nine months in advance. Without rebates, drug manufacturers will likely have to rethink their market-access approach and reevaluate their pricing strategies.

The loss of rebate revenue could cause plan sponsors to re-evaluate their pricing models, plan designs, and underwriting process. Without a new model to represent the current net-of-rebate cost for all drugs, consumers could see higher out-of-pocket costs, or more limited benefits to keep premiums from rising.

The drug-rebate model is extraordinarily complex, and people across the health care ecosystem are closely analyzing a variety of possible scenarios that could occur if that model changes or is eliminated. There are many questions that can’t yet be answered. Will rebates go away completely? How long will it take? Will the change be limited to Medicare? Will rebates continue to exist, but get shifted to the point of sale? Maybe the biggest question is…who wins and who loses? And can re-evaluating business models and potential financial vulnerability now help to create different winners?

We will begin to try to answer these and other questions in future blogs as we continue to dig into this issue and further evaluate the potential impact on all of the stakeholders in the health care ecosystem. Stay tuned.


1 Health Affairs, January 2018, “National Health Care Spending in 2016”
2 Adam J. Fein, Ph.D., Drug Channels Institute, April 24, 2018 (April https://www.drugchannels.net/2018/04/the-gross-to-net-rebate-bubble-topped.html)
3 https://www.pcmanet.org/new-data-rebates-are-unrelated-to-drugmakers-pricing-strategies/

The good, the bad, and the ugly of opioids: For large employers, the epidemic can stretch far beyond medical claims

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]

Published Date : July 26, 2018
Author: Deloitte
Categories : Analytics, Health plans, Regulatory

First the good news. While we are in the midst of an opioid epidemic, large employers have seen prescription rates fall significantly since peaking in 2009. That year, 17.3 percent of covered employees or dependents had at least one opioid prescription. People who work for large employers are now using fewer prescription opioids.1 This is likely due to an increased focus—among health plans and clinicians—on limiting opioid prescriptions among patients who might be at risk for opioid dependence. There also is growing evidence that opioids aren’t appropriate for all patients or for every type of pain.

Now the bad news: Employers are spending nearly nine times more to treat opioid addiction and overdoses (prescription and illicit drug use) than they did 12 years ago—from $300 million in 2004 to $2.6 billion in 2016, according to the Kaiser Family Foundation. The average inpatient treatment cost for an opioid addiction topped $16,000 in 2016, according data from Kaiser. More than half of this spending is for the treatment of an employee’s dependent children. After a person first seeks formal help for an addiction, it can take as long as eight or nine years to achieve sustained recovery, according to a report from the Surgeon General.

And the ugly news: Opioids, both prescription and illicit, were involved in more than 42,000 deaths in 2016, according to the Centers for Disease Control and Prevention (CDC). That number is five times higher than in 1999. Moreover, emergency department visits for opioid overdoses increased 30 percent nationally between July 2016 and September 2017, according to the CDC.

Compared to people who do not have a substance-use disorder (SUD), people with SUDs incur higher health care costs and have a greater number of disability claims, miss more work days, and are more likely to be demoted or fired, according to the National Business Group on Health (NBGH). Along with direct medical costs, opioid addiction and treatment also impacts productivity, absenteeism, and recruiting, according to a recent NBGH survey of 62 large employers. One out of four employers say it has become difficult to find qualified workers who are not dependent on opioids.

Misuse and abuse of opioids is having a devastating impact on many employers and their workers and families.

Is workers compensation the canary in the coal mine?

Pain-related conditions affect 116 million adults in the U.S., according to the Institute of Medicine. This costs employers up to $635 billion in medical costs and lost productivity.2 Workers who are injured on or off the job could wind up becoming addicted to opioids that are prescribed to help manage their pain. While employers want to prevent addiction, the crackdown on prescribing is sometimes making it difficult for people to get access to opioids that they need to manage pain. Non-opioid therapies might not be as effective and could keep people off the job longer. What is the cost for employers when workers are unable to return to work either due to an injury or because of an opioid addiction? Moreover, some employees might choose not to seek help if they are worried about their job security. Employers want their employees to have effective pain-management options and don’t want them to seek illegal sources for drugs.

Workers’ compensation programs are often seen as employee benefits programs. They provide injured employees with a percentage of their salary until they are able to return to work. Given the volume of opioids being prescribed for work-related injuries, workers’ compensation insurers were some of the first organizations to recognize the critical role that physicians played in preventing opioid addiction.

Today, many workers’ compensation insurers are beginning to utilize advanced detection tools. Thanks to their unique position in the ecosystem—where they touch health care, consumers, and governments—they can effectively leverage state and federal guidelines, physician education, and advanced analytics to help prevent dependency and addiction.

Some industries have higher addiction rates

Industries where workers have physically demanding jobs, perform repetitive motions, or spend long stretches on their feet tend to have higher rates of opioid abuse. These industries include construction, automobile manufacturing, carpentry, and trucking. About 15 percent of people who work in the construction industry have engaged in illicit drug use, according to a lead commercial insurance carrier. The automobile manufacturing plants that produce more than 70 percent of US cars are in states that have seen significant increases in drug overdose deaths, according to the US Centers for Disease Control and Prevention. Recognizing an uptick in opioid abuse among truckers, the Department of Transportation added four prescription opioids to its mandatory drug-screening beginning on January 1, 2018.

What can employers do to address opioid use and abuse?

Given the costs associated with opioid abuse and misuse, employers might want to consider strategies that help prevent their at-risk employees from becoming addicted. But employers often need alternatives to treat pain among employees. They also need quality treatment for addiction. Strategies many employers are using to address this issue include:

  • Creating drug-free workplace policies
  • Increasing communication
  • Identifying at-risk employees
  • Covering treatment therapy
  • Treating workers for addiction, rather than terminating them
  • Working with health plans and pharmacy benefit managers (PBMs) to find solutions

Employers should also consider working closely with their health plans to develop solutions to curb opioid use and misuse. The Center for Health Solutions recently conducted research to find out what health plans and pharmacy benefit managers (PBMs) are doing to help address the opioid epidemic. Many health plans and PBMs have a stake in improving care outcomes, and they have key assets—especially data—that could be used for diagnosis and treatment.

Strategies that some health plans and PBMs are already using include:

  • Pharmacy lock-in programs: These can help prevent patients from receiving multiple prescriptions and/or using multiple pharmacies to fill prescriptions for controlled substances
  • Utilization management tools: Some health plans use these to develop evidence-based approaches that provide access to necessary treatments. These tools can help encourage safe, effective care at affordable costs. Tools might include prior authorization for prescription pain medication, step-therapy, and prescription tiering.
  • Medication-assisted treatment (MAT): This is using medications with counseling and behavioral therapies to treat SUDs. The medications used in MAT could help block other narcotics or help with withdrawal symptoms. They do not cause the euphoric highs associated with opioids.

Additionally, research indicates that the focus on opioid abuse is shifting to greater use of data and analytics to identify and engage those who might be at risk.3 Given the number of patients who use prescription opioids, and the ongoing threat from illicit drugs such as fentanyl, it can be to important shift from a fraud, waste, and abuse (FWA) mentality to a fraud, waste, abuse, and care approach.

An ecosystem approach is still needed

As we noted several years ago, tackling the opioid crisis requires coordination across health plans, PBMs, pharmacies, providers, employers, and many other constituents. This is a complex problem that goes beyond what any one group can influence.

At the same time, we cannot let the drop in new opioid prescriptions lull any of us into complacency. Systemic issues should be addressed from a policy perspective, including enabling data integration opportunities. And, given the need and risk of relapse, we likely need patient engagement strategies that effectively manage their risk over time and through treatment.1 Kaiser Family Foundation, April 2018: https://www.kff.org/health-costs/press-release/analysis-cost-of-treating-opioid-addiction-rose-rapidly-for-large-employers-as-the-number-of-prescriptions-has-declined/
2 National Center for Biotechnology Information, US National Library of Medicine: https://www.ncbi.nlm.nih.gov/books/NBK92521/
3 HealthIT Analytics: https://healthitanalytics.com/features/for-opioids-and-substance-abuse-big-data-analytics-is-just-the-beginning

The emerging Hispanic health care segment: What health plans should consider

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]

Published Date : September 29, 2016
Author: Deloitte
Categories : Health care providers, Health IT, Value-based care

Hispanics are a large and fast growing segment of the US population. As of 2014, there were over 55 million Hispanics in the US with the population projected to grow to 119 million by 2060. From a health care perspective, they’ve often been underrepresented and underserved. As the Hispanic population grows and ages from their current average age of 29, health plans and prescription benefit managers (PBMs) should consider learning more about their expectations, needs, and challenges.

In an effort to engage with Hispanic consumers, many health plans offer language lines or interactive voice response options in Spanish and translate printed materials. However, consumers often complain that translations are too literal and would prefer something more conversational. Though studies show that language barriers can be linked to worse health outcomes, having the same language doesn’t mean that all Hispanics share a common history, health care experience, or even the same risk of a condition like diabetes. For example, while Hispanics are nearly two times more likely than non-Hispanic whites to have diabetes, there are variances across the subpopulations with 18.3 percent of Hispanics of Mexican decent having diabetes versus 10.2 percent for Hispanics of South American decent. But since lifestyle and prevalence of conditions like diabetes varies within the Hispanic population, it’s important for health plans and providers to understand these differences and nuances in order to effectively engage them and their families.

Beyond language and economic constraints, there can also be cultural barriers for Hispanics using the US health care system. Our recent 2016 Consumer Priorities in Health Care Survey found that surveyed Hispanics valued two key interactions relative to non-Hispanic whites:

1. A health care provider who gives helpful updates on their condition or status to family during and after a procedure and
2. A doctor or health care provider who helps them and their family create a care plan or wellness plan that fits with their lifestyle.

Health plans should consider these types of cultural differences to better understand ways to engage with Hispanics around their health care.

Additionally, as we dug into the data from the Deloitte Center for Health Solutions 2016 Survey of US Health Care Consumers, we found several insights that health plans should consider in meeting the needs of their Hispanics members or attracting new members from this growing group. For example, surveyed Hispanics are more likely to use alternative care settings and providers:

• Hispanics are 40 percent more likely than non-Hispanic whites (45 percent versus 32 percent) to use a retail clinic for a non-emergency health issue if their physician was not available, and
• Hispanics are twice as likely as non-Hispanic whites (12 percent versus 6 percent) to see a pharmacist for treatment information.

Not only do Hispanics often use the system differently, they also reported trusting certain sources of information more than other groups; notably their friends and family and information found through social media.

** From the Deloitte Center for Health Solutions 2016 Survey of US Health Care Consumers

Hispanics also use available tools for navigating health care more often.Seventy one percent of Hispanics own a smartphone (compared with 61 percent of whites), and they tend to be much more likely to use technology for health care purposes.

** From the Deloitte Center for Health Solutions 2016 Survey of US Health Care Consumers

As we transition from a fee-for-service health care system to a value-based care environment, these issues of cultural differences, health literacy, information sources, and technological engagement are increasingly important. Value-based care and population health strategies sometimes revolve around self-care, wellness and better adherence, so figuring out the most effective strategies to engage different populations makes sense.

Moreover, expansion of health insurance coverage has brought many Hispanics to the private insurance market for the first time. They are still figuring out how to shop for, use, and evaluate plans. According to our survey, thirty two percent of Hispanics reported switching plans in the past 12 months (versus 21 percent of non-Hispanic whites). If health care companies don’t consider the unique needs and expectations of this population, they likely risk cutting themselves out of a real opportunity for growth over the next decade.

To get started, health plans should begin with these basics:
1. Capture ethnicity and/or language preference in your member data;
2. Understand how different segments and sub-segments (e.g., Cuban versus Mexican) typically use the health care system, respond to different channels and messaging, and have different needs;
3. Hire staff and writers that can engage Hispanics in person, on the phone, and in writing; and
4. Embrace digital solutions for providing and capturing information.

As we celebrate National Hispanic Heritage Month, consider evaluating your current market share, share of wallet, and strategies to reach this growing demographic.

Four New Deloitte Publications

For those of you that still subscribe here or that look here, I’m sharing links to the four latest things:

Asembia and Rebate Articles

With the future of rebates being such a hot topic, I’ve published a few articles on the Deloitte Center for Health Solutions site and just presented earlier this week at Asembia on the topic.

My Latest Thought Leadership – Opioids

For those of you that have followed me for years, I wanted to share my latest pieces with Deloitte which focused on the opioid crisis:

I also spoke this year at AHIP (twice), sPCMA, and PBMI.

Digitization of Pharmacy

For those of you that still subscribe to this blog, I’m sharing my latest blog post on the Center for Health Solutions blog by Deloitte on digitization in the pharmacy industry.

Emerging Hispanic Health Care Segment

My posts now appear on the Center for Health Solutions blog by Deloitte.  I posted on the rapidly growing Hispanic market several months ago.

 

New Deloitte Post

I had the chance to share two new posts through other channels.  For those of you that have followed me here, I wanted to share those with you.

I just posted a new blog about The Specialty Pharmacy Elephant on The Center for Health Solutions blog by Deloitte – http://blogs.deloitte.com/centerforhealthsolutions/the-specialty-pharmacy-elephant/.

I also used LinkedIn to share a post about The Pharmacy Marketplace in 2016.

New Blog Post and Whitepaper…and Upcoming Presentation

For those of you that have followed me here, I thought I would share three things with you:

  1. I just had my first blog post published under the Deloitte brand on the Deloitte Center for Health Solutions blog.
  2. I recently helped lead the creation of a whitepaper on what topics health plans and payers should be working with their PBMs to address.
  3. I will be speaking on the topic of specialty pharmacy at the PCMA event in March.  I hope to see some of you there.

Thank You For Reading

As those that have followed the blog for a while know, I generally posted an average of one blog per day and did so for almost 8 years. With the new job, I’ve decided to look for ways to create content under the Deloitte brand either through white papers or on their blogs.

I will continue to share information through Twitter and on LinkedIn, but I’m going to keep this blog on hiatus for now.

It’s been a great outlet for me over the years. It’s helped me think through numerous ideas. I’ve used it to connect with people. I’ve used it to open doors and get press and speaking opportunities. And, within the start-up world, the ability to blog on my own has been widely accepted and embraced. As many of you know, that’s harder to do within a corporate environment.

For those of you that have followed the blog and read it continuously, I really appreciate it. I hope you will follow me on Twitter or connect with me so I can share new things as I create them in my new job.

Happy Holidays!!

Healthcare Companies Sitting On Lots Of Cash…What Will They Do With It?

In the September 8-15 edition of Time Magazine, they have a whole article about data and numbers.  One of the pages is on which companies have the most cash.  Apple is number one and the one you always hear about.  As we’ve all seen, there are lots of rumors about Apple, Google, and Amazon and what they’re doing that is health related. 

At the same time, I was intrigued to see all the health related companies on the list:

  • Medtronic – $13.7B
  • Abbott Labs – $8.1B
  • Merck – $27.3B
  • Pfizer – $48.8B
  • Johnson & Johnson – $29.2B
  • Abbvie – $9.9B
  • Eli Lilly – $12.7B
  • Amgen – $23.1B
  • Bristol-Myers Squibb – $8.3B

You have several other non-healthcare companies which are doing things in healthcare that are also on the list:

  • Walmart – $8.7B
  • GE – $14B
  • Procter & Gamble – $8.5B
  • Qualcomm – $31.6B

If you look at the Rock Health recent report, you can imagine how these companies could leverage all this money to really change healthcare.  They could fund companies.  They could buy companies.  They could invest in orphan drugs.  They could create new technology standards.  They could educate consumers.  They could push technologies like the Internet of Things. 

Dynamic Journey Mapping and P2P

I’ve talked several times about what P2P (peer-to-peer) healthcare is.  We have examples of PatientsLikeMe and CureTogether.  This is something that Pew has talked about several times over the years.  Additionally, here’s a blog post by Susannah Fox on this.  The point is that people turn to Dr. Google and social media often before they talk to a healthcare professional.  That’s critical to understand. 

Interestingly, as I was reading the IMS whitepaper on Journey Mapping, it really got me thinking about how all this social listening and patient content can influence and shape the Patient Journey (see example).  We’ve already heard about the influence this channel is having on clinical trials.  And, we know that Big Data trends are driving lots of new data sources for analysis and insights.  I think this JAMA list is a good starting point.  But, as Jane Sarasohn-Kahn points out, we can’t forget about the Open Notes initiative and the power that it will bring with it. 

The question of course is how this will all be reflected in the way we think about the consumer in all the “patient experience” and “consumer engagement” hype in healthcare.  For example, this image from a Deloitte whitepaper shows some of the ways a health plan can influence the consumer experience.

Consumer Experience Payer

We all know this is tricky, and it’s critical to establish trust between the consumer and the entity influencing the journey.  Health plans and pharmaceutical companies are usually not high on the trust scale. 

That being said, the IMS whitepaper does a good job of pointing out the need to expand beyond the traditional effort of focusing on key influencers.  It’s important to understand the payer view and the patient view in new ways.  It’s also important to understand what matters to each group.  While adherence may seem like the right metric, I would argue that it’s simply the easy metric.  It’s important to really understand the overall health of the patient.  They care about their experience.  They care about their quality of life.  These all need to be factored into the patient journey

Book: My Healthcare Is Killing Me

“A hospital bed is a parked taxi with the meter running.”  Groucho Marx

While I was flying last week, I had the chance to read My Healthcare Is Killing Me.  I could probably think of a few other titles for the book like:

  • Don’t let healthcare bankrupt you
  • Navigating the healthcare billing maze
  • Negotiating to better health
  • The $20 disenfranchisement fee

Those should give you a hint about the topic of the book.  It’s written by Chris Parks, Katrina Welty, and Robert Hendrick who are all part of the founding team at Change Healthcare.  If you’re not familiar with Change Healthcare, you should look at them and others in the transparency space.  (You can look at Jane Sarasohn-Kahn’s series on cost transparency for more information.)

Here’s a few of my notes from the book:

  • Hospitals and doctors view their patient’s bills as Days Sales Outstanding (which is why you can negotiate for prompt payment).
  • 22% of people have been contacted by a collection service for a medical bill
  • 60% of consumers that asked for discount on a medical bill were successful
  • The bill is NOT what the provider will (or expects) to get paid…It is the most that they will get paid
  • The chance of getting the right diagnosis and treatment on the first visit is 50% (scary)

The book has an interesting analogy from Patsy Kelly comparing healthcare to a restaurant:

“In healthcare, the patient does not order the service or have the primary responsibility for payment.  Additionally, the person who pays for the service does not order it or consume it, and the person who orders it does not pay for it or consume it.”

Another quote from Unity Stoakes was:

“We must arm ourselves with knowledge, wisdom and information.  Demand transparency in pricing by researching alternatives.  Negotiate!  Take control of your own healthcare now.  The more you know, the more power you have.”

The authors do a good job of simplifying down some of the complexities of the healthcare payment system.  Some things have changed with health reform, but the fundamentals are the same.  For someone taking on a large, complex condition which is likely to result in lots of costs, its worth reading.  For someone trying to change healthcare and understand the fundamentals, it’s also a great quick read which you can then follow-up on to see how this became the foundation for Change Healthcare. 

 

Moon Shots in Healthcare

I think many of are familiar with Google’s use of the term “Moon Shots” and to a lesser degree their Google X projects.  I was inspired to see who in healthcare is using the term and think about a few moon shot ideas myself. 

I didn’t find much else out there (although I’m sure there is).

So, here’s some of my thoughts:

  1. Curing cancer.  But I think this is one many people think about.
  2. Creating a healthcare system that people actually understand.  That would be great!
  3. Making healthcare a positive experience.  Not easy, but it should be achievable in many settings.
  4. Preventing disease progression.  Maybe too simple, but there has to be some stretch about using data to predict risk and trigger proactive, personalized engagements that successfully change behavior.
  5. Integrated data.  The idea of interoperability of data across the care continuum with the ability to make it actionable would be great.
  6. Remote monitoring of people without them having to do anything.  The Internet of Things will make this much easier (some day), but the idea of simply integrating technology into our lives to monitor us and look for ways to improve our life is a great goal. 
  7. Integrated devices such that our decisions are improved would be great.  A device that knows I’m getting hungry and that I’m about to pass a McDonalds could suggest a healthy alternative. 
  8. Reducing global obesity by teaching kids about health.  This is a great one with complexity like addressing food deserts, sleep patterns, food selection, and general attitudes about health. 
  9. Eliminating negative stress in order to improve health.  This is another tricky one as our lives become more and more stressful.

I’ll leave the list open…what would you add?  I know there are some big stretch thinkers out there. 

  • Digital pills you can print in a 3D printer
  • “Doc in a box” solutions that could be in every home where the physician can get your vitals and interact with you all virtually.
  • Self-healing band-aids that turn into skin.
  • A pill that you take once a year, and it doses you ever day.
  • A machine that can actually diagnose you (like that mirror in the one cholesterol advertisement).
  • A pill to cure addition to cigarettes and other addictive substances.
  • Food that turns bad cholesterol into good cholesterol.

Book Review: Social Media In Clinical Practice

I finally had some time to read Dr. Bertalan Mesko’s book called Social Media in Clinical Practice.  I’m a big fan of his blog and a lot of the information he puts out.   I was intrigued to see what he thought was important for clinicians and then to compare that to what I know as someone active in the space. 

Overall, I thought it was a good, quick read for someone who knows very little about social media and all the options out there.  He quickly hits a lot of information:

  • Search engines
  • RSS
  • Facebook
  • E-Patients
  • Blogging
  • Twitter
  • Collaboration
  • Wikipedia
  • Second Life
  • Mobile
  • Videos and podcasts
  • E-mail

He provided some reinforcing references and laid out some key reasons for physicians to get involved such as:

  1. Keeping up to date
  2. Sharing and collaborating with other physicians
  3. Improving patient care

I was glad that he brought up the concept of “Information Therapy” which is a term I use a lot, and I think is really important for how providers can direct patients to quality content. 

While he spent a lot of time on Facebook and Google+, I personally would have expected more on Sermo or other physician specific networks. 

I thought the section on e-patients was really important for physicians to understand how to engage and work with them and creating a difference between a “Googler” and an e-patient. 

I knew it was possible, but it was good to see him provide the proper way of citing medical blogs and tweets in medical papers.

I was surprised to see a whole chapter on Second Life.  I never hear anyone talk about that anymore.  At the same time, there wasn’t any focus on LinkedIn or talk about tools like SlideShare.  I think there’s also a need for much more on mobile applications and use of SMS with patients along with a discussion on connected devices ranging from FitBit to more sophisticated tools with feedback and integration into the clinical systems. 

He did have some good suggestions on presentations such as looking at the Lessing Method, PechaKucha, and Guy Kawasaki’s 10/20/30 Rule. 

My overall summary would be that:

  1. If you’re new to the space, it’s a good quick read.
  2. If you’re in the space, you’ll learn a few things, but it’s probably not for you.

Of course, with technology and social media, things change really fast so it’s going to need to be come a more interactive version to keep up with the changes. 

Lessons Learned And MVPs

 I’m a big believer in trying to capture and learn from everything you do.  When you work in the start-up and turnaround space, not everything will be a clear success

After looking back on my time at my last turnaround, there are several clear takeaways:

  1. Demonstrate Incremental Benefits…All The Time.
    1. Taking on long-term projects is dangerous.  Sponsors change.  Markets change.  New technology comes out.  If you’re working on a multi-year transformation, you need to demonstrate incremental wins and have clear milestones.  You should assume you don’t have the next round of funding and build for success at each point.   I could say this is using an Agile approach, but it’s more than that. 
  2. FOCUS, FOCUS, FOCUS. 
    1. This one probably seems so obvious from the outside looking in, but it’s easy to get carried away with trying to take on too much.  In this particular case, we thought we had a 3-year timeframe to build and deliver on the vision.  We created a vision of care coordination that was really innovative, but we knew that no one had pulled it off before.  We then tried to coordinate care coordination and cost management which also hadn’t been done.  It would have been better to deliver one thing at a time and make ourselves incredibly sticky in that area.
  3. Know Your Customer…Really Well.
    1. When coming into a business, it’s so important to know the customer base and what they feel about the business.  Do they love it?  Do they engage regularly?  Is it just a commodity?  And why.  In this case, clients seemed to love the business, but it was because it was a massively customized business doing all the wrong things.  As we brought the business into compliance and created re-usable processes, it changed the relationship with the customers.  The relationships weren’t sticky, and we didn’t have clear alignment of goals.
  4. Partner Well.
    1. When you’re in the early stages of growth, it’s tempting to try to partner with people bigger and leverage their brand.  While that can help, it’s often a big distraction.  Some times, you commit to something that you can’t achieve putting pressure on a key relationship.  And, other times, you put so much at risk tied to the big company that when you realize that you’re not important to them then you have real challenges.  This gets back to the traditional understanding of buy, build, or partner and understanding your core competencies.
  5. Have A Clear Value Proposition.
    1. You’ll always find early adopters especially when you have a compelling vision, good sales people, and good management.  But, they won’t make your business for you if you can’t clearly demonstrate value.  You have to have access to data.  You have to be able to report on what you do and demonstrate how you’re creating a ROI.  In today’s competitive market, companies without a clear value proposition don’t last long.
  6. Be Different.
    1. This is a tough one.  We all watch the competition and see a path towards success, but as a younger company, trying to compete on price is a sure path to disaster.  Like the Blue Ocean Strategy, you want to compete in a different area.  Find your niche and do it better than anyone else in a way that is really different.  Trying to build something to just catch up always puts you behind. 
  7. Hire Slow and Fire Fast.
    1. This is something many people say, but they don’t always do.  It’s important to get the right team.  It’s important to hire in a logical sequence.  For example, getting a great sales team before your solution is built is great for the pipeline but frustrating to everyone in between.  On the flipside, in a smaller company, a toxic personality or someone that doesn’t fit can kill you.  You need to realize that quickly and let them go.  No one likes to do it, but you do a disservice to everyone else if you keep them. 

The past few years have been really interesting as I learned more about case management, disease management, utilization management, oncology, kidney care, and many other parts of our healthcare system.  The key is leveraging all of this as I move forward in my new role

I think another related topic to think about here is some of the lessons around MVPs (minimum viable products)

I always use the Apple 1 as my case study for an MVP.  

Apple Minimum Viable Product

Is There A Future For Community Oncology?

Cancer costs are expected to reach $174B in the US by 2020.  Right now, it’s about 10-11% of total healthcare spend which makes it a big area of focus within the healthcare industry.

The question is how to manage this spend:

  • Is it about site-of-care and where the care is provided?  (community oncology; Centers of Excellence; outpatient clinics; inpatient)
  • Is it about specialty drugs and how they are managed and charged?  (Buy-and-bill; white-bagging; brown-bagging; on-site pharmacy; 340B)
  • Is it about evidence-based care and following NCCN guidelines or clinical pathways?
  • Is it about palliative care and managing spend in the last 3-6 months of life?
  • Is it about personalized medicine?

One of the challenges is the survival of the community oncology practice (see ASCO report) that is an issue that physicians have struggled with in other specialties.  Over the past few years, we’ve seen continued consolidation of practices with many of them being acquired by hospitals and hospital systems.

In some cases, oncologists have seen a reduction in their income tied to a reduction in buy-and-bill and are looking to be employed in order to continue to maintain their incomes.  They are one of the few medical professions that have seen a reduction in income recently.  At the same time, this trend is also driven by hospitals taking advantage of the 340B pricing which allows them to generate approximately $1M in profit for every oncologist they employ.  And, the complexity of oncology treatment also is prompting the need for a more comprehensive care model which requires a broad set of services which is sometimes difficult for a small practice to provide.

Of course, this shift in care from community oncology to hospitals is driving up costs without a demonstrated improvement in outcomes.  This is driving a lot of payer focus and driving discussions of payment reform whether that’s in the form of ACOs, PCMHs, or bundled payments.  United Healthcare recently released some data from one of their pilots.

This seems like another classic example of misalignment across the industry.  Hospitals clearly see an opportunity to buy up more oncology practices while payers and others are going to push for reform around 340B and payment differences.  Oncologists are struggling to continue providing care but replace the income they were making of buy-and-bill of specialty medications.

I’ve talked to a lot of people about this struggle.  It doesn’t seem clear whether community oncologists are destined for extinction or will payers will find a way to enable them to survive.  The other question is how things like teleoncology, tumor boards, big data, and the focus on prevention and survivorship will ultimately change the care delivery approach to oncology which may impact the role of the community oncologist in the future.

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?

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:

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