Enabling Healthy Decisions

I was reading a Barclay’s Capital report this morning put out by Larry Marsh and team. In it, it included some data on the PBM market. What I found interesting were two key data points:

1. The average number of prescriptions PMPY (per member per year) by insurance type
   1. Medicare Part D uses approximately 30 Rxs PMPY
   2. Commercial uses approximately 15 Rxs PMPY
   3. Medicaid uses approximately 11 Rxs PMPY
   4. Uninsured uses approximately 5 Rxs PMPY
2. As you might expect, the costs per member per year are also different
   1. Medicare Part D is approximately $1456 PMPY
   2. Commercial is approximately $844 PMPY
   3. Medicaid is approximately $522 PMPY
   4. Uninsured in approximately $257 PMPY

Interesting, if you look at the assumptions and data around the uninsured, they pay more per generic script than anyone else, and less (on average) per brand script. BUT, the brand script number is deceiving since they have no specialty scripts in there (since the uninsured could never afford those prices).

[Note – I use the term “approximately” since these were derived numbers based on CMS, CBO, and Barclay’s estimates.]

Well, I’m finally getting around to hosting a blog carnival. Next week (January 18^th), I’ll be hosting Grand Rounds which a weekly round-up of the best medical and healthcare blog posts (see here for more information). While I’m open to any submission, I’d like to make the theme “engagement”. How to get patients more involved in their healthcare or the role of other healthcare constituents (MDs, RPhs, RNs) and healthcare entities (Payor, PBM, Employer) in getting consumers engaged.

You can see this week’s Grand Rounds at FDAzilla.

Please send me your submissions by Sunday night (1/16/11) at 10pm EDT, and I promise to use as many submissions as possible especially if their on this week’s topic. You can e-mail me at gvanantwerp at mac dot com with a subject heading of “Grand Rounds Submission”. Please include your name, Blog Name, and blog post URL.

Thanks.

For those of you that haven’t downloaded it yet, here are the key themes of the whitepaper. [BTW – I know many of you don’t like to comment publicly, but I welcome your feedback privately or publicly on the whitepaper.]

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While there are certainly some opportunities for PBMs or pharmacies to differentiate by specializing in certain markets (e.g., Medicare, Worker’s Compensation), the best opportunities for sustained differentiation are found in two areas of innovation:

1. Using an evidence-based approach to consumer engagement and
   
2. Developing integrated solutions that are patient-centric.
   

These business strategies go beyond the traditional fundamentals – location, operational excellence, customer service, reporting, account management, managing trend, and leveraging efficiencies of scale (network pricing, rebates). While it’s possible to create some differentiation in those areas, they are often difficult to maintain over time especially as you approach a point of diminishing returns.

Ultimately, understanding and succeeding at engaging the consumers whose choices drive the costs in our healthcare system is the path to success. This is a change for the PBMs more than the retail pharmacies, but, to succeed at this transition, both PBMs and pharmacies have to be nimble organizations that innovate and learn quickly. They have to understand the consumer from the outside-in and make decisions from an experiential perspective.

Download the complete whitepaper to see:

• Recent changes in the PBM and pharmacy industry.
• Examples of innovation
• Why consumer engagement matters?
• Examples of Silverlink insights into consumer behavior

An example of a multi-channel adherence solution

This is a tough but interesting question.  If I know that a patient is not likely to take their medication for very long (i.e., be non-adherent) for whatever reason, should I pay for their drug?  For a long-term maintenance medication, if they only take it for 3 months and then stop, I’ve just wasted money. 

For a generic drug, this isn’t much of an issue.  My cost is low.

For an average priced brand drug, this is probably a calculated risk.

BUT, for an expensive specialty medication that might cost $10,000 (or more) a month, this is an interesting ethical question.

• Can I really predict their likelihood of being adherent?  If I’m sure their not going to be adherent, why pay for the medication?
• Can I put some burden on the patient (e.g., your copay is $50 per month, but if you stop taking it within 6 months, we’ll bill you $1,000)?  In theory, that creates an interesting stick / carrot, but since I’m not going to sit there and monitor them (unless it’s an injectible which is provided in the physician’s office), that would likely lead to some manipulation?

I was looking at an article this morning about how FICO (credit scores) can be used for predicting adherence, and it made me think of this issue. 

Another reason to keep your credit scores up?  I doubt it will ever be used this way, but it does show how information crosses from one area of our live to another.  On the flipside, it also indicates that behaviors in one area may be good indicators of behaviors in another area.

I’ve been getting this question a lot lately. Honestly, I haven’t heard a convincing argument either way (but I also haven’t had time to read the definitions in detail).

From what I can tell, there are a few factors:

1. Will the definition allow mail order claims to be fully processed as medical costs? If yes, this may be a huge boost from retail-to-mail programs across the industry and could change the market for PBAs (Pharmacy Benefit Administrators) that don’t have their own mail order pharmacies. If it clearly doesn’t allow affiliates (or captive PBMs) of the managed care company to get the same treatment, that could certainly create some interesting discussions about pharmacy assets at places like Cigna, Humana, Kaiser, or Regence. Would they get more value out of long term deals like Aetna has with CVS Caremark?
2. Will the definition only force retail claims to be broken out into ingredient costs and administrative costs? If so, would you see the death of administrative fees and dispensing fees? If dispensing fees disappeared, would you see discounts going back to where they were a few years ago (i.e., just a shifting of profit)? Or, would you see a whole different contracting strategy where retailers would work to contact directly (like the Walgreens and Wal-Mart deals with Caterpillar) with payers and employers and would that allow them to get the same treatment as mail order? If that happened, that would change the spread model at PBMs and could be a boost for PBAs.

There are also broader implications to payers about decisions to insource other things like disease management or medication therapy management (MTM). If they get better treatment by outsourcing them, would PBMs jump into that market more than they are today? It would be an interesting discussion. Certainly, the big PBMs have lots of cash and there are several standalone DM companies.