Tag Archives: $CTRX

The Era Of The Two-Tier PBM Strategy

After Aetna, Cigna, and Wellpoint all moved into different PBM relationships with CVS Caremark, CatamaranRx, and Express Scripts, it certainly marked the end of much of the debate on whether a captive PBM (i.e., owned and integrated with the managed care company) could compete with the standalone PBMs.  There are really only a few big integrated models left including Humana, OptumRx (as part of UHG) and Kaiser with Prime Therapeutics having a mixed model of ownership by a group of Blues plans but run as a standalone entity.  Regardless of where the latest Humana rumors take them, it made me think about what the market has become with these new relationships.

  1. Scale matters.  All of these relationships and discussions show that there are clear efficiencies in the marketplace.
    1. Drug procurement (i.e., negotiating with the manufacturers (brand and generic) and the wholesalers)
    2. Pharmacy networks (i.e., getting the lowest price for reimbursement with the retail pharmacies)
    3. Rebating (i.e., negotiating with the brand and specialty drug manufacturers for rebates)
  2. Outcomes matter.  If scale was all that mattered, there be no room for others in the marketplace.  But, we continue to see people look at this market and try to make money.  That means that “outcomes” matter in different ways:
    1. Clinical outcomes (i.e., does the PBM have clinical programs or intervention strategies that improve adherence and/or can demonstrate an ability to lower re-admissions or impact other healthcare costs?)
    2. Financial outcomes (i.e., does the PBM have innovative programs around utilization management (step therapy, prior authorization, quantity level limit) or other programs like academic detailing that impact costs?)
    3. Consumer experience (i.e., does the PBM’s mail order process or customer service process or member engagement (digital, call center, etc) drive a better experience which improves overall satisfaction and overall engagement…which drives outcomes?)
    4. Physician experience (i.e., does the PBM engage the physician community especially in specialty areas like oncology to work collaboratively to drive different outcomes?)
    5. Data (i.e., does the PBM use data in scientifically valid but creative ways to create new actionable insights into the population and the behavior to find new ways of saving money and improving outcomes?)

While I’ve been beating the drug of the risks of commoditization to the market for years, I’m going to make a nuanced shift in my discussions to say that there is still a risk of commoditization and driving down to the lowest cost, but we may be quickly approaching that point.  What I’m realizing is that there can be a two tier strategy where you commoditize certain areas of the business and let the other areas be differentiated.  And, that this can be a survival tactic where you either outsource the core transactional processes to one of these low cost providers or figure out how to be one of them while creating strategic differentiation in other areas.  

Maybe you can eat your cake and have it too!

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Care Is Coming To Your PBM

The creation of the “softer, gentler” PBM is one of my predictions driven by the rise in specialty pharmacy. While generic fill rates and mail order penetration still matter to earnings, the focus across the industry is on specialty. 

  • What can we expect in terms of pipeline?
  • How and when will genetic tests be required? (i.e., companion diagnostics)
  • How can we treat the patient not just fill the drug?

This will bring back a focus on how pharma and the PBMs work together which has had a bumpy past. Initially the two were very close. Then, with the rise of generics and more trend programs like prior authorization and step therapy, the PBMs and pharma butted heads frequently.

Of course, the situation for pharma has changed also. They are trying to figure out how to go “beyond the pill” and create new consumer relationship and make money. (Here’s a good article about pharma and digital from the other day.)

In case you missed them, here’s a few other things that are relevant:

And, I think this screenshot from the Barclays Global Healthcare Conference Presentation given by Express Scripts shows that they are focused on this care and delivery intersection by continuing to show the success from the Therapeutic Resource Centers.

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So, what do you think?  Will the PBMs become more care management focused?  Will they integrate with the other care providers?  Will this be the beginning of their focus on working with ACOs and PCMHs?  Will this change their approach?  Will we see PBMs differentiating around key, chronic diseases like the specialty pharmacies have done?  Will this create an opportunity for integrated PBMs (i.e., Humana, Cigna, Aetna) to differentiate?  

2013 CatamaranRx Drug Trend Report

I just finished reading the 2013 CatamaranRx Drug Trend Report (2014 Informed Trends: Moments of Opportunity) and wanted to share some of the things that caught my eye. (BTW – CatamaranRx was formed by the merger of SXC and CatalystRx.)

One of the early comments in the document caught my eye. While simple, it is still so true in healthcare.

“Bringing consistency through a national perspective on best practices, a “local” understanding of how health care is practiced and deep insights at the individual level, to promote the very best outcomes.”

CatamaranRx Trend

  • They did a good job of tackling the impact of healthcare reform on the PBM marketplace and why this creates more opportunities.

“The looming pharmacy demand is also driving the healthcare market toward expanded cost containment and coordinated care measures. Industry estimates are projecting more than 30 million new PBM customers as a result of the ACA. This influx of new customers will stimulate creative cost management paradigms and entice new entrants into the PBM sector.”

  • 50% of the new drugs approved by the FDA in 2013 were specialty drugs.  (reiterating the fact that specialty is really the focus of the PBM today in terms of opportunity to influence trend)
  • 30% of the new drugs approved were oncology drugs.  (similar to years past)
  • Orphan drugs without competition were 2.6x more expensive than orphan drugs with competition.  (not too surprising)
  • They point out that no true biosimilar has been approved in the US (which I didn’t realize).  They also point out that international experience is that biosimilars will save 10-15% not the 40% projected by the CBO.
  • They have nice clean charts around price inflation (deflation) for brand and generic drugs.

2013 CatamaranRx Brand Rxs

2013 CatamaranRx Generic Rxs

  • The average cost of a specialty drug rose to $2,860 in their book-of-business.
  • The top 10 specialty drug classes represent 86% of specialty drug spend.

2013 CatamaranRx Top Specialty Classes

  • The report talks about medication adherence using PDC (proportion of days covered).  They show some good adherence rates in key classes (which always brings up questions about methodology).

o   Over what time period?

o   Is this all members prescribed an Rx?

o   Is this all members with one Rx?

o   What is the percentage of members with over 80% PDC (versus the average PDC)?

o   (Note: These are the same questions for every PBM that shows you adherence numbers.)

  • Here’s their forecast for the next few years in terms of trend.

2013 CatamaranRx Trend Forecast

  • They are projecting a generic fill rate of as high as 90% by the end of 2016!
  • I like that they break out their highly managed clients to show they got an overall trend of -0.1% even though they had higher specialty trend driven by oncology.  They shared a list of key things that those clients were doing:

o   Member risk scoring and personalized interventions.

o   Tailored clinical programs, including step therapy, quantity limits and prior authorization.

o   Aggressive management of controlled drugs to reduce misuse and abuse.

o   Formulary management tailored to address client-specific, high-cost medication classes.

o   Exclusive specialty through BriovaRx, a high-touch, patient-centric model.

o   Plan designs with copay differentials that promote cost-effective choices.

o   Multi-channel communications that engage members in their healthcare.

  • I was excited to see them dedicate a whole section talking about engagement.

o   The need for the right message.

o   The need for targeting algorithms.

o   The need to vary channel based on preference.

  • They share some details on their hospital discharge program which sounds right from a PBM perspective – focused on medication reconciliation and adherence.  My key question would be understanding if they address the other risks of re-admission while they have the patient on the phone (i.e., treating the patient not the Rx and not the disease).
  • I haven’t heard as much about MTM lately so it was nice to see them talk about it and see some results which seem really good.

2013 CatamaranRx MTM

Two miscellaneous comments here:

  1. This seems to be a much improved document than the one I reviewed years ago from SXC.
  2. My only challenge with the format was that it prints the two pages on one page in the PDF (but that could be user error).

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