Google’s Waymo self-driving car project just passed an important milestone, with the arrival of its fully autonomous modified Chrysler vans on the streets of Chandler, Arizona. Uber, GM and others will not be far behind. Society soon will need far fewer roads, parking garages, and of course cars—while hopefully the quality of our lives will see another step-change as it did with the smart phone revolution. And it is all about data and the resulting intelligence.
Healthcare systems globally are also affected by this new, data-driven reality. Necessarily, these healthcare systems, which account for 10-18% of the economy, adopt new technologies gingerly and often belatedly, but a dramatic shift is underway as vertical integration continues its march towards concentration of data and concentration of power. This puts patients’ rights and benefits in the balance.
Our previous column pondered the mystery around the value that pharmacy benefit managers (PBMs) create and the beneficiaries of that value. From the perspective of patients, concerns include the fact that they only receive a meager share of the savings that the PBMs extract from the pharma companies, which now amount to a third of a total combined list price of over $400bn annually; accounting practices that are obfuscated to inflate the top line even when PBMs do not take title to the drugs they dispense or process, just so that they can show lower profit margins; and, above all, patient copays being based on retail prices, not what they actually pay.
We also noted how the vast quantities of data the PBMs collect are a treasure trove, which can yield a wide range of potential benefits for patients from better outcomes to lower costs. But such valuable clinical benefits have proven difficult to realize. One explanation is that many disparate data sources need to be better integrated.
Enter the possible merger of CVS and Aetna even while CVS continues to grow the scale and power of its own Caremark PBM unit, and even as it prepares to manage the PBM benefits for the newly created Anthem PBM. ([A#SC099700]) Just as 90% of the US metropolitan areas now have only a handful of hospitals and provider organizations, the payer and retail pharmacy end of the healthcare system is about to reach a similar degree of concentration. Such vertical integration is needed to realize the potential of data analytics to yield actionable intelligence to enable patients to take responsibility for their care, though the parallel concerns about the concentration of power limiting patient choices while raising costs remain, especially in the present-day Washington environment.
CVS is already a diversified biopharma service provider with its now leading Caremark PBM unit, its specialty biopharma delivery unit, and its ubiquitous drugs stores that increasingly include a medical clinic. This vast network generates enormous data every moment, but still along just one or two dimensions, and not enough to generate intelligent recommendations that motivate the patient to do the right thing. As with the data held by PBMs, organization-wide data at CVS readily lends itself to identify ways to maximize cash flow, but evidence of impactful improvements in patient care or substantial savings is meager.
Prescription data without a broader perspective limits the pharmacist to offering mundane services, such as avoiding drug interactions or ensuring timely drug refills that can enhance compliance—all meaningful no doubt, but not really harnessing the power of integrated data analytics and resulting intelligence.
Doing More With Data
With Aetna’s claims data, a whole new dimension should compound the value of data that joining hands with CVS ought to bring. From preventive care via timely vaccinations, to optimally matching drug selection to the diagnosis, to further leveraging their scale to ensure best drug prices, this combination can offer a step change in the way data can be translated to impactful patient care with better outcomes. It need not be just about the bottom line.
In fact, the profit potential of such healthcare behemoths is not assured. Regardless of whether the CVS – Aetna merger goes through, powerful outsiders are poised to pounce, promising truly effective data analytics that is already second nature to them.
Game Changer: Amazon
Amazon is the most direct and near-term threat. It is capable of disrupting the drug distribution and dispensing scene across the spectrum in multiple ways, from its free Prime delivery service anchored around its massive mail order eCommerce operations, to its recently acquired Whole Foods stores network that is bound to develop a national footprint. Imagine Amazon setting up its own PBM. It would probably prefer to build it organically to avoid many of the pitfalls of the current PBM model, rather than inheriting legacy burdens that acquiring, for example, Express Scripts would bring – as tempting as it may seem to get a running start. PBM business is a natural for Amazon; it would be well positioned to bring greater transparency and fairer sharing of greater savings that it should be able extract from biopharma companies as well as other participants in this chain.
More than any FTC edicts, such online marketing powerhouses are likely to bring and maintain some semblance of free market forces in our ineffective capitalist healthcare system.
Fairer Sharing In Sight?
However, the ongoing pharma-political debate in Washington and most other world capitals may further change the rules of the game. The US Senate HELP Committee has health legislation as a key part of its mandate, and has held two of the planned three hearings on the subject. A range of experts from across the political spectrum have put forth many policy ideas, not to mention the Idea Generator in Chief Mr. Trump, who periodically reiterates how biopharma gets away with murder. There seems to be a surprisingly uniform distaste for ever-increasing drug rebates, which drag biopharma companies further into the medicine pricing debate, along with several of the practices of PBMs. ([A#PS121843]) Can a CVS-Aetna type of alliance, with or without a full merger, address the fundamental need for fairer drug pricing and equitable sharing of profits from the therapeutics segment of the healthcare system?
Amazon, when it finally enters the fray – likely after the Washington drug pricing debate clears up – will only accelerate this journey towards all the players on the biopharma playing field losing the ability to exploit the regulatory veil in search of maximal profits just for shareholders, and instead truly focusing on all stakeholders.
This column originally appeared on Scrip Biopharma Intelligence, November 17th, 2017