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.
Vertical Integration
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