Tag Archives: pharmacy benefit manager

How Amazon Could Disrupt Care (Part 3)

In Part 2 of this series, I explored how the innovations that Amazon popularized in retail would be transformative if applied to health care at scale.

The potential value of such innovations is not lost on those inside the healthcare sector. Many startups and large healthcare organizations are already working hard to adapt and adopt them. (See, for example, my articles on diabetes preventionBoomers and how to shape the future of connected health). Here are some of the advantages that Amazon brings to this challenge.

Amazon can start with a clean sheet of paper. Unlike those inside the current healthcare system, Amazon doesn’t have existing customers to placate, legacy systems to update or business models to protect. A fundamental disconnect in healthcare is that the patient is not the customer, so helping customers doesn’t necessarily benefit patients (or vice versa). In this case, Amazon and its partners are the customers. And, because the potential patients are employees, Amazon can leverage strong existing connections, relationships and overlapping interests.

See also: 10 Mistakes Amazon Must Avoid in Health  

Amazon brings differentiated capabilities and experience. While many talented people in healthcare are working on the same capabilities, few can match Amazon’s technical expertise and practical experience. Amazon’s expertise in social networking, mobile devices, user experience, the Internet of Things and artificial intelligence are extremely relevant to healthcare. Its existing platforms, like its Alexa-enabled devices and AWS cloud platform, will, no doubt, also come into play.

Amazon doesn’t have to make money. Innovators in healthcare have to worry about revenues and reimbursement, usually from insurance. With deep pockets and the potential to recoup cost through savings, Amazon has great flexibility to experiment without such concerns. Indeed, the alliance declared itself to be “free from profit-making incentives and constraints.”

While its initial focus is on reducing cost and improving satisfaction for its 1.2 million employees, the alliance is not shy about wanting to create solutions relevant to all Americans. Doing so would serve two other incentives for Amazon to think big about its healthcare innovation.

Healthcare could enable synergies with Amazon’s other businesses. As I’ve previously observed, Amazon approaches competition as a no-holds-barred battle for tighter customer relationships and ever-larger share of customer wallets. It is hard to find a bigger untapped market category than healthcare through which to grow Prime membership. In addition, because mobile devices, AI and cloud-based platforms and services have become synonymous with the future of healthcare, it is likely that Amazon can find business synergies in those areas, as well.

There is a massive $3.2 trillion healthcare market to enter. Industry valuations tremble at the whisper of Amazon’s interest in healthcare for a good reason, as has happened to pharmacies, benefit managers and health insurers. That’s because investors know that there are deep pockets of inefficiencies and unnecessary complexity in healthcare that, in turn, offer real market opportunities for Amazon. For example, one analyst estimates that just pharmacy benefits management (PBM) business is a $25 billion to $50 billion market opportunity. Amazon had already been rumored to be building an internal PBM capability for its employees. Adding Berkshire Hathaway and JPMorgan employees into that mix would be another step closer to launching a market-facing business.

See also: Media Coverage on Amazon Misses Point  

Forbes.com contributor Dan Munro is pessimistic. He describes the overall effort as an exercise in “Fantasy Health Care.” At the heart of the problem, he writes, are big systemic flaws that the alliance cannot address. What’s more, Munro argues that the alliance “is not remotely novel or innovative, and the historical evidence is clear that it certainly won’t disrupt health care.”

Rather than partaking in a fantasy, I think Jeff Bezos offered a cleared-eye view of the challenge in the alliance announcement:

The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty. Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind and a long-term orientation.

For my part, I’ll take an optimistic point of view. The problem is big and hairy, and I applaud the audacious effort to take it on.  Let’s remember: Innovation is always hard and more often than not fails—and that’s why the rewards are great for those with the audacity to try and the chops to succeed.

9 Key Factors for Drug Formularies

These remarks were prepared for testimony at a recent Assembly hearing in Sacramento on California’s consideration of a workers’ comp drug formulary.

Thank you for the opportunity to be part of this hearing on the potential development of a prescription drug formulary in California. My name is Mark Pew, senior vice president of PRIUM, a nationwide medication management company based in Duluth, GA, that has conducted business in California for more than 15 years and been a utilization review organization since 2009. I have followed the development of workers’ compensation drug formularies in other states since 2010 and, through observation and dialogue and corresponding deployment of services, have come to identify success criteria. I spoke on the subject at the National Workers’ Compensation and Disability Conference in November 2012 and at that time opined that California should consider a drug formulary. Since 2013, I have had several conversations with various California stakeholders to further that discussion, so I’m very pleased to see progress being made towardsthat goal.

Because I value the time of this committee hearing, I will be brief in what I consider to be important foundational tenets when constructing a drug formulary. I will forego any statistics or rationale for a drug formulary as that has already been well articulated in the bill’s analysis.

  1. A drug formulary should be about better patient clinical outcomes, not cost. My opinion is that if you do what’s right for the patient, all other stakeholders win by side effect. While much of the discussion leading up to this hearing has been about cost savings, it would be shortsighted to think that should be the criteria for success. In my opinion, true success from a drug formulary would be a decrease in disability, a decrease in addiction and dependence, an increase in return-to-work and an increase in the use of less dangerous treatment options. If the focus is on better patient clinical outcomes, there should be no stakeholder in California workers’ compensation that can argue that this isn’t a good thing.
  2. A drug formulary should rely on evidence-based medicine. Robust clinical studies that indicate what drugs should be used when, and what non-pharmacological treatment options should be tried in advance, should dictate which drugs require additional evaluation before prescribing. There are some very dangerous drugs that are generic and inexpensive, so the trigger should be what produces the best clinical outcomes in proper sequence. Step therapy, the idea that you start with the most effective, least dangerous option, is built into evidence-based medicine and should be the template for prescribers. The optimal approach to evidence-based medicine is the adoption of third-party, peer-reviewed standards that are regularly updated to reflect contemporary medical practice standards.
  3. A drug formulary should not handle new and legacy claims in the same manner. By “legacy claims,” I mean those claims that exist before the formulary rules come into effect. A patient taking his first opioid is different than a patient who has taken opioids for many years. While new claims require primarily process education for the stakeholders, there should be a remediation period for “legacy” claims to allow time for appropriate weaning and development of alternative treatment methods. Based on my observations, there should be a one- to two-year period between the rollout of a drug formulary for new claims vs. “legacy” claims. Both implementation dates should be unchangeably enforced to ensure action is taken. To be clear, any formulary that applies to new claims should also apply to legacy claims, albeit at a later date. Not applying the formulary to legacy claims would result in two different standards of care for injured workers in California depending on when the worker was injured. This is clinically inconsistent with the application of evidence-based medicine.
  4. A drug formulary will change prescribing behavior. The extra steps required for a drug that is not allowed by the formulary requires the prescriber to think through the best options as opposed to just maintaining past practice patterns (however they were developed). For example, if carisoprodol was excluded from the formulary, the prescriber either needs to validate the medical necessity through a preponderance of evidence or choose a muscle relaxant that is included (which likely means it has less dangerous side effects, has proven to be more effective for certain conditions and does not have dangerous drug-to-drug interactions). Given experience in other states, the prescriber will often choose the less dangerous drug included in the formulary, which should result in better clinical outcomes for the patient.
  5. A drug formulary should be enforced at the point-of-sale. Allowing drugs to be given to the patient and THEN deciding whether they are clinically appropriate allows the start of a potentially dangerous path to polypharmacy regimens that create more harm than good. A workers’ compensation drug formulary, just like those we see in group health plans, should be implemented at pharmacies within their point-of-sale system. The information provided to pharmacists will help them better communicate with the patient and prescriber as necessary for an option that is allowed by the drug formulary. One advantage for California is that pharmacy benefit managers (PBMs) and pharmacy chains already have experience with implementing a workers’ compensation formulary in other states. If California is modeled after that same process, there should be less up-front time required to develop processes for California.
  6. A drug formulary should be the result of consensus among all stakeholders. While reaching consensus takes longer, providing a seat at the table for every workers’ compensation stakeholder in a very transparent process will ensure a smoother implementation. It’s extremely important to the ultimate success of a drug formulary that everyone be part of the deliberation process. And if everyone is involved in developing the drug formulary, ultimate implementation will be more easily achieved. A point of clarification: while the process surrounding the drug formulary should be based on stakeholder consensus, the medical treatment guidelines upon which the formulary is built should NOT be based on consensus, but rather on the best contemporary medical evidence available. California stakeholders should focus negotiations on the rules governing the formulary, not on the medical principles that underpin it.
  7. A drug formulary should educate all stakeholders clearly and consistently. Clear (and free) education needs to be provided to all prescribers, all attorneys, all payers, all employers and preferably all injured workers as to how the drug formulary was constructed, how it will be implemented and how best to comply. Preferably, this would be led by the Division of Workers’ Compensation. This education should not stop in the lead-up to implementation but should continue in a feedback loop during and after to ensure that issues are identified and resolved quickly.
  8. A drug formulary should be simplified for ease of implementation. States with workers’ compensation drug formularies have made the choice of drugs relatively binary. For instance, a drug may be classified as one that is recommended for first line therapy (“Y” drug) or a drug that is not recommended as first line therapy (“N” drug) and should not be used unless it has been reviewed and approved by a second clinical opinion. The definition of what is and is not included in the formulary should not be narrative or interpretive, but something easy to read and — more importantly — to program into pharmacy benefit management (PBM), utilization review (UR), independent medical review (IMR) and bill review systems.
  9. Drug formulary rules should include a well-defined dispute resolution process and expedited appeal process. The goal of a closed formulary is to ensure that there are safeguards in place to prevent unnecessary medications from being dispensed to injured workers. The exclusion of a drug from the formulary (for example, an “N” drug) should not mean it cannot be utilized, only that the prescriber should be required to validate its medical necessity vs. drugs that are included. California obviously already has that infrastructure, which is why I felt in 2012 that California was a candidate for a workers’ compensation drug formulary. The onus should be on the prescriber to provide necessary evidence as to why this particular drug is required for this patient at this time. If that can be established, then that drug should be allowed to be given to the patient.

If the above steps are taken and appropriate time is given for their completion, a properly constructed and implemented drug formulary in California should result in cost savings to the system. The primary savings will emerge over time as fewer and fewer of California’s injured workers are lost to dependence, addiction and overdose. The ability to settle and close claims more quickly will be a positive result for both employers and employees.

A workers’ Compensation drug formulary could have a lasting and significant change in how prescription drugs are prescribed in California. I truly believe that by making everyone in the system think before prescribing, the injured workers will receive better care, and stress on the workers’ compensation system in California will be reduced.

I would enjoy being a continued resource to this committee as deliberations evolve. Thank you again for the opportunity to be part of this hearing.

How to Make Data a Robust Medical Tool

“Data makes all the difference.” This is according to a white paper published by LexisNexis, titled, “More Data, Earlier: The Value of Incorporating Data and Analytics in Claims Handling,” which states that carriers can reduce severity payments by as much as 25%.

This is true for P&C carriers but especially true for workers’ compensation payers, where medical costs have steadily increased for decades. In workers’ compensation, medical services are not limited by plan design. The costs for medical now amount to more than 60% of claim cost, and they continue to climb. Nevertheless, data managed correctly can make all the difference and save real dollars.

Everyone is talking about big data as a panacea. The notion is that organizing and analyzing copious amounts of data will produce new and improved insights. But it needs to be complete, consistent and accurate, and purity is rare, regardless of the size of the data set.

Duplicate records must be cleansed and merged, for starters. More importantly, bad input processes must be altered upstream, where data is created. Standards for quality must be set and enforced. Automated imaging systems must be regularly calibrated to ensure accuracy while individuals who input data along with their managers must be held responsible for the quality of the data.

In workers’ compensation, as with all insurance lines, comprehensive data is a fete accompli. Data has been collected digitally for decades, driven by claims payment requirements. In workers’ compensation, the claim is set up in the payer’s system and continually fed by incoming data. Mandatory reports of injury are submitted by employers and treating physicians. Bills from medical providers and others are streamed through bill review systems, then to claims systems throughout the course of the claim. Events such as litigation, court dates and bills paid are documented in the claims system. The PBM (pharmacy benefit manager) sets up an additional database related to the claim. Most payers also collect medical utilization review and medical case management data. The question is not the amount of data, but its quality and what can done with it. How is it applied?

Unfortunately, in workers’ compensation much of the data remains in separate silos. The focus has been on collecting the data. Now the question is how to make data an operational tool that achieves the kind of savings results reported in the LexisNexis study. A different approach is needed.

Making data a useful work-in-progress tool is a matter of first integrating the data across multiple data sets relating to claims. This is sometimes a tedious process but is invaluable. The request and funding must come from the business units, where anything related to data is not usually a priority. Business managers must begin to value the process of collecting good data and converting it to action.

Once the data is collected and integrated, analyzing it to gain the business knowledge is the task. Business managers can learn to articulate for IT what they want and need for decision support and other initiatives. IT has a role in assisting business managers in understanding how to ask more effectively for what they need. Cost drivers and trends can be uncovered in the analyzed data.

The power of data is best exploited when it is analyzed and made available to the business units as concurrently as possible. Intervention is far more effective when it is mobilized early.

The data must be analyzed and presented to the business units in ways that can be easily accessed, understood and applied. Through analytics, the data is transformed to knowledge: knowledge about conditions in claims, events, costs and performance of vendors.

Individuals can be prompted by the system to take specific initiatives based on the knowledge, thereby creating a structured and powerfully enhanced approach to medical management with measurably positive results.