Over the past few years, momentum has been building for increased accountability in the healthcare system. The signs have been clearly visible:
- Outrage at the price gouging practices of Turing and Valeant Pharmaceuticals
- Increasing public scrutiny of drug prices and the corresponding value delivered,
- High-profile value-based contracting agreements between drug manufacturers and payers (Novartis and Cigna for the heart failure drug, Entresto; Amgen and Harvard Pilgrim Health Care for the PCSK9 drug, Repatha)
- Accelerated integration of healthcare delivery including accountable care organizations (ACOs); and
- Evolving quality performance metrics not only for providers, but for payers as well.
As a result, US healthcare stakeholders are increasingly being compensated on performance metrics regarding the quality of delivered healthcare, patient outcomes, patient satisfaction and health economics (which in the US focuses almost exclusively on payer and provider budget impact). Such compensation comes in the form both of payments through contracted agreements (between payers and drug manufacturers, payers and providers, and payers and self-insured employers), and government quality-based penalties and bonus incentives.
One stakeholder group, the pharmacy benefits managers (PBMs), has stayed for the most part outside of the accountability system – until now. Independent PBMs traditionally have focused almost exclusively on controlling the cost of drugs and not on their effect on the overall healthcare system. As a result, some drugs favored on PBM formularies may cost less than alternative treatments, but could be more costly to insurers and the healthcare system overall. However, that is in the process of changing.
Increasingly, health insurers are bringing the PBM function in-house – through PBM acquisitions or by building their own PBM organization. Notably, UnitedHealth Group established OptumRx to manage its pharmacy benefits and then added scale by acquiring the PBM, Catamaran. Aetna is currently looking to build its own PBM on the foundation of Humana’s existing PBM following its acquisition of Humana.
The impetus for these health insurers is to integrate pharmacy benefits management into their overall benefits management. Rather than evaluating the impact of drug benefits and medical benefits separately, the two can be evaluated within a single framework. As a result, the impact of medical products and procedures can be evaluated in terms of their overall impact on patient outcomes and healthcare costs, specifically the payer’s budget impact.
Integration can also provide opportunities for creative membership services to improve drug adherence and management of chronic conditions. The current drive towards integration can go well beyond the integration of health insurers and PBMs; integrated healthcare delivery systems (of which ACOs are a subset) are increasingly including their own health plans in addition to primary care, acute and long-term care, imaging and other forms of healthcare services.
This shifting landscape may be leaving PBM giant Express Scripts (ESI) out in the cold. ESI is the largest independent PBM left that has built its business through maximizing prescriptions and driving down the cost of drugs, lately through increasingly aggressive interactions with drug manufacturers.
Anthem’s legal suit against ESI filed earlier this month is an indication that health insurers are very aware that their interests are not aligned with those of independent PBMs. While the Anthem suit focused on a dispute regarding ESI’s failure to share $15 B in cost savings over the life of the existing contract, it speaks to the larger context of healthcare stakeholders increasingly holding each other accountable, as well as to ESI’s vulnerability in the new landscape. Given the bitterness of the existing dispute, there are indications that Anthem may be taking its PBM business elsewhere.
The current trend towards the integration of PBMs into health insurance companies is another important step towards the creation of a healthcare system that is aligned with the goals of improving the quality of healthcare delivery, patient outcomes, patient satisfaction and the overall economics of healthcare. It can be anticipated that the different stakeholders in the healthcare ecosystem will continue to evolve in the direction of cooperation and integration to survive in this challenging, rapidly changing landscape.