Author: Seth Friedman
Today's pharmaceutical supply chain is very complex. It's no longer your grandfather's pharmacy that consisted of drug manufacturers who sent their product to a wholesaler, that sent it to a retailer, that delivered it to a patient. The modern pharmaceutical supply chain is here and continues to evolve, making it more circuitous for patients, payers and providers.
Knowing the burden organizations are facing to stay on top of this evolution, Seth Friedman, practice leader of Gallagher's Pharmacy Benefit Management Consulting practice, held a session titled "Not Your Grandfather's Pharmacy" at the International Foundation of Employee Benefit Plans (IFEBP) Conference. Seth and Hannan Allen, Gallagher's area senior vice president of Business Development, spoke about how the pharmacy-benefits supply chain has changed quite a bit over the years and some of the solutions organizations have leaned into to manage drug costs without compromising patient care.
Here are five considerations that PBMs are thinking about these days to optimize healthcare costs:
1. Alternative funding
This solution to manage costs was developed in 1990 in response to public concern about high drug price inflation. The result was a commitment from manufacturers to help patients afford expensive medications, specifically specialty medications. Further, although specialty medications are making up 50% of an organization's costs, Seth has observed that only 2 to 3% of your population is using them. Alternative funding is a great place for organizations, such as unions, to focus on as a strategic way to manage costs.
Additionally, patient assistance programs (PAPs) are a way to distribute prescription drugs to individuals through the pharmacy's own 501C organization, often set up as private foundations. According to the Foundation Center (now Candid), pharmaceutical PAPs accounted for 7 of the 10 largest grant-making foundations in 2015, as ranked by annual giving. PAPs provide drugs to uninsured individuals and to people enrolled in private insurance and public health programs.
Consumer eligibility assistance criteria vary among PAPs and generally appear to be based on annual income, insurance status, physician endorsement, prescription information and proof of U.S. citizenship or legal residence.
2. Prescription digital therapeutics (PDTs)
Telemedicine gained traction during the height of the pandemic, but it also set a precedent for the future of medicine. PDTs are a type of digital therapeutic, which is tested for safety and efficacy in randomized clinical trials, is evaluated by the FDA, and has to be prescribed by a healthcare provider. With the emergence of PDTs, patients can use software that leverages technological advancements to address gaps in care — thus supporting safer and more clinically effective methods to prevent, manage and treat diseases across multiple therapeutic classes.
Take a deeper dive into the innovation of PDTs, as well as how they affect benefit plan designs with Gallagher's white paper, "Digital Health: Assessing Prescription Digital Therapeutics."
3. Point solutions
Point solutions are ways to manage costs while also providing enhanced patient care. Point solutions didn't exist five years ago — they truly inserted themselves into the supply chain and frankly are an innovative channel to manage costs. Using these new tools can help provide better patient care, lower overall healthcare costs and drive better satisfaction with the overall healthcare benefit.
4. New entrants
The pharmaceutical industry has consolidated quite a bit — the top three PBMs account for about 80% of the market. Ironically, this consolidation created more competition, as new entrants look to manage the PBM in a different way — for better or for worse. New entrants can truly be a differentiator.
5. Values-based and outcomes-based contracting
This strategy is vendor contracting at a drug- or therapeutic-class level, based on value or outcomes, with a direct correlation to price/rebate. The two differ in that value-based contracting is the price paid based on the value of the drugs, whereas outcomes-based contracting is a price or refund based on the result. Typically, these contracting options include medication therapy, drug management and patient support, with a focus on high-cost therapies. Values-based and outcomes-based payment models differ by contracting entity, but both have some type of shared savings model.
The challenges with this strategy can include:
- Finding the right drug for contracting purposes
- Contracting with partners
- Administering the collection of information and reconciling to contractual terms and conditions
- Agreement on design and measurements
- Membership stability