Choice and transparency aren’t words that fit naturally in the healthcare industry, though the consumer trend in healthcare and Congressional scrutiny have yielded some advances.
In a session at Bullseye, a one-day invite-only event for healthcare investors and corporate business development leaders hosted by MedCity News in Chicago recently, one Amazon Pharmacy executive and the CEO of a pharmacy benefits manager pointed to systemic challenges and misaligned incentives that lead to high prescription drug prices. In doing so, both executives called out practices by pharma companies, PBMs, and other stakeholders that have directly contributed to Americans paying high drug prices.
“Choice becomes paramount and formulary is anti-choice,” said Tanvi Patel, general manager of Amazon Pharmacy, when asked how Amazon is trying to bring transparency to the pharmacy market. “And yes, as a brand manager, I can understand if you can get your medication and only your medication for a certain condition, you’re going to go for that more and more and more. You won’t abandon a model that is helping your own personal P&L or your own personal goals.”
A formulary is a list of generic and brand-name prescription medications covered by a patient’s or an employee’s health insurance plan or self-insured employer.
By contrast, Patel lauded her employer for creating a transparent marketplace.
“But if you take it back and do what Amazon did, we built a marketplace. We’re transparent on pricing. We have our own products alongside third-party marketplace products on everything. And so when you bring transparency, the way you still can get comfortable with your own product is delivering a really great customer experience. So if you still start with the consumer and you don’t say, ‘I’m going to give you one choice and one choice only, and that’s mine, and that’s how I’m going to win,’ — that’s not choice. And you’re also not incentivized to do right by the consumer.”
Patel also took issue with how the current system is set up with respect to prescription drugs that patients may not have access to.
“And what never is great without transparency is if someone gets prescribed a medication and it’s not on their formulary, they get given only a cash price. Now they can’t afford it. Why are they not told right up front what the therapeutic alternative on their formulary is, No.1? Or No.2 like AJ said: Why are there formularies at all?”
AJ was a reference to AJ Loiacono, CEO of Judi Health, a tech-enabled pharmacy benefits manager that charges an administrative fee to administer the pharmacy benefit. Loiacono was a co-panelist with Patel at Bullseye. The moderator, Jay Rughani, of a16z venture firm, also asked Loiacono about the lack of transparency in drug pricing, challenging him on the notion that pharma alone should bear the entire blame for its absence.
This is how Loiacono responded:
“I think if pharma was brave enough, they could do it, but they need to abandon the model of formulary access. And I just want to be very clear about this, which is at any one time, if you were to survey 20 brand managers, probably 15 to 16 of them would say they’re winning under the current formulary strategy. And until that goes to what I would say less than 50%, I don’t think they will be brave enough because they’ll go to their CFO or their CEO and say, ‘we can’t abandon this model — we’re winning.’ And by them winning, unfortunately, it’s creating this very murky, gross-to-net system that punishes, unfortunately, the people that are the most ignorant or the people that have the least amount of what I would say intelligent representation.”
While abandoning the formulary model on the prescription side could be debated, when drugs are part of the medical benefit, that discussion of choice and formulary becomes much more complicated.
“Choice looks pretty different when it comes to medical benefit; you’re not going to a pharmacy to pick up your medical benefit drugs,” said Annie Collins, chief commercial officer Aradigm Health, a co-panelist. “So yes, you can pick your doctor, but from there it’s mostly providers and payers kind of having a little bit of a battle in the background.”
Collins explained that those battles are waged in three areas: a) where the doctors buy the medication from the payers and then add a little markup to have some “upside” in delivering these medications. Those could be oncology drugs received as part of treatment, such as expensive cell and gene therapies; b) then there are “white bagging” arrangements she said, where the payer is “running these drugs through a specialty pharmacy” that most likely is integrated in the pharmaceutical supply chain and the payer gets a financial upside; and c) there are battles regarding the site of treatment, whether at the hospital or at home.
Collins, whose company Aradigm Health is a risk-management platform for expensive cell and gene therapy, also highlighted a problem with drugs in medical benefits where the provider is choosing the drug and patients don’t have much of a choice. For instance, in sickle cell disease, there are two cell and gene therapies that can be administered to patients — Casgevy, manufactured by Vertex Pharmaceuticals and Lyfgenia, manufactured by Genetix Biotherapeutics, (formerly known as bluebird bio).
“One drug, Casgevy, is safer, has more efficacious outcomes in terms of the clinical trials,” Collins explained. “It’s $900,000 cheaper. You would be surprised how much people are still choosing Lyfgenia over Casgevy, and I think oftentimes it’s, you know, those doctors were part of the clinical trials, or it’s just what they’re used to administering. And so I think there is a lot of opportunity for choice to actually help the system in drugs that are that expensive and that complicated.”
