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A Century of Patient Safety

The history of patient safety as an organized movement has been a century in the making, beginning with the American College of Surgeons hospital standardization campaigned, launched at a Chicago conference on October 19, 1917.  A narrated video presentation on the movement’s early years is available above and the transcript follows below.  

In the 1990s, errors in health care had patients dying at a rate equal to a jumbo jet crash a day, according to a Harvard study.  Giving these patients real names and compelling stories, high profile media coverage of particularly tragic errors made the human cost and the need to act unavoidable.  The American Medical Association responded by launching the National Patient Safety Foundation. There was a sense of urgency and it may have seemed new, but it really wasn’t new at all. Rather, it was a renaissance.

The fact is, patient safety as an organized movement began a century ago in 1917.  That October, the American College of Surgeons launched its effort to standardize the nation’s hospitals for greater efficiency.  For them, hospital efficiency meant losing fewer lives to inaccurate diagnoses and incompetent surgeries.  They called on the nation’s hospitals to institute patient record systems, follow up on results, organize physician staffs, and establish laboratories.  The surgeons would check up on hospitals annually, publishing lists of hospitals meeting their standards.

The story begins on October 19, 1917.

Opening the pages of the Cincinnati Enquirer, we find a short article about the superintendent of Cincinnati’s General Hospital Dr. Arthur C. Bachmeyer.  He had left the previous evening for Chicago and a conference convened by the American College of Surgeons to make operations safer.   Inspectors would later fan out across the country, “checking up” on hospitals to see if they met minimum standards.

Also attending the conference was Amory Codman, the Boston surgeon considered by many the father of patient safety. He had developed an innovative record system, one card to a patient, documenting the end result of each case.   Using the cards, he summarized errors and failures.  He asked:  “was it the fault of the surgeon, the disease or the patient.  What can we do to prevent similar failures in the future.

Codman believed patients were put at risk by a rigged promotion system that overlooked the best surgeons.  Based instead on seniority, advancement came to those who built careers on connections and personal reputations, not on results.  In a very undiplomatic move, Codman made his point with a large cartoon drawn by an artist friend – fully in the style of a muckraker exposing corruption — which he unveiled at a public medical society meeting with reporters present.  As result, Boston society ostracized him while, across the nation, many heralded him as a patient safety pioneer.  In fact, the Joint Commission until recently presented an annual Codman award.

Meanwhile, patient safety borrowed from other movements, including Teddy Roosevelt’s conservation movement. Conservation came to mean more than protecting nature.  It also meant protecting human life.  In Atlanta, the newspaper reported that conservation of human life would be the focus of a public meeting on hospital standardization sponsored by the American College of Surgeons.  It urged its readers to attend.

Efficiency was another, “borrowed-from” movement. The most famous of the efficiency experts, Frederick Taylor, focused on factories.  But, Amory Codman’s friends, Frank and Lillian Gilbreth – of Cheaper by the Dozen — concentrated on bringing scientific management to the operating room.  In fact, Frank Gilbreth spoke at the same meeting where Codman presented his controversial cartoon.  Codman said “There’s a general movement, which the public is beginning to demand, toward increasing the efficiency of hospitals.”  Greater efficiency meant better safety.

The surgeons weren’t alone in promoting standardization. Henry Ford got in the act too. You could have your Model T in any color so long as it was black!  For the surgeons, efficiency was the standard. They said hospital standards “are as figures of a barometer which indicate the degree of efficiency of a hospital or the degree of safety of a hospital to patients.”

Correct diagnosis was Richard Cabot’s passion. He and Codman were friends and, like Codman, he was a reformer.  He published controversial studies reporting diagnoses were more than half-wrong. In partnership with Ida Cannon, pictured here, sent social workers from Mass General into the community, to improve conditions and to follow up on the results of care.

As far as Codman was concerned, surgeon efficiency reports were like batting averages. An amateur baseball player, he believed medicine needed rules and umpires.    Quite to the contrary, Arthur Bachmeyer, the Cincinnati hospital administrator believed great teams won championships even without any star players.  What mattered most was the organization, not the individual.

Teamwork was a constant refrain, like standardization and efficiency. To be up to standard, hospitals had to conduct monthly hospital staff meetings dedicated to reviewing and preventing errors. Pictured here is the St. Louis Children’s Hospital staff of the time.

Hospitals also had to keep records. The editor of Modern Hospital, John Hornsby wrote, if good records are kept, good work will be done, but 75% of hospital records had no value.  When Bachmeyer presented a set of recommended forms at the American Hospital Association, his report was hailed.

Speaking for nurses was Carolyn Gray from, as she said, “the applied common sense department or safety first division. Writing or printing orders spells safety for the patient and after all that is the acid test.”

Catholic hospital sisters got their written orders, quote “with a sister in charge having full authority to demand the careful cooperation of doctors, interns and nurses.”

When the nation entered World War I, many top physicians, surgeons, nurses, and administrators joined the army or navy. Patient medical records and monthly hospital reports, including documentation of errors and mistakes, were mandatory.  In this photo we have – in uniform – the Mayo brothers, Albert Ochsner of New Orleans and George Crile of the Cleveland Clinic.

Organizing and staffing their own battlefield hospitals were America’s leading medical schools and hospitals. Here is the Washington University base hospital in France.  The American College of Surgeons executive director John Bowman, wrote in the New York Times,  “Military hospitals are now standardized for soldiers so is the best surgery too good for the humblest patient? Are mistakes due to carelessness not repeated?”

About half the men examined for Army induction were rejected for defects. The surgeons saw standardization as a solution.  In fact, it was a test of medical patriotism.

Hospital fund raisers promoted the standardized safety of their new hospitals. Between 1925 and 1929 nearly a billion dollars was spent on new hospital construction, a third of all hospital capital investment by the end of the decade.

By 1928, the American College of Surgeons declared their hospital standardization campaign a great success.  Hospitals were safer.  Hospital mortality had been cut by half to 5%, from about 10% a decade earlier.

Meanwhile, auto crashes were sending drivers, passengers, pedestrians and an alarming number of children to the hospital. Cars were the fifth leading cause of fatalities. The surgeons and the auto club joined forces in a new campaign:  Safety first (when driving)/Safety afterwards (if you have to go to the hospital) The auto club provided lists of approved hospitals to its members.

Sadly, optimism over safer care came crashing down in 1929 when x-ray film at the Cleveland Clinic caught fire, costing 123 lives. It turns out that the Cleveland Clinic was not considered a hospital and thus not part of the surgeon’s safety program.  Responding to newspaper reporters, the American College of Surgeons said it had warned about the dangers of improperly storing x-ray film.

During the depression, the big issue for health care became how to pay for it.  Then came a brutal global war in the 40’s.  In the 50’s, an Ohio court decision stripped charitable hospitals of legal immunity.  Thereafter, lawsuit crises thereafter routinely boiled over.

Fortunately, during these dark ages, the health care equivalent of monks and monasteries labored on.  The Joint Commission took over from the American College of Surgeons.  The American Hospital Association and the National Safety Council collaborated on safety initiatives.  In 1962, the University of Michigan School of Public Health convened a remarkable conference, a beacon in the darkness, alerting hospitals to the hazards of poor safety practices.

Turning on the lights, for good, was the Anesthesiology Patient Safety Foundation with its founding in 1984.  Soon after, the Harvard Medical Practice Study got underway, using patient records from 1984.  By 1997, the National Patient Safety Foundation appeared, launched by the American Medical Association and inspired by Lucian Leape’s revealing research on the high number of deaths caused by medical error.  The patient safety renaissance had begun.

Hepatitis C, a Miracle Cure and Gilead’s Plan

Hepatitis C, a Miracle Cure and Gilead's PlanGilead aims to eradicate hepatitis C from the planet and has enlisted an entire nation as its demonstration lab.    In return, the Republic of Georgia has gotten the best possible price on Harvoni (ledipasvir-sofosbuvir), the company’s hepatitis C drug that lists at $1,150 a pill in the U.S.

The Black Sea nation wedged between Turkey and Russia does not pay a penny (or “tetri”) to Gilead as part of a five-year Hepatitis C Elimination Program launched in April with technical support from the U.S. Centers for Disease Control and Prevention (CDC).

Gilead donated an initial 5,000 courses of Sovaldi (sofosbuvir) and, this fall, began supplying Harvoni, which it began donating at a rate of 20,000 courses annually this fall upon its approval by Georgia.

The Georgian government is funding other costs associated with the program, such as screening, administration and monitoring.  Harvoni is a once-daily tablet while patients must use Sovaldi with other medications.

With just a population of five million, Georgia has the world’s third highest prevalence of HCV infection, exceeded only by Mongolia and Egypt.   As many as seven percent of the nation’s adults carry the virus, a blood infection which can destroy the liver.  Worldwide, HCV infects an estimated 130 – 150 million people and killed 700,000 in 2013.

By the end of August, the Georgians had completed a population based prevalence survey, registered 10,564 patients in the program, started treatment on 3,022 and recorded cures for 122 of 125 patients completing a 12-week regimen.  Some estimates place the total number of Georgians infected at 200,000.

Progress but Obstacles

Despite this early progress, the Georgians are facing obstacles inherent in the complexity of the disease and the variety of current therapies, including interferon, multiple anti-virals, Sovaldi and Harvoni.  These obstacles will hinder eradication there or anywhere else – as noted by “Alexandre,” a Georgian HCV patient interviewed by Georgia Today.

“I try not to worry,” said Alexandre, “My biggest concern is that our infectionists lack experience with hepatitis C management.  The disease emerged in the 80’s and despite a large number of variations in the treatment formula, it needs high professional experience.”

The virus, discovered in 1989, has six different genotypes, the prevalence of which varies from nation to nation.  Genotype 1 is most common in the United States at 75% of those infected.  In Georgia, genotype 1 drops to 43%, accompanied by genotype 2 at 20% and genotype 3 at 37%.

Disease progression by patient also differs, from spontaneous disappearance or easy treatment of the virus, to chronic hepatitis, cirrhosis, cancer and/or decompensated liver disease requiring a liver transplant.  Patients can also vary by age, comorbidities (e.g. heart disease, HIV), treatment history, risk factors and disease stage.  Hepatitis C can also be associated with heavy alcohol use, toxins, some medications, and certain medical conditions.

As a result, selecting the right treatment alternative typically requires – even in the United States — a specialist to type the virus, assess the patient, avoid harmful drug-drug interactions and monitor for potential side effects.  “Alexandre,” for example, suffered an allergic reaction from a prescribed adjunctive medication, ribavirin.  Patients must also strictly adhere to their medications or risk full recovery.

In the United States, the National Institutes of Health (NIH) is conducting a clinical trial in Washington, DC, to assess the effectiveness of treating hepatitis C with Harvoni in community clinics led by primary care physicians, nurse practitioners, and physician assistants.  Based on trials conducted by specialist teams, the Food and Drug Administration (FDA) approved Harvoni in October 2014, but only for genotype 1; approval for genotypes 4, 5 and 6 came in November 2015.

Miracle Cure for Hepatitis C

However, a solution for the specialist bottleneck is on the way — the first all oral, single tablet chronic HCV regimen for every genotype, simple to use regardless of prior treatment, disease stage or anti-viral resistance.  Potential side effects are modest, most commonly fatigue, nausea and headache.  “This is what a miracle looks like,” enthused one hepatitis C activist on Twitter.

Groundbreaking results from clinical studies of Gilead’s sofosbuvir (Sovaldi) – velpatasvir (SOF/VEL) combination recently appeared in the New England Journal of Medicine here, here and here, and in the Annals of Internal Medicine here and here.

The new drug is on approval fast tracks in both the U.S. and Europe.  The FDA has assigned SOF/VEL a Breakthrough Therapy designation as an investigational medicine that may offer major advances in treatment over existing options.  It has also set a PDUFA approval target date of June 28, 2016.  Meanwhile, the European Medicines Agency (EMA) has granted SOF/VEL Accelerated Assessment.

“This drug regimen changes the standard of care in treating patients with HCV. We can now cure almost everyone with a very simple treatment,” explained Dr. Jordan Feld, MD, MPH, lead author of the NEJM studies, to the Toronto Star.

“Knowing which treatment to use for which patient required expertise, which made it much more difficult for non-specialists to treat hepatitis C.  With the single tablet that is effective for all strains of the virus, it’s hoped that family doctors, internists and nurses will step in to treat hepatitis C,” he added.

“There are some who believe that the future is a one-size-fits-all single pill, such that a primary care doctor could prescribe it without having to be concerned about genotype, viral load, or complications,” concurred Ronald Sokol, MD, of University of Colorado School of Medicine and Children’s Hospital Colorado during a liver disease conference in November 2015.

Weighing in, too, were two key CDC leaders via a NEJM editorial:  John Ward, MD, Director of the Viral Hepatitis Program and Jonathan Mermin, MD, MPH, Director, National Center for HIV/AIDS, Viral Hepatitis, STD, and TB Prevention (NCHHSTP).  They said sofosbuvir–velpatasvir regimen could simplify HCV management, “paving the way for simple ‘test and cure’ strategies appropriate for primary care and other settings, such as addiction-treatment programs.”

In noting that this new medicine removes significant clinical obstacles to hepatitis C eradication on a global scale, Ward and Mermin are very concerned that financial and access barriers could be thwarting:

“The availability of simple, safe, and curative regimens creates opportunities for improving the health of the millions of patients living with HCV infection. At a population level, the effect of HCV medications will be determined by affordability and equitable access to HCV testing, care, and treatment. Only through these improvements can our focus be directed to what matters most: reducing the morbidity and mortality associated with HCV infection, stopping HCV transmission, and ultimately eliminating HCV as a public health threat in the United States and worldwide.”

Pricing the Miracle Cure

How do you price a new miracle cure for hepatitis C, serving both shareholders and patients?   Gilead likely is still working the problem, deploying a process much like the one it used to price Sovaldi.  The U.S. Senate Finance Committee revealed the process in a December 2015 report, which the Wall Street Journal described as providing “perhaps the most transparent look ever into pricing decisions in the modern drug business.”

Aside revenue maximizing accusations and price gouging insinuations by Sens. Ron Wyden (D-OR) and Chuck Grassley (R-IA), Gilead actually deployed a very deliberate pricing process.  It calculated the value added by Sovaldi compared to existing treatments and balanced that with forecast of patient “starts” (volume), potential payer access restrictions and clinical obstacles like the specialist bottleneck.

Then, amidst U.S. market competition and payer resistance for 2015 sales, it discounted both Solvadi and Harvoni by an average of 46% to an estimated $643 per tablet for Sovaldi and $536 per tablet for Harvoni.

In Europe, Gilead negotiated a $536 per tablet price for Sovaldi with both Germany and France, although the deal with France includes volume incentives.  Globally, list and negotiated prices tracked a nation’s ability to pay, as measured by gross domestic product, gross national income and health expenditure per capita.

Meanwhile, Gilead has signed licensing agreements with 11 Indian generic manufacturers to produce and distribute generics for Sovaldi and Harvoni in 101 developing countries.  In addition, it has signed agreements with three companies in Egypt and Pakistan for local distribution within those countries.

In May 2015, Médecins Sans Frontières/Doctors Without Borders (MSF) reported that one of the Indian generics makers was charging $189 per 28-day-supply bottle, or $567 for a full 12-week treatment course of sofosbuvir (Sovaldi).  However, it is unhappy with Gilead’s generic licensing strategy, saying that it prohibits licensees from selling in 50 middle-income countries and excludes additional generics makers who want licenses.

Setting the Stage for Launch

Notably, Gilead has already included its breakthrough SOF/VEL combination drug in these generic licensing arrangements, anticipating approvals from the FDA, EMA and regulatory bodies elsewhere.  Alluding to SOF/VEL and its forthcoming launch, MSF notes, “People living with HCV and governments around the world have high expectations.”

However, MSF suggests governments do not have to wait for “patent and regulatory barriers” to come down, especially in middle-income countries.  To secure access to affordable treatment, MSF advises:

“Through measures taken at the domestic level, or through collective engagement at the international level, low-cost generic medicines – which cost a fraction of the high prices charged by Gilead – could be provided.”

Already, another group, Initiative for Medicines, Access & Knowledge, is challenging Gilead patents or patent applications in China, Argentina, Brazil, Russia and Ukraine.

The Republic of Georgia is among the 50 middle-income countries MSF wants included in Gilead’s voluntary licensing program – “or else.”  Rather than expand its licensing program to these countries, Gilead reveals a different strategy with its Georgian demonstration project – one of engagement with these nation’s governments coupled with financial assistance from multilateral organizations.

“We will take the Georgia data to other countries around the world to really make the case that investment can fundamentally change the disease over time,” explained Gregg Alton, Gilead’s executive vice president, corporate and medical affairs.   “Gilead cannot cure hepatitis C globally on our backs alone.”

Launching the Miracle Cure

Just another pharmaceutical product launch, SOF/VEL will not be.  Instead, look for Gilead to announce a global campaign to eradicate hepatitis C, answering the global call of patients, health systems, governments, multilateral organizations and even the Economist newspaper.

Photographs will show generics produced and ready to ship, videos will document compelling patient stories in Georgia, agreements will chart the expansion of Georgia-like demonstrations and support from multilateral organizations.  Perhaps, even MSF and Gilead leaders will stand together at the press conference.

In the U.S. and the developed world, shifting to a primary care screen and treat model, removing the specialist bottleneck, should provide an increase in patient starts justifying list and negotiated prices much lower than those of Sovaldi and Harvoni.

Watch, too, for the rollout of education campaigns to increase screening and diagnosis, and special initiatives in prisons and among substance abusers, recognizing that about half of all those with HCV have yet to be diagnosed.  Again, at the press conference, expect representatives from government, medical societies and the big pharmacy benefit managers to stand with Gilead.

Stay tuned!

Repatha’s Path to Patients: Via Value?

amgen repatha

Amgen’s Repatha is “well tolerated” and a “welcome alternative” for some, admits the U.K.’s National Institute for Health and Care Excellence (NICE).  Yet, the British cost watchdog this week told Britain’s National Health Service (NHS) not to pay for the new super cholesterol reducer.

Repatha, one of the new class of biologic specialty drugs called PCSK9 inhibitors, reduces ‘bad’ low-density lipoprotein (LDL) cholesterol by 54 to 77%.  The European Commission and the U.S. Food and Drug Administration (FDA) approved Repatha and another PCSK9 drug, Praluent, this summer.

More Repatha Data

In a draft guidance set for final review in January, NICE disagreed with some of Amgen’s economic calculations and assumptions.  More significantly, it said direct evidence of Repatha’s impact on cardiovascular disease (CVD) outcomes was lacking and thus an “important limitation” and “key area of uncertainty.”

NICE could have used Repatha’s cholesterol-reducing results as a surrogate for CVD outcomes, based on biologic and epidemiologic studies of statins’ cholesterol-lowering impact on these outcomes.   In fact, the draft guidance allowed, “it was reasonable to infer that evolocumab (Repatha) would reduce CVD.”

However, NICE instead proposed a guidance review for February 2018, when results will be available from the long term, FOURNIER study documenting Repatha’s impact on CVD outcomes.   Short-term- study meta-analyses suggest considerable Repatha CVD effectiveness, possibly reducing mortality odds by 50%.

Pay for Performance

Meanwhile, a week earlier, back in the U.S., Harvard Pilgrim Health Plan decided not to wait for documented CVD outcomes.  In an exclusive agreement with Amgen, the plan negotiated a discount on the drug’s annual $14,100 wholesale price, plus additional discounts if Repatha delivers LDL reductions less than those observed during clinical trials.

Further discounts accrue if utilization exceeds certain limits, incenting Amgen to focus on patients who have an inherited disorder resulting in high levels of LDL cholesterol or have high-risk atherosclerotic cardiovascular disease conditions, such as heart attack or stroke, that have been resistant to treatment.

Harvard Pilgrim’s chief medical officer, Michael Sherman, told the Boston Globe that slightly less than one percent of the plan’s 1.2 million members would be eligible for Repatha.  He added that it was likely that even fewer would opt for the drug because it comes as a once or twice monthly injectable rather than a once daily pill.  The plan will also deploy rigorous utilization controls.

Sherman was coy when EP Vantage asked for more details on Harvard Pilgrim’s Repatha discount.  Was it close to an annual ‘care value price” – $7,735 for a cost effectiveness threshold of a willingness to pay $150,000 per quality adjusted life year (QALY)calculated by the Institute for Clinical and Economic Review (ICER) for the New England Comparative Effectiveness Public Advisory Council in which Harvard Pilgrim participates?1

“We’re not anywhere near that,” Sherman told Jon Gardner of EP Vantage.  “Ultimately, it was more about a negotiation, versus fundamentally agreeing that there’s a dollar value to [a QALY], which is where I’d like to be.  Maybe when there are other drugs on the market and more competition, we may get there.”

Express Scripts’ Deals

Mum, too, about exact pricing has been Express Scripts, which placed both Praluent and Repatha on its National Preferred Formulary in October after securing discounts from Amgen and the makers of Praluent, Sanofi and Regeneron.

This was after a July declaration by Express Scripts President Tim Wentworth, “while these drugs are being viewed as breakthroughs, they also have the potential to wreak financial havoc on clients who do not proactively manage.”

At Express Scripts, utilization management will come through a new Cholesterol Care Value program featuring “rigorous documentation” to ensure use only by clinically appropriate patients, who will get help with properly injecting the drugs and remaining adherent.

For plan sponsors enrolled in the CCV program, Express Scripts will cap total 2016 costs for the drugs.  It expects to spend $750 million on the drugs next year, lower than previous forecasts.  Among those earlier predictions was a ‘sky is falling’ alarm from CVS, which said costs could reach $150 billion annually if all coronary disease patients were included.

Before Express Scripts struck its PCSK9 deals, the company’s chief medical officer, Steve Miller, said the company would reference the ICER findings in its “negotiations with manufacturers.”  Apparently pleased with the result, Miller said the company received the best price possible and complimented the manufacturers for “collaborative discussions.”

During negotiations, Amgen, Sanofi, and Regeneron presumably repeated for Express Scripts their critique of the ICER methodology, specifically that it underestimated CVD risk, was not applicable to the population most likely to receive PCSK9’s and overestimated the population size likely to be treated with PCSK9’s.

Value Controversies

Amgen also explained that an alternative cost effectiveness model, which it is developing in alignment with the NICE model, confirms PCSK9 as cost effective at a QALY threshold of $150,000 or below.  In other words, Amgen believes the ICER ‘care value price’ of $7,735 (see above) should more accurately be $14,100.  The company notes that $150,000 is the value threshold recommended by the American College of Cardiology and the American Heart Association.

Meanwhile, back in the U.K., differential pricing is in play where the Repatha list price is £4,448.60 ($6,802.13), excluding an undisclosed patient access scheme discount.    Including the discount, the price Amgen proposed to NICE resulted in value thresholds ranging from a high of £78,879 ($119,903) to a most cost effective low of £22,902 ($34,813), depending on patient subpopulation and indication.

In stark contrast to the U.S., the QALY threshold over which NICE is less likely to recommend treatments for use in the NHS is typically between £20,000 ($30,393) and £30,000 ($45,590).  For the potential Repatha patients where the QALY threshold was within this range, NICE still decided to wait two years for more studies, the results of which are highly likely to show a CVD benefit.

Perhaps there is another reason for caution at NICE.  It is coming under pressure to lower the threshold to £13,000 ($19,759) – very different from the increasingly standard $150,000 in the U.S.  University of York’s Prof. Karl Claxton says that the current NICE threshold diverts funds from local health authorities and medical procedures, which he claims are more cost effective than new, expensive drugs.

Value or Values

NICE chief executive Sir Andrew Dillon countered, saying, “We need to think carefully about what’s being valued.”

“Concentrating only on QALYs means we are in danger of losing sight of other things that people, health systems and the government value very highly. This includes encouraging an innovative UK research base, or perhaps valuing more highly specific treatments that may be the only option for people with certain conditions,” Dillon added.

To advance Sir Andrew’s point, what is being valued depends on our values.  On that score, the negotiators at Amgen, Sanofi, Regeneron, Express Scripts and Harvard Pilgrim appear to have struck the right balance.

They are ensuring that the patients clinically most in need of Repatha and Praluent get the drugs by focusing on just those patients, while also providing financial support to those who might not otherwise get the drugs because of economic need.2

In human terms, only 28 people would need to be treated over five years to prevent a heart attack, stroke or death.  A “relatively low” number ICER admitted in its report.  Viewed another way by ICER, among CVD patients with high cholesterol, taking a statin and a PCSK9 together would prevent 5,621,800 heart attacks, strokes or deaths over a lifetime horizon.

Meanwhile, the U.K. waits.

____________________________________________

  1. When ICER initially announced its findings in early September, it highlighted and got the most headlines for an even lower, “value based price benchmark” of $2,177.  The key constraining assumption:  That health care costs should not grow any faster than growth in the overall national economy, which it estimated at +1% GDP growth.  After a series of calculations and further assumptions, ICER declared that the total annual cost of any single new drug could not exceed $904 million.  In other words, rationing.
  2. Groups such as AARP and editorial writers call for more public transparency in pricing agreements between payers like Express Scripts and manufacturers like Amgen.  However, the confidentiality to which buyers and sellers agree helps sustain a sort of differential pricing and access system within the U.S., i.e. ensuring the patients in clinical and financial need get the drugs they need.  Express Scripts negotiating with a manufacturer surely is a fair match.  However, where the match is not fair, i.e. when the buyer is a consumer, such as a consumer with a high deductible, then transparency is needed along with financial assistance.

Walgreens: Purveyor or Provider?

Walgreens-store

An intriguing question emerged from last week’s merger announcement from Walgreens Boots Alliance and Rite Aid.  Led by CEO Stefano Pessina and his largely European executive team, will Walgreens be purveyor focused on retail sales or provider engaged with a transforming U.S. health care system?

The signals are mixed.  A tea-leaf reading of last week’s investor call suggests Walgreens is destined to be a purveyor, focused on selling products and services.  Today, however, Walgreens announced a big technology move that points to a provider future, closely integrated with payers and providers.

Purveyor or provider?  Read on.

Tobacco:  To Sell or not to Sell

“Are you considering eliminating tobacco,” Barclays Capital analyst Meredith Adler asked Walgreens president Alex Gourley during the investor call as the company fielded questions about earnings and the merger.

Gourley had just praised RiteAid for its new, sales-increasing wellness format, saying it was an opportunity for Walgreens, which also is seeing success with its new health, wellness and beauty positioning.

“It seems pretty clear,” said Adler, explaining her question, “that providers and payers feel uncomfortable working with a retail pharmacy that still sells tobacco.”  In the background was the 2014 tobacco sales halt of CVS Health, which boasts 49 clinical affiliations, including Cleveland Clinic.

Gourley’s answer:  No.

Walgreens would instead continue investing in smoking cessation.  Anyway, he noted, only about three percent of all tobacco sales occur in a drugstore.  He did not pivot to emphasize how Walgreens is working with providers and payers, notwithstanding tobacco sales.

A tea-leaf saying “purveyor”? Perhaps.

Outposts in Seattle

Gourley could easily have drawn the analyst’s attention to a Walgreens announcement just two months previously.  In August, Walgreens and Seattle-based Providence Health & Services launched a new “strategic clinical collaboration.”

Providence will own and operate clinics in 25 Washington and Oregon Walgreens stores under its Providence and Swedish brand names.  The first three will open in early 2016, with the remainder following in two years.

Rite Aid made a similar move in the Seattle market in May when it announced a joint venture between its RediClinic subsidiary and MultiCare Health System.   The joint venture will operate clinics in 11 stores staffed by board certified MultiCare Nurse Practitioners in collaboration with MultiCare affiliated physicians.

Seattle, home to only three CVS stores, will provide a sheltered environment for Walgreens and Rite Aid to test the strategy of developing “deeper and more strategic relationships” with health systems.  In particular, Providence is quite a catch, having directly contracted with Boeing to provide health care for the aircraft maker’s employees.

The EpicCare Connection

However, the nation’s 1,000 CVS MinuteClinics dwarf both Walgreens 400 Healthcare Clinics and Rite Aid’s small number of in-store RediClinics.  Surpassing 25 million patient visits since the opening of its first clinic, CVS says it is opening three new MinuteClinics a week.   Aiming for 1,500 clinics by 2017, CVS is acquiring all of Target’s 1,660 pharmacies and 80 clinics.

CVS is converting all of its MinuteClinics to the market leading EpicCare electronic medical records (EMR) system.  Used broadly across health care, Epic also has strong interoperability with other EMR systems.   This will provide seamless data exchange with most American hospitals.

“EpicCare will help us work more closely with physician practices as part of the medical home team, facilitate co-management of patients, and advance our mission to make health care more accessible, convenient and affordable for Americans,” said MinuteClinic chief medical officer Nancy Gagliano, M.D.

Dr. Patrick Carroll agrees.  Today, the chief medical officer for Walgreens Healthcare Clinics announced the clinics would begin moving to EpicCare early next year.  “As our clinics play an increasingly important role in health care, supporting the health care system, provider practices and patients’ medical homes, care coordination can be critical,” he echoed.

So, a provider future for Walgreens?  It certainly looks like it.  “This will benefit our patients, clinic providers and partners, and serves as an instrumental part of our strategic growth plan [emphasis added],” explained Carroll.

Confusing Signals

However, as recently as May, Walgreens quietly shuttered 35 clinics, a move two former employees described to Crains Chicago Business as signaling “uncertainty whether Walgreens really wants to spend more on primary care and in particular upgrading the clinics’ electronic medical record systems.”   Today’s announcement erases some of that uncertainty, at least with respect to the EMR system.

In Seattle, Walgreens will provide in-store space, overseeing any needed build out.  Providence will be using its own Epic system.  “Patients will experience a seamless patient experience through our existing electronic health record system, providing direct connectivity to the clinics and billing systems, which will ensure better continuity of patient care and collaboration among providers,” said Providence senior vice president of physician services Mike Waters.   Now, Walgreens will be able to connect directly.

Convincing Collaborations

In Seattle, a provider land lord; in Tampa, still a provider.  There, Walgreens partners with a multi-specialty practice, assuming risk in an accountable care organization (ACO), Diagnostic Clinic Walgreens Well Network.  Serving 7,500 patients, the ACO saved $1.5 million or 2% in costs.  However, Walgreens has exited ACO partnerships with Baylor Scott & White in the Dallas-Fort Worth area and New Jersey’s Advocare.  The company continues a clinical affiliation with Baylor Scott & White.

Meanwhile, Walgreens has launched additional collaborations with CHE Trinity Health, a 30-hospital, Michigan-based system, Arizona Priority Care, a unit of California’s Heritage Provider Network, and Mercy Health – Cincinnati.  Leading Trinity Health is former Medicare official Dr. Richard Gilfillan, chair of the Health Care Transformation Task Force; Mercy Health is part of the nation’s largest not for profit health system, Ascension Health; and Arizona Priority Care specializes in accountable care.

In Baltimore, Walgreens has a long-standing relationship with Johns Hopkins Medicine (JHM).  The company provides grants for population health research overseen by a joint committee.  Two years ago, it opened a store, including a Healthcare Clinic, adjacent to the JHM campus.  In this case, Walgreens’ board certified nurse practitioners staff the clinic, although they and company pharmacists can work with JHM faculty.

Rite Aid’s Health Alliance program should dovetail nicely with Walgreens provider collaboration initiatives.  The program brings together physicians, pharmacists and special care coaches to provide care and support to individuals with chronic and poly-chronic health conditions, helping them achieve health improvement goals established by their physicians.

Eight provider organizations currently are participating in Health Alliance, which leverages Rite Aid’s population health subsidiary, HealthDialog.  Another 11 reportedly are be interested.  On average, patients participating in the Rite Aid Health Alliance are 36% more adherent to their medications; they have lost an average of 7.7 pounds; they have a 39% reduction in blood pressure; and they have lowered their blood sugar by 36%, reports Drug Store News.

Big Bet on Consumer Technology

Rite Aid is also bringing Cleveland Clinic physicians into some of its Ohio stores via telehealth start up HealthSpot.  Installed in the stores is a kiosk, enclosed for privacy, which includes a video connection with a physician and the capability to take and transmit vital signs to the physician.

Opting for mobile, Walgreens is using the Pager platform, designed by an early Uber architect, to connect customers with physicians.  It also is relying on the MDLive platform for telemedicine, and working with WebMD on a wellness app, and with PatientsLikeMe enabling people to share medication experiences with each other.

Walgreens has been a leader in using technology to engage its customers.  Its app is the third most downloaded retail app in the U.S. and the number one brick and mortar pharmacy app, reports mobihealthnews.  Fourteen million people visit a Walgreens app or website each week and Walgreens fills more than one mobile prescription every second.

Walgreens’ Epic Catch-Up

However, until the EpicCare announcement today, Walgreens lagged in using technology to engage providers.  Its electronic record system could not easily communicate with other systems, forcing stores to use secure fax and email to communicate with physicians and other providers.   That raised serious questions about the future of its provider collaborations and role as a provider.

Now, EpicCare means Walgreens can be more than a purveyor.  It can also be a provider, fully integrated into the new health care.

Scaling the Limits of Scale: The PBM Path to Value-Based Health Care

Scaling the Limits of Scale: The PBM Path to Value-Based Health Care
Scale has its limits, as the nation’s two largest pharmacy benefit managers (PBM) are discovering.  Express Scripts and CVS Caremark each process more than a billion prescriptions a year.   That is not enough for big customers Anthem and Aetna.  Both are likely to alter dramatically or not renew long-term contracts set to end in 2019 with the PBM behemoths.

PBM Optionality for Anthem, Aetna

Anthem and Aetna say they now have “optionality” because Cigna and Humana, which they are respectively acquiring, both have PBMs.  That optionality goes well beyond the scale Aetna would enjoy as the fourth largest PBM.  It can put the pharmacy benefit, integrated within each organization, on the path to value-based health care.

Both the Humana and Cigna PBMs align well with the quality and outcomes focus of value-based health care.  Humana’s PBM primarily supports the company’s Medicare Advantage (MA) and Part D programs, with MA accountable care arrangements delivering better outcomes than traditional Medicare.

Meanwhile, Cigna has pioneered outcomes-based reimbursement arrangements with pharmaceutical manufacturers.  Previously overseeing Cigna’s PBM was none other than Aetna CEO Mark Bertolini; Cigna CEO David Cordani will serve as chief operating officer of the new Anthem.

In their sights is UnitedHealth Group (UHG), which brought its PBM business inside from Medco at the start of 2013, trigging Express Scripts’ anticipatory acquisition of Medco in 2012.    UHG says its OptumRx PBM focuses “on connecting total condition spend and pharmacy’s impact across benefits,” a process it calls “synchronization.”

More explicitly than Anthem, Aetna has said it will integrate Humana’s PBM, along with its “growing health care services business,” even characterizing it as an “Optum-like business.”

Value beyond Scale

UHG’s Catamaran acquisition earlier this year, while adding scale, also significantly included Catamaran’s RxClaim processing platform.  OptumRx plans to integrate the adjudication platform with its medical and pharmacy claims synchronization.  UHG promises to create value “beyond the scale … resulting from integration,” by linking “demographic, lab, pharmaceutical, behavioral and medical treatment data” to encourage healthy decisions and improve compliance with pharmaceutical use and care protocols.”

In fact, the very tools used to leverage scale to get lower prices, such as formulary exclusions, can potentially work against reducing total costs.  In securing a substantial discount from AbbVie for Viekira Pak, Express Scripts excluded Gilead’s Harvoni from its 2015 formulary.  Viekira Pak is a four pill a day regimen to Harvoni’s adherence-friendly one pill for curing hepatitis C.

Not surprisingly, given their focus on overall costs, Aetna, Anthem, UHG and Cigna all included Harvoni on their formularies and do not publish exclusion lists like Express Scripts and CVS Caremark.  Instead, they typically establish clinically based prior authorization criteria.

For the latest high-cost drugs to hit the market, Express Scripts is following the health plans on their value path.  Instead of excluding one of two new anti-cholesterol drugs, known as PCSK9 inhibitors and list priced at $14,000 per year, it announced coverage for both this week.

As the health plans did with Harvoni, Express Scripts will implement rigorous prior authorization procedures.  The company says it negotiated good pricing with Amgen for Repatha and with Sanofi and Regeneron Pharmaceuticals for Praluent, enabling it to cover both drugs.  Perhaps it also heard from customers unhappy with price-driven drug exclusions.

Wanting More, Customers Become Competitors

Clearly, some very big customers – Aetna, Anthem and UHG – want something more than scale from traditional PBMs like Express Scripts and CVS Caremark.  Beyond scale, they want a pharmacy benefit that contributes to reducing total costs through better outcomes, consistent with achieving overall value-based payment goals.

Building PBM paths to value-based health care for themselves, Anthem, Aetna and UHG will also sell against volume-based models like those of Express Scripts and CVS Caremark, and against health plans that fail to integrate pharmacy and medical claims for actionable intelligence.

Employers and the Limits of Scale

Their strategy blueprint could easily have come from the Harvard Business Review article “The Limits of Scale.”  Hanna Halaburda and Felix Oberholzer-Gee argue that, when rapidly scaling companies neglect to take into account differences among their customers, performance declines.  On that premise, they suggest how challengers and incumbents can take advantage of customer differences.

Among PBM customers with differences are employers, which provide health coverage for 147 million Americans.   The National Business Coalition on Health is uneasy with the growing use of exclusionary formularies.  It advises members to “base selection criteria for formularies on clinical outcomes to ensure that pharmaceutical costs do not decrease at the expense of rising medical costs.”

Employers are becoming more actively engaged in managing the pharmacy benefit, even developing their own formularies and negotiating directly with pharmacy retailers.  Caterpillar’s Daren Hinderman told an NBCH panel last year, “I don’t want to have a conversation [with PBMs] on rebates; I want to have a conversation on how I can keep my employees more compliant with medications they need to stay healthy. We decide what’s best for our employees. It’s a transparent process.”

NBCH also urges members to “verify that pharmacy and medical benefits are aligned, and link data between the two in order to evaluate cost and outcomes across both types of benefits and the entire health-care spectrum, not just through the lens of pharmacy.”  As Dr. Mark Fendrick of the University of Michigan Center for Value-Based Insurance Design told the NBCH panel, “I’d prefer to spend more on statins than on stents.”

Obstacles on PBM Value Path

Mapping the PBM path to value-based health care is one thing, building it is another.  Aetna and Anthem still must face a gauntlet of government and legal reviews before they can complete their acquisitions and commence integrating the Humana and Cigna PBMs.

OptumRx must complete its integration of Catamaran, which in turn is still integrating the data platforms of its acquisitions.  Furthermore, OptumRx and Catamaran both use different versions of the RxClaim platform and, for Catamaran, medical claims synchronization remains down the road (or path).

Meanwhile, the Catamaran acquisition has roiled a PBM industry where many participants use Catamaran’s RxClaim platform – including Cigna!  They were content to compete with Catamaran, despite using its technology.  However, will they be similarly comfortable with OptumRx and UHG in the technology driver’s seat?

Much like UHG’s acquisition of Catamaran and its technology, Rite-Aid did the same when it acquired EnvisionRx.  The PBM had previously acquired Laker Software, also a claims platform supplier for many PBMs.  Again, the comfort question arises, in this case over Envision and Rite Aid as the drug retailer pursues its path to value-based health care via innovative alliances with health care providers.

Making the Laker and RxClaim platforms particularly valuable has been the PBM industry’s reliance on a hodge podge of decades-old, antiquated platform technologies.  With each acquisition, scaling PBMs have patched together instead of invested in their platforms to maximize short-term synergies, at the cost of limited flexibility and lower efficiency.

PBMs Miss Technology Revolutions

Meanwhile, multiple revolutions have coursed through the systems development world since the PBM industry acquired its mainframes and data centers in the late 1980’ – early 1990’s.   When relational databases followed soon thereafter, PBMs adopted them for after-the-fact data analysis, but not broadly for real time use with claims processing platforms, which now are antiquated and fragmented.

More recently, graphical user interfaces have greatly streamlined the programming of business intelligence applications.  It is now easier for more people, more efficiently to translate their expertise into innovative systems.  No longer must visionaries exclusively funnel their solutions through highly specialized programmers and coders.  Now, the visionaries’ can become coders, their hands on the programming controls, unleashing new applications across the entire economy, including the PBM industry.

PBM Platform for Value-Based Health Care

One such visionary has developed a PBM solution for value-based health care.  His name is Ravi Ika.  “The solution is holistic, unlike that of any other existing PBM.  It reduces overall pharmacy cost, converts specialty from ‘buy & bill’ to ‘authorize and manage,’ and lowers avoidable drug-impacted medical costs,” explains Ika.

Before turning his attention to the PBM industry, he created a comprehensive, integrated payer platform now provided by ikaSystems, which he founded to transform the payer operating model.  Spanning all payer departments and business lines, it decreased administrative costs for health insurers by as much as 50% and reduced avoidable medical costs.

In 2013, Ika launched RxAdvance, a full service PBM, which similarly operates on an integrated, end-to-end platform – one designed specifically for value-based health care.   Combining pharmacy, medical, and lab data, the platform – called PBM Collaborative Cloud– enables real-time engagement.  This engagement occurs with physicians at the point of care, pharmacists at the point of sale, and patients via mobile cloud.  It also engages payers clinical and pharmacy staff through their workflows.

Better decisions by these stakeholders – driven by platform-generated, actionable intelligence – can reduce avoidable drug-impacted medical costs, optimize utilization, facilitate better specialty drug management, and decrease overall pharmacy costs.

PBM Processes Reimagined

“We started with a clean slate,” observes Ika, who says he and his team reimagined PBM processes to streamline workflow before building the platform.  Redefining the human role, they automated as much as possible while, on the other hand, increasing opportunities for engagement, what-if modeling, and informed decision-making.  The platform also enables market and regulatory changes configurable by the business user, as well as system-driven compliance management.

Ika built the platform from the ground up using a unified data model.  In information technology parlance, that means the platform’s standards are universal enough to encompass a large scope of data and types of data with high scalability.

In PBM language, the platform includes everything from pharmacy claim adjudication, formulary management, benefit design, enterprise reporting and analytics, to pharmacy network and rebate contracting, medication adherence and therapy management, specialty management, transparency, compliance, and adverse drug event management.

From Existing to Ideal Formularies

For example, the platform includes algorithm-driven artificial intelligence to manipulate, with plan sponsor engagement, the complex and interdependent variables associated with formulary management.  Incorporating habitual member and prescriber utilization patterns, in addition to other data, it derives an ideal formulary with optimal financial and clinical outcomes.  The system then maps a transition plan from an existing formulary.  The platform also accommodates an unlimited number of formularies and supports real time dynamic modeling and changes coupled with full transparency.

Better Medication Therapy, Adherence Outcomes

For medication therapy management (MTM), the platform taps patient medical claims and disease conditions, against which the system overlays a prescription listing for easy use by prescribers.  In addition, each new prescription triggers a dynamic analysis to determine patient eligibility for a comprehensive medication review (CMR), which the system prepopulates for efficient prescriber use.

After the CMR, RxAdvance advisors rely on system alerts to intervene with patients to ensure medication adherence.  For high-risk patients, RxAdvance will install an electronic, patent-pending pill station at their residences and resupply it with disposable pre-filled pill trays.

Integrated with and wirelessly connected to the company’s platform, the device assists with monitoring adherence and vital signs.   The company says the device has improved adherence to more than 93%, including patients with multiple chronic conditions who are taking an average of 15 medications a day.

The Centers for Medicaid and Medicare Services (CMS) recently underscored the PBM need for physician-led, point-of-care MTM capability when it announced a new Medicare Part D MTM model.  Currently, highly fragmented PBM MTM relies on pharmacists “chasing” patients without closing the loop with prescribers, thus failing to secure meaningful health outcomes, according to Ika.

Ika points to the RxAdvance specialty management program as another example of his platform’s capabilities.  As it does for MTM, the platform integrates prescriptions, medical claims and disease conditions to create an action plan for all stakeholders.  Case managers use a dashboard to prioritize their outreach to patients, prescribers and pharmacists.  Because the platform integrates medical, pharmacy and lab information, it helps facilitate appropriate utilization.

Risk Sharing

One of the hallmarks of an organization configured for value-based health care is its ability to share risk.  The RxAdvance unified data model platform enables it to share risk for both pharmacy and avoidable drug-impacted medical costs.  For pharmacy, it is prepared to assume both up and down side risk based on its cost management performance against a risk cap set below a national benchmark projected increase.

The company can also compute a baseline trend for avoidable drug-impacted medical costs using prior years’ medical claims data.  RxAdvance and its client then set a target and, if the PBM lowers actual avoidable drug-impacted medical costs, it will share in the savings.  According to Ika, this sort of risk sharing is unique in the PBM market.

Ika reports that RxAdvance is currently implementing full PBM services for three clients, replacing national PBMs.  “The Collaborative PBM Cloud platform is making for a very smooth launch,” he notes.

RxAdvance has gotten a head start along the PBM path to value-based health care, scaling the limits of scale.

SSM Health: Baldrige Pioneer Now Value-Based Care Model?


SSM Health
In 1872 St. Louis, all that would later become SSM Health could fit in the basket Mother Mary Odilia Berger, SSM., carried from house to house – bread for the poor, medical supplies for the sick and clean linens for her patients.  As she walked “with a very purposeful step,” people she met on the street would slip a donation in her basket.

Nearly 145 years later, woven in today’s SSM Health “basket” are 30,000 people – including 1,300 employed physicians – working in four states at 19 hospitals and more than 60 outpatient clinics.  In addition, the system operates an insurance company, two nursing homes, comprehensive home care and hospice services, a telehealth company and two Accountable Care Organizations (ACO).

Among the hospitals is the system’s first academic medical center, Saint Louis University Hospital, which it acquired earlier this year from Tenet, and a children’s hospital.  Most of the outpatient clinics and many of the physician employees arrived with the 2013 acquisition of Wisconsin’s Dean Health System.  Dean also brought a health system rarity, ownership of a growing pharmacy benefit manager along with a string of retail pharmacies and eye care centers.

Process, Purpose, Patient

The base of today’s SSM Health “basket,” with its focus on process, purpose (mission) and patient, took shape in the hands of another purposeful leader, Sister Mary Jean Ryan, FSM.  It took a dozen years, beginning four years into her leadership of a newly centralized system:

  • Process (1990): She and the system’s leaders committed to continuous quality improvement.  They aimed to “create a culture in which every employee at every facility and at every level of the organization would constantly seek to improve processes – every single day.”
  •  Purpose (Mission) (1998): Three thousand system employees, at all levels, in all locations, condensed a wide variety of mission statements into one succinct declaration:   “Through our exceptional health care services, we reveal the healing presence of God.”  The system had discovered it needed develop a more compelling mission after practicing with the Malcolm Baldrige National Quality Award criteria.
  •  Patient (2002): The system attributes its 2002 Baldrige Award to a focus on its core customers, patients, and “connecting the dots” from Baldrige criteria through core processes and results.  SSM Health had begun submitting applications as soon as health care organizations became eligible for the award, in 1999, and became the first in the category to win.

In July of this year, Quality Management Journal published a study comparing 34 Baldrige winners, including SSM Health, with their 153 geographically closest competitors.  It found that the “award recipients provided care equal to or better than competitors while at the same time providing a better patient experience.”

The “patient, purpose, process” culture SSM Health created as it pursued the award, and nurtured thereafter, has proven to be a dependable guide for the system amidst health care’s transformation from volume- to value-based care.

To Join or Not to Join

Earlier this year, SSM Health committed to put 75 percent of its business into value-based arrangements that focus on providing higher quality at lower costs by 2020.  It did so as one of 24 provider organizations participating in the Health Care Transformation Task Force, which also includes payers and employers among its members.  Dr. Gauroy Dayal, health care delivery vice president for SSM Health noted that the system “began working on transforming itself five years ago….when it began assuming risk and responsibility for improving the quality of care while lowering costs.”

On the other hand, because of its unique culture, SSM Health knows what not to join.  Several years ago, the system chose not to participate in the Medicare Shared Savings Program (MSSP) by creating a Medicare Accountable Care Organization (ACO).  It had concluded that the assignment of beneficiaries based on claims history, not choice, was inconsistent with SSM Health’s transparent, patient centered care model.

Instead, SSM Health embarked on a path to “True North,” as it explained in a Mayo Clinic Proceedings article, “The SSM Health Care Approach to Achieving ‘True North’:  Improving Health Care Quality While Reducing Costs.”   True form, it created a process based on a functional definition of accountable care.  The system then chartered five teams to design “an organization capable of assuming and managing global clinical and financial responsibility for the care of a defined population.”

The Volume to Value Process

Flashes of process appear continually from SSM Health as it makes the change from volume to value.  For example, the system has:

  • Created a methodology to eliminate unjustified variation in their medication formulary using available data from purchase history, quality management systems and electronic health records.
  • Established a “single source of terminology truth” that effectively manages and maps data to industry standards, ensuring accuracy across the enterprise in advance of ICD-10.
  • Developed more efficient processes for utilizing hospitalists, decreasing readmissions.
  •  Deployed a digital app, which learns and adapts to self-reporting patients, reducing 30-day hospital readmissions by 57%.

Even the legal department is doing its part, earning recognition as a 2015 Association of Corporate Counsel Value Champion.

Process at SSM Health may be very rewarding, but it is certainly not easy.  Take clinical device technology.  Teams now have data at their fingertips enabling business decisions based on fact, data such as mean-time-between-failure, according to Heidi Horn.  However, “It took a vision and years of work and tenacity by all 100+ team members of Clinical Engineering Service,” she added.

SSM Health’s commitment to process likely played a decisive role in its merger with Dean.  Although both organizations had worked together for decades, neither assumed a successful integration would necessarily follow.  In fact, SSM paid “an excessive amount of attention” to culture, according to Dr. Dayal, who originally had been with Dean.   An “organizational heath index” of several hundred parameters characterized the two cultures, identifying the presence or absence of overlaps.

SSM Health More Like Dean

Trustee Magazine reports that, as a result, SSM Health has become more like Dean since the merger, putting doctors on the board and appointing Dayal and another physician to lead two of its three divisions.  Objective accomplished, because SSM Health acquired Dean not for its financial assets, but for its talent, knowledge and capabilities, especially around health plan and physician practice management.  As Dayal explained, the 90-year-old, fiercely independent, physician-run Dean has given SSM the capabilities needed to transform into an integrated value based organization.

Operating a health plan since the 1980s and a population health model since 2009, Dean can accept performance risk for almost 70% of its business.  An innovative medical value program brought clinicians, staff and data analysts together to identify opportunities to improve clinical processes and care management.  The program used claims data from Dean’s insurance arm and electronic health records from area hospitals owned by SSM Health – before the merger.

Now, after the merger, the fully integrated SSM Health Care of Wisconsin now offers some of the lowest public exchange health insurance costs in the state for Janesville-Beloit consumers in Rock County south of Madison, on the Illinois border.  It did so through its St. Mary’s Janesville Hospital, Dean Health System and Dean Health Plan.

In fact, when Rock County consumers select health coverage, they choose between health providers, not health insurers.  Competing in the same area is a similar fully integrated health system, also with an insurance component, Mercy Health System.  Citizen Action of Wisconsin, which compiled the rate comparisons, gave both Dean and Mercy four-star ratings.  Only Gunderson Health Plan received five stars.

“Vertical integration has a lot to do with the lower rates,” explained Dean’s Jamie Logsdon.  “When you’ve got a network, such as Dean and St Mary’s Janesville in that market, they are all working together to provide more efficient care.”

Twenty-five years in the weaving, the “basket” that is SSM Health could very well be a model for value-based health care.

Express Scripts 2020: Back to the Future?

Express Scripts

The clocks are ticking for Express Scripts.  Having achieved formidable “size and scale,” how will the nation’s largest pharmacy benefit manager synchronize with value-based health care?  With each day, between the medical and pharmacy benefits, the time to value is diverging.

Time to Value

Under fee for service, the time to value is relatively short for both benefits.  The physician bills soon after an encounter.  Similarly, the patient (for the most part) uses her pharmacy benefit to get her prescription, after which Express Scripts pays the pharmacy, collects a rebate (on a brand) and bills its client.

In value-based health care, the time to value lengthens to include outcomes and, as a result, expands to include many more inputs.  As Michael Porter explained, using the Institute of Medicine as his source, “Because care activities are interdependent, value for patients is often revealed only over time and is manifested in longer-term outcomes.” According to Porter, “The only way to accurately measure value, then, is to track patient outcomes and costs longitudinally.”

Value Based Health Care

By 2020, 75% of commercial payments will be through value-based arrangements, if the Health Care Transformation Task Force — a coalition of providers, payers, purchasers and patients – has its way. In 2014, 38% of payments to hospitals were value-oriented, compared to 10% for specialists and 24% primary care physicians in the outpatient setting, reported Catalyst for Payment Reform.

Meanwhile, the Centers for Medicare and Medicaid Services (CMS) wants 30% of Medicare payments in alternative payment models by the end of 2016 and 50% by the end of 2018.  The percentage stood at 20%.  Alternative payment models include Accountable Care Organizations (ACOs), advanced primary care medical home models, bundled payments for episodes of care, and integrated care.

Great Value from Express Scripts

To be sure, Express Scripts has added substantial value to the pharmacy benefit transaction.  It led the conversion to generic drugs, most notably and unprecedentedly when it moved against Pfizer’s Lipitor with simvastatin (generic Zocor) in 2006.  Now, Express Scripts’ drug exclusion announcements are routine events and its public campaign against high priced specialty drugs compelling.  The company has also narrowed retail networks and, for nearly a year, excluded Walgreens.

For years, Express Scripts has mined its mountain of data for insights and it pioneered the application of behavioral economics to the pharmacy benefit, in an effort called “consumerology.”   The company now has its own research laboratory, to which Medco’s Therapeutic Resource Centers and RationalMed program have been important additions.  Using these assets, the company has driven drug costs down, promoted greater use of lower cost drugs and achieved stronger adherence to drug regimens.

Better adherence can indeed lead to improved outcomes, thus increasing Express Scripts time to value, as demonstrated by its ScreenRx® program.  However, the company’s value proposition remains tethered to the pharmacy benefit transaction, instead of the ultimate clinical outcomes of value based health care.  At most, its contribution to those outcomes can be inferred, but not routinely measurable — yet.

Drug Payment Models

Take the pay-for-outcomes vs. pay-for-performance conversation now underway between Express Scripts and some drug manufacturers.   For its newly approved heart failure drug Entresto, Novartis proposed an initial discount with a performance bonus if it successfully lowered hospitalization rates in patients suffering from the condition.  The company said Entresto does a better job of preventing heart failure deaths and hospitalizations than lower cost alternatives already on the market.

Express Scripts was not buying it.  Instead, the company countered with an indication-based model, emphasizing its “elegance.”  It would differentiate pricing for specific cancer drugs based on how well they work against different types of tumors.

“Unlike the outcomes-based rebate systems that have been tried by others in the past, our model won’t require plans to reconcile payments long after-the-fact based on downstream health outcomes of a specific patient,” responded Express Scripts.

However, a leading pioneer of outcomes-based rebate systems has been Cigna, which Express Scripts client Anthem is set to acquire. Cigna’s arrangements have involved Merck’s diabetes drug Januvia (sitagliptin), the EMD Serono multiple sclerosis drug Rebif (interferon beta-1a) and, recently, Gilead’s hepatitis C drug Harvoni (ledipasvir/sofosbuvir).  Cigna based the Harvoni contract on elimination of the disease.

Hepatitis C

Arguably, disease elimination would reduce high cost liver transplants – a significant and valuable outcome.  Presumably, that is why Cigna, Anthem, Aetna, Humana and United Healthcare – with their longer, medical benefit time to value equation — all contracted with Gilead for Harvoni. They did so exclusively, presumably for better discounts.  Prime Therapeutics, owned by a number of Blue Cross plans contracted for both Harvoni and AbbVie’s Viekira Pak.

Meanwhile, Express Scripts contracted exclusively and presumably at a deep discount with AbbVie for Viekira Pak, excluding Harvoni from its 2015 formulary.  Viekira Pak is a four pill a day regimen to Harvoni’s one pill, with similar effectiveness and different safety profiles.  The latter comes from a review by Advera Health Analytics, which analyzes real world outcomes data.

Payer Cost

Advera Executive Vice President, Jim Davis, argued that exclusive deals emphasize the payer trend of focusing on immediate savings rather than overall outcomes, total cost of care and most importantly patient safety.

He echoed findings of a 2014 survey by the consulting firm EY that found “payers are highly focused on immediate cost containment, which means that the longer-view approach that emphasizes outcomes and keeping total costs down is irrelevant to payers.”

Express Scripts clearly is not alone in its short-term focus on controlling immediate costs.  However, it alone of the major PBM’s has the shortest time to value horizon because its “center of gravity” remains the pharmacy benefit transaction.

Competitor Time to Value

Both Caremark and EnvisionRx are subsidiaries of providers CVS and RiteAid respectively.  CVS recently inked a big data deal with IBM’s Watson cloud to predict patient health and RiteAid is pursuing innovative care initiatives with EnvisionRx.  OptumRx, and now Catamaran, are part of UnitedHealth Group, which concentrates on linking “demographic, lab, pharmaceutical, behavioral and medical treatment data.”

Synchronizing Express Scripts

Often offered in answer to the question of how Express Scripts will synchronize with value-based health care is a merger or other arrangement with Walgreens mirroring CVS/Caremark.  That may be part of a solution, but it will not be the entire or sufficient answer.

Also not the answer, but still important, Express Scripts should remain independent and continue to leverage its size and scale to lower drug prices.  Ironically, its assault on Giliad’s Solvadi and Harvoni, and then its exclusive contract with AbbVie, lowered Giliad’s prices, benefiting Express Scripts’ competitors.

Anthem Contract

It is through Express Scripts’ relationship with Anthem that the PBM can extend its time to value horizon and synchronize with value based health care.

Key will be the creation of a new, outcomes-focused collaborative thrust involving Anthem’s HealthCore, which is conducting real world evidence research with drug manufacturers, Cigna and its innovative payment models and the Lab at Express Scripts.  The only alternatives would be losing the Anthem business or relegation to functional role, much like Medco’s with UnitedHealth Group, the pending 2013 loss of which led to Express Scripts’ acquisition of Medco in 2012.

Notably, Anthem CEO Joe Swedish told investment analysts during a conference call on his company’s acquisition of Cigna “We do believe there’s significant value and opportunity from a better pharmacy contract.”  Cigna CEO David Cordani, who will serve as COO of the combined company added, regarding Cigna’s PBM business, “We have meaningful optionality relative to the program as it stands, and you should think about that optionality as being preserved and further expanded.”

Back to the Future

In the face of this challenge, Express Scripts would do well to go back to the future, twenty years ago when it launched a visionary effort to link pharmacy and medical claims.  Embodied in a “before-its-time” subsidiary called Practice Patterns Science (PPS), the initiative sought to build clinical data warehouses for health plans that organized all of a patient’s financial medical claims into meaningful, condition-specific, longitudinal episodes of care.”

Express Scripts’ CEO at the time, Barrett Toan, explained, “Having identified an episode of care for a patient, the drug therapy costs for the episode are compared to the associated medical costs.  What we’re finding is, in some cases, the drug costs are helping us control the overall costs.”   He pointed to a $380 reduction in epilepsy medical costs resulting from using a newly approved drug costing just $30 more.   An episode is a time line, which may be long or short depending on the nature of the disease.

Epilogue

With the DeLorean time machine at the ready, enter target destination California and target date April 3, 2015.   Flux capacitor powered, you will arrive in a Federal court where Dr. Douglas Cave won a $12 million patent infringement suit against UnitedHealth Group over the PPS technology.

Cave had been president of PPS and, when Express Scripts shut down the subsidiary.  The company gave him the intellectual property rights, including the disputed patent for physician efficiency measurement.  He now operates Cave Consulting Group in San Mateo, California, and filed an anti-trust suit in July against UnitedHealth Group alleging UHG obtained its patent laws fraudulently and violated anti-trust laws.

High Drug Prices: What Would Donald Trump Say?

Trump_Debate

In a new poll released yesterday, the Kaiser Family Foundation reported that large majorities of Americans, regardless of political party, think drug prices are unreasonably high, drug companies put profits before patients, and government should limit the cost of high priced drugs and negotiate lower prices for Medicare.

However, the same poll found that 76% of Republicans preferred market competition over government regulation to lower drug prices.  In addition, while 74% of Republicans say the government should directly negotiate Medicare drug prices, a smaller number – 56% — believe it can be effective.

Perhaps this explains why Republican candidates for President have not addressed high drug prices, preferring instead to focus on Obamacare repeal, as reported by Politico.  Neither Scott Walker nor Marco Rubio have included drug prices in their Obamacare replacement proposals.

Will Donald Trump take on high drug prices?  If he does, what would he say?  Whatever he says about an issue quickly frames how other Republican candidates and the news media speak about it.  Such is Trump’s dominance of the daily news cycle.   That alone makes the question relevant and the answer useful.

He is also more in tune with the Republican base than the party’s establishment may want to admit, as   political commentator Ezra Klein observed earlier this week.  Trump is the only Republican candidate who opposes cuts in Medicare, Social Security and Medicaid, a long-held position he directly links to making American strong again.

Interviewed on Larry King in 1999, he said, “What’s the purpose of a country if you’re not going to have defense and healthcare.  If you can’t take care of your sick in the country, forget it, it’s all over. I mean, it’s no good.”   He told the Iowa Freedom Summit earlier this year, “I want to make the country rich so that Social Security can be afforded, and Medicare and Medicaid.”

Recently, on Meet the Press, he said, “I want people to be taken care of from a health-care standpoint. But to do that, we have to be strong. I want to save Social Security without cuts. I want a strong country. And to me, conservative means a strong country with very little debt.”

In fact, Trump comes across as a Robin Hood, putting himself on the side of American citizens, taking money from wealthy countries he says rightfully belongs to us, fighting government corruption and stupidity, and expelling illegal aliens (to use his terminology).   He is also a deal maker, exploiting leverage or creating advantage to get what he wants.

What, then, would Donald Trump say about high drug prices?  To answer that question, here is an imagined Meet the Press conversation between host Chuck Todd (imagined) and Donald Trump (imagined).   It suggests Donald Trump could easily take high cost drugs to a place neither the other Republican candidates nor the drug industry want to go.

 

Chuck Todd (Imagined):

Mr. Trump, in a new poll, 70% of Republicans want the government to limit how much pharmaceutical companies can charge for high-cost cancer drugs.  What would you do about the high cost of prescription drugs?

Donald Trump (Imagined):
Repeal Obamacare and replace it with something terrific.  It’s a disaster.  It’s virtually useless and big lie.  Deductibles are through the roof and costs are going up.

 

Chuck Todd (Imagined):

How would repealing Obamacare lower drug costs?  They’re growing faster than other health costs – mainly because of the new specialty drugs – but they still only account for 10% of all health spending.

Donald Trump (Imagined):

Chuck, the drug company lobbyists did a fantastic job when Congress passed Obamacare.  They out-negotiated the President and got a great deal.  They supported Obamacare and agreed to help pay for it.  In return, they got more customers and higher prices.   When I repeal and replace Obamacare, the pharma companies will have to negotiate with me.

 

Chuck Todd (Imagined):

Does that mean you support letting the government directly negotiate with drug companies over the prices it pays for Medicare drugs?

Donald Trump (Imagined):

Medicare is the largest single buyer of prescription drugs.  In business, a best customer gets the best deal.  When I buy televisions for my hotels, which I sadly can’t get in the US but that’s another issue, I use that leverage for a great price.  Yes I’d negotiate better prices with the drug companies.  But, it’d be different, like a business, not as price controls or more regulations in disguise.   You’ll be very pleased, very pleased with how I do it.

 

Chuck Todd (Imagined):

But, what about the cost of drugs not covered by Medicare….these new cancer drugs that cost thousands of dollars.  In fact, the doctors who treat cancer are campaigning for lower prices.

Donald Trump (Imagined):

Chuck, I’ve got a deal where everyone wins.  I love the drug companies.  They’ve made great discoveries and cured many people.  I want the drug companies to create jobs in the US, making new drugs.  That takes money.  They hold almost a half-trillion dollars outside the United States because the taxes on bringing it home are too high.   Bring those dollars home, use them for jobs, discover new cures, keep prices under control and I’ll lower the taxes.

 

Chuck Todd (Imagined): 

Republicans also think Americans should be able to buy prescription drugs imported from Canada, and by a wider margin than Democrats:  75% Republicans vs. 69% Democrats.  What do you think of that?

Donald Trump (Imagined):

The problem is much bigger.  What our pharmaceutical industry accomplishes is tremendous.  It benefits the entire world but prices are highest in the United States.   Per person, we spend twice as much as other wealthy nations.    It’s time other nations paid their fair share.  As you know, rich nations like Saudi Arabia must pay us back for what the Defense Department spends on protecting them.  Canada, the European Union and other wealthy nations should help pay for our National Institutes of Health.  The American taxpayer funds 85% of basic research.  We have to stop subsidizing their health care.

 

Chuck Todd (Imagined)

The drug industry says that it needs to charge high prices because it takes so long to bring a drug to market.  Would you make any changes at the FDA?

Donald Trump (Imagined)

The FDA needs to do a better job on safety, especially after a drug is on the market.  Take vaccines, I don’t think kids should get them all at once.  Spread them out.  It doesn’t hurt anybody other than probably the pharmaceutical companies because they probably make more money putting it into one shot.    I want more approvals and more competition.  That will bring prices down.

 

Chuck Todd (Imagined):

Speaking of health care.  Earlier, you said you would repeal and replace Obamacare.  How would you replace Obamacare?

Donald Trump (Imagined):

I believe in universal healthcare. I believe in whatever it takes to make people well and better.  What’s the purpose of a country if you’re not going to have defense and healthcare?  We can have something far better for the people, and far less expensive, both for the people and for the country.  And believe me there are plans that are so much better for everybody.  And everybody can be covered.  I’m not saying leave 50-percent of the people out.

 

Chuck Todd (Imagined):

How would you pay for it?

Donald Trump (Imagined)

Get tough with the big players like China and OPEC that are ripping us off so we can recapture hundreds of billions of dollars to pay our bills, take care of our people, and get us on a path toward serious debt reduction. We must take care of our own people—we must make our country strong and rich again so that Social Security, Medicare, and Medicaid will no longer be thought of as a problem. We must save these programs through strength, power, and wealth.

 

Chuck Todd (Imagined):

During the debate, you seemed to speak favorably about single payer systems in Scotland and elsewhere.  Do you favor a single payer system in the United States?

Donald Trump (Imagined):

No.   What we need in the United States is free market plan that provides consumer choice, keeps plans portable and affordable and returns authority to the states. We also must break the insurance company monopolies and allow individuals to purchase health insurance across state lines.