...which is strongly suggestive, that the VA's problem with Cerner implementation? It's coming a lot more from the VA, than…
Tom Borzilleri is CEO of InteliSys Health of San Diego, CA.
Tell me about yourself and the company.
I spent many years in the finance business. My first dive into the healthcare space was back in the late 1990s, having founded and operated the second-largest patient finance company in the country. As I progressed on through the years and had a successful exit of that company, I then moved into the PBM space in the mid-2000s. I spent five years founding and operating a pharmacy benefit management company, where I learned and deployed many of the processes and tricks of the PBM industry.
I realized that there had to be a better way to be able to address the market and deliver value, savings, and benefits to patients and companies across the board. I set out to create a solution that would disrupt what had become the status quo of that industry, or for a better description, the profiteering by the PBM industry, to specifically deliver the ability of true price transparency and ultimately deliver the absolute lowest drug cost for all patients, consumers, and at-risk stakeholders.
How do PBMs make money?
PBMs are exactly what they’re described as — pharmacy benefit managers. They manage the pharmacy benefit, or the prescription benefit, on behalf of plans, payers, insurance carriers, ACOs, and self-insured employers. Those functions include setting up a formulary and creating a network of pharmacies in which members can acquire their prescriptions through the plan.
PBMs negotiate the price of a drug with the manufacturer and then negotiate a contract rate with the pharmacy. They profit by creating an ingredient spread, the difference between the acquisition cost to what they are charging their clients or customers, which would be those clients, payers, ACOs, and insurance carriers.
Why are insurance companies willing to overpay for the PBM’s services instead of pressuring manufacturers to give them lower prices?
Their contracts are convoluted. Most insurance carriers really don’t understand or have an ability through the language in those contracts to determine what the actual acquisition cost is. There’s a lot of functions that the PBM fulfills, especially with regard to patient management and formulary management. The role of the PBM is as a buffer between the pharmaceutical manufacturers and doctors.
Pharma manufacturers used to send their reps into doctors’ offices, bringing in lunch or other compensation to doctors. That got them to prescribe their medication or their brand. PBMs took over the role of managing which drugs are included in that formulary. They acted as a buffer to eliminate what was called steerage, where it was illegal to compensate a doctor to prescribe a specific brand over another. It’s kind of like payola in the radio industry for playing songs on the radio many years ago.
PBMs acted as the intermediary, but at the same time, it also opened the door for them to set their profitability in acting as pseudo wholesaler, buyer, and then reseller of those prescriptions or drugs to the insurance carriers insuring those members.
How can technology help doctors answer the deceivingly simple patient question of, “How much is this drug going to cost me?”
We have brought together all the necessary components to offer true price transparency. First off, we have created our own network of pharmacies. We operate on what is called the no-spread model. Whatever the acquisition cost is of that drug, that’s what is being charged to the patient or insurance carrier at the end of the day.
A great deal of price disparity exists between pharmacy chains as well. You can go to a CVS or Walgreens and expect to pay anywhere from 30 percent to 75 percent more than you would pay at a local independent or even a grocery store pharmacy. It’s really amazing the price disparity that exists.
Consumers assume that the large chains buy in volume and therefore get the best pricing on drug ingredients, but that is far from the truth. Because they maintain such a significant footprint, they can command that price. Patients ultimately don’t know and they don’t have the time nor the resources — and that includes doctors as well — to do the research to find out find which chain or which store — which may be even a store closer to my home — has a price that’s 50 percent less than what they’re paying.
That goes for the insurance carriers as well. Insurance carriers are looking for convenience for their members. They’re forced to enter into these contracts to provide access to pharmacies so that when the patient arrives, they only pay their co-pay and then the insurance carrier will reimburse that pharmacy for whatever remains on the cost of that ingredient.
How do free consumer coupon programs like GoodRx work?
In my PBM, I administered what were called DDCs, or drug discount card programs. In the GoodRx model, they are signed up with multiple PBMs. Their mobile application searches out the lowest-cost drug discount card programs to provide the best discount to the patient.
But there are ingredient spreads that the PBMs have built into those prices, as well as very high admin fees. The patient who is uninsured or underinsured will save money, but until you strip out those admin fees and that ingredient spread, they’re not saving as much as they could.
DDC products, because they’re sponsored by the largest PBMs in the country using their networks, pricing spreads, and admin fees, generate $5 billion in annual profit for PBMs and programs like GoodRx.
Did you say $5 billion? Wow.
Between 60 and 100 companies are marketing these drug discount cards under a plethora of names. In some instances, it’s the same PBM and the same program. There are basically only five PBMs in the market today — following our exit four years ago — that still sponsor and administer these drug discount card programs.
So GoodRx isn’t some kind of disruptive organization demonstrating transparency, but rather just another way for PBMs to make money by working with consumers directly instead of through an insurance company?
That’s correct. GoodRx gives comparison prices across different pharmacy chains. I mentioned that there is price disparity across the pharmacy chains, but there is also price disparity across the PBMs that administer the drug discount card programs. PBM A will have a different price on an ingredient versus PBM B.
The GoodRx model looks at the discount card program pricing across multiple PBMs to give the lowest price — of those inflated prices — that all the PBMs are charging. It is a form of transparency, but it’s really not true price transparency because it is not providing the actual cost to the PBM on that drug.
Our model strips out all the ingredient spread. We strip out all the administrative fees that are built into these prices. It’s delivering the price that the PBM is paying themselves to the pharmacy down directly to the consumer. We’re undercutting and disrupting that entire drug discount card market with our tool.
Why did you decide to work with prescribers rather than consumers?
The primary objective of physicians is to get their patient on therapy, get them well, and create a better health outcome. They have a dog in the hunt because essentially their scores will increase based on their ability to get that patient well and have a positive outcome.
Physicians prescribe a drug based on a familiarity of the condition. Physicians have no idea whatsoever what the cost of the medication is. They leave that up to the patient to find out at the pharmacy. In many instances, the patient is hit with sticker shock.
In addition to that, patients may either not have insurance or they have insurance with high co-pays or high out-of-pocket minimums. There is such vast variety of insurance coverage currently on the market that patients don’t know what is going to be covered, if it’s on formulary, or if they’ve met their minimum. They know they have prescription coverage, but they don’t know what it’s going to cost until they get to the pharmacy.
Our software analyzes the patient’s plan information. We’re conducting a real-time benefit check on that patient, so we know what their co-pay will be based on the drug that the doctor has chosen. They will know at that time if the co-pay is inflated, meaning that there could be a cash price that is less than their co-pay, which eliminates a claim being processed through the insurance carrier and gives a lower cost to the patient.
It also looks at the drug that the doctor has chosen. As I said, doctors prescribe based on familiarity of a drug with the condition. That may not be necessarily the cheapest drug for the insurance carrier that’s going to pay them that claim. Our software analyzes the formulary of the plan and identifies, if one exists, a clinically and therapeutically equivalent alternative drug to what the doctor has chosen that will cost the insurance carrier the least amount of money.
Insurance carriers today have no idea what the doctor is prescribing. They only know what they have paid on after the claim has already been submitted and adjudicated. They’re in a very awkward position, a disadvantage, because they can’t control or they have no input and ability to be able to help that doctor choose the most cost-effective and most therapeutically-effective drug because they don’t find out until after the fact.
Our software brings that price transparency. The patient can see the drug price before it’s sent to the pharmacy, eliminating sticker shock. When they get hit with sticker shock, one of three things happen. They’re on the phone with the doctor, creating a second encounter that disrupts the workflow and takes staff time and the doctor’s time to re-prescribe because they just found out that their insurance company is not going to cover the drug or they’re going to have to pay a ridiculous amount of money out of pocket. Or if the doctor chose a brand drug when there was an available generic that could have been prescribed instead at a fraction of a cost and the pharmacist is on the phone with the doctor doing the same thing. Worst-case scenario, the patient abandons at pharmacy and never gets on therapy, which opens up the issue of financial risk on the part of the insurance carrier and obviously health risk on the part of the patient for never getting on therapy.
We can eliminate this in the encounter as we’re sitting in the exam room with that patient, providing actionable, beneficial, and valuable data to the patient and their doctor before that prescription is sent out. That is the most efficient method for addressing these problems.
What impact will the CVS – Aetna merger have?
It’s not going to be of any benefit to the patient. I think it’s going to reduce options and locations in which patients will be able to get their prescriptions filled.
Number two, I believe that they will try to herd patients into CVS to create pull-through revenue. Pharmacies don’t make their money in the pharmacy in the back of the store. Their profits are generated through products sold in the front of the store.
This is a mechanism in which that they may incentivize patients to go to CVS rather than going to Walmart or their local independent or grocery chain to get their prescriptions filled, to be able to pull patients out of other chains and herd them directly into theirs.
I think it’s going to eliminate options for patients. It may in turn increase cost for patients, because they’ll have fewer choices. Ultimately it will probably be a very profitable opportunity and enterprise for CVS and Aetna.
Do you have any final thoughts?
With our software and our technology today, we are addressing price transparency as well as price and drug affordability, which will benefit the patient, the payers, and somewhat the doctors. We will be introducing in the coming weeks a new product, which is a e-prescribe solution that was specifically developed and designed to address affordability for the doctors themselves, to help them save money and have positive and financial impact on them.
What’s so unusual about this solution is that there are over 400 EHR systems in the country that use third-party e-prescribing tools. Those doctors are forced to have to pay anywhere from $15 to $150 a month to be able to prescribe.
Our product will be 100 percent free to every doctor who uses it and every EHR system that integrates it. It will also create an alternative revenue center for the EHR company. We hope those profits will turn into savings and reduction on the rest of the subscription fees that these doctors have to pay to have access to an EHR system.
Our objective is to lower cost and bring benefit and value to the entire healthcare value chain across the board. That’s the focus of InteliSys Health.