PBMI Presentation On PBM Marketplace

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2012 presentation at the PBMI conference in Phoenix regarding the growth and challenges to the PBM industry.

2012 presentation at the PBMI conference in Phoenix regarding the growth and challenges to the PBM industry.

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  • Hi. I’m George Van Antwerp. I’m the SVP of Pharmacy Services at Silverlink Communications which is a technology services company that works with many of the PBMs. I spent 5 years at Express Scripts working on many of the programs that are now called “Consumerology” and have spent the past 5 years working on direct to consumer programs for over 15 different PBMs. Today, I’m going to talk about the rapidly changing market dynamics which is keeping us all jumping. Ultimately, the question you should be asking yourself as a PBM is how do I grow through differentiation or are we just a commodity. As a client, you should be thinking about what are the tradeoffs you’re willing to make around price. Where are the value drivers for your business? For example, would you pay for outcomes or pay PBMs a capitated amount?
  • Here’s a bunch of the key topics that I hear as I’m out there in the marketplace.
  • http://georgevanantwerp.com/2011/02/17/pcma-interview-%E2%80%93-the-core-pbm-skill-adaptability/I think Mark Merritt from PCMA summed it up well when I interviewed him last year…it’s about adaptability.
  • Of course, the primary topic in today’s news is the Express Scripts acquisition of Medco. We’re all waiting on the FTC’s decision, but I feel very confident that it will get approved. There have been a few people who have come out against the acquisition, but most of that is driven by the independent pharmacies.
  • The question of course is what does this mean. The acquisition is based on an older model which says that scale matters. It drives down acquisition costs. It increases leverage over the supply chain. Is that true? I believe that the curve flattens out so while scale matters to some degree that has decreased in recent years. It should also create more opportunities for PBMs to differentiate themselves. (read list)
  • You are certainly seeing lots of different discussions out there around direct model like Caterpillar, limited networks like ReStat, preferred networks like Humana and Walmart, and many others. But, the big benefit here for many of you is that everyone expects 2x as many clients to be in play in 2012. This churn will bring lots of different PBMs into play in a broader set of RFPs.
  • The other big topic in the news also involves my old employer – Express Scripts and Walgreens. While I thought this would take a while to get resolved, I didn’t expect it would flip into 2012. I thought clients and the pressure of going into the selling season with a proposed acquisition and no Walgreens in their network would be enough to get both sides to the table. But, the reality is that no one seems to be budging.
  • I did an e-mail interview with Michael Polzin from Walgreens last month. He reiterated a lot of the key points that they’ve made in their whitepapers and the press. They seem to want to get a deal done, but they also want to be acknowledged for engaging the consumer differently. It’s a great question…will we as an industry pay for better experience and better outcomes? And, if yes, how do pharmacies and PBMs demonstrate that?
  • On the flipside, Express Scripts is about to pull off what many PBMs have talked about for a while. Creating a limited network without one of the two big chains. The key question is whether this creates enough savings for clients (and whether it gets passed through). This will be a great case study. Do clients leave? Is the disruption manageable?
  • I thought some of the comments from Drew Crawford were helpful the other day. Drew spoke about getting more RFPs that require retailers to be included or asking about language that allows them to contract directly.
  • While 2/3rds of our clients are skeptical of the adoption of limited networks, you are seeing some adoption built upon the success of Humana and Walmart. We’ve seen Aetna offer a program with CVS and Coventry offer a program with Walmart, Walgreens, and Target. Of course, there are several offerings out there in the market such as the Align network by ReStat and the Maintenance Choice offering by CVS Caremark.
  • My expectation is that price will always be important, but there will be other ways to create differentiation.
  • And, this echo’s what we heard in our Silverlink client survey in pharmacy in December. A focus on mail order has dropped down while customer experience has leapfrogged to the top. Unfortunately, specialty (the fastest growing area) has the least innovation in most PBMs.
  • So as you look at the broader market, there is lots of other activity and even more speculation. Here’s a few of the recent deals. Of course, everyone is also monitoring the captive PBMs to look for long-term deals like Wellpoint or ways to buy that book of business.
  • Mail order use is down with 2011 being the first year with negative growth. Costs continue to go up. Specialty is exploding.Utilization is down.
  • Fortunately, generic utilization has gone up keeping trend to much more reasonable levels in recent years, but with Specialty spend expected to account for 40% of the pharmacy spend by 2015, everyone is worried. I just used this at PCMA re: copay cards.
  • So, what you’re seeing is people looing at different areas of focus.
  • A big piece of this is engagement. And, to a certain degree figuring out new channels like mobile.
  • Another big focus is adherence. This is one of those rare areas where everyone is aligned. The challenge of course has been finding the ROI in these programs with a few rare exceptions like diabetes.
  • But, this is changing with things like Star Ratings in Medicare. You now have companies getting paid on outcomes! Wow…what a radical concept.
  • The question in any of these programs is how do you actually drive change. The easy answer is to close the formulary, raise the copays, put in place a bunch of UM tools like PA and ST, and implement mandatory mail and mandatory specialty. How many of you want to do that?
  • So, if you’re not going to do that, you actually have to focus on engagement. We’ve all seen the marketing push behind Express Scripts consumerology story. Or last year, we heard some fascinating research from Dr. Whitehouse at Catalyst about the work their doing. And, everyone has something their working on from behavioral economics or the “nudge” concepts.
  • This is where we’re seeing a new focus around growth and differentiation which is creating blended databases of medical and pharmacy data. Some companies are also including lab. You’ve certainly seen this from ActiveHealth and Optum, but last year Prime Therapeutics announced their Guided Health product. I’ve also talked with several of you that have similar efforts underway.
  • In summary, …

Transcript

  • 1. Organic And M&ABased PBM Growth GEORGE VAN ANTWERP SVP, Pharmacy Services Silverlink Communications February 23, 2012ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 2. ENGAGEMENT COPAY CARDS ADHERENCE CONSOLIDATION CMS GENERICS PASS-THRU MAIL ORDER LIMITED Rx + Dx SPECIALTY MOBILE NETWORKS 2ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 3. The Core PBM Skill = AdaptabilityThe PBM will continue to drive value. While some had forecasted PBMsbecoming commoditized five to six years ago, they have continued to grow anddemonstrate value time after time.But, Merritt admitted that the exact model they hold in the future is unknown.PBMs have focused on affordability and access and with that mantra, they havecontinuously changed and adjusted. They’ve evolved from claims processes to trend managers. They’ve moved from mail order companies to add specialty pharmacies. They’ve moved from focusing on rebates to focusing on generics. And, at the same time, they’ve launched new technologies such as electronic prescribing and been critical to the Medicare Part D solution. Source: Interview with Mark Merritt from PCMA – The Core PBM Skill: Adaptability | Enabling Healthy Decisions 3ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 4. 4ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 5. Big 3 Changes To ??? How will PBMs  Transparency  Integrated model  Pass-Thru be evaluated and  Captive PBM  Clinicaldifferentiate themselves:  Carve-in / out  Service Source: Chart from Barclays Capital report 5ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 6. Bringing Other Players Into The Mix 6ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 7. 7ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 8. It’s also important to point out that during negotiations, Walgreens offeredto hold rates for a new contract flat and did not seek an increase inrates. The response from Express Scripts was to insist on being able tounilaterally define contract terms, such as what does and does not constitutea brand and generic drug.Express Scripts also proposed to slash Walgreens reimbursement rates tolevels below the industry average cost to provide each prescription.Walgreens is focused on helping payers with their total health carespend, not just the 10-12 percent of their health care costs that arespent on prescription drugs. While a patient with asthma can lower drugspend by not getting refills on their medication, the resulting emergencyroom visit that could result will be much more expensive overall for thepayer. So we are focused on expanding the pharmacist’s role among healthcare providers to lower overall medical costs rather than focusing on drugspend alone. Source: Interview with Michael Polzin, Walgreens - Walgreens Interview As Follow-up To Their White Paper | Enabling Healthy Decisions 8ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 9. Tweets from Express Scripts 9ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 10. “While Mr. Crawford suggested that he would have expected to have seen an agreement reached between Express Scripts and Walgreens by year end 2011, he doesn’t anticipate any near-term resolution now given that many customers have already switched pharmacies. He has seen some expansion in RFPs requiring broad retail network inclusion for PBMs for the 2013 selling season. While he did not suggest that limited retail networks will meaningfully expand given the ESRX/WAG dispute, he did highlight the benefits of more “performance-based” networks.” From Barclays Capital PBM “Hot Topics” Conference Call Series with Drew Crawford, President and CEO of BeneCard PBF on 1/26/12 10ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 11. Medicare Is Leading The Path OnPreferred Networks Humana and Walmart Aetna and CVS Coventry with Walmart, Walgreens, and Target 11ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 12. The Model Is Changing With Some Pains Old Model Evolving Model  Spread  Specialty  Mail Order  Clinical  Scale Matters  Outcomes  Transaction Based  P4P 12ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 13. Consumer Experience Is A New FocusSource: Silverlink Client Survey, December 2011 13ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 14. Consolidation Is Playing Out Elsewhere Also UA HealthTrans FutureScripts HealthSpring Healthnet PDP PTRx Walgreens Health Aetna MedMetrics Initiatives MedFusionRx With the long-term deals keeping everyone focused on the remaining captive PBMs – Cigna, Humana, and RegenceRx 14ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 15. The Traditional Fundamentals Are ChallengingSource: Chart from Barclays Capital based on IMS Health data 15ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 16. Generics Continue To Go Up Utilization By Tier 2000-2011 80 70 60 % of all Rxs 50 Tier 1 40 Tier 2 30 Tier 3 20 10 0 00 01 02 03 04 05 06 07 08 09 10 11 Source: Drug Benefit News Volume 11, Number 16, p.5. 16ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 17. Cost Management Dominates The Trends But OtherAreas Of Focus Include:EXPERIENCE CLINICAL SPECIALTY TRADITIONAL Digital  Adherence  Clinical pathways  Lipitor (SMS, QR, Web, Mo  Star Ratings  REMS (Risk  Copay cards bile) Evaluation and  Post-Hospital  90-day and Mail Consumer Insights Discharge Mitigation Strategies) Order Acquisition & Multi-channel  Diabetes  Biosimilars and Retention Coordination Management Utilization  Satisfaction Surveys Management  POS Walkaways  Acquisition & Retention  Limited and Preferred Networks 17ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 18. Engaging with Members Where They Are 90+% of population now own mobile phone 40% of mobile phones are smart phones 40% of US households don’t have a landline THE TIME FOR MOBILE CHANNEL IS NOW 72% of phone subscribers have pre-paid texting plan 18ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 19. 19ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 20. Star Ratings For Medicare Is A Huge FocusAdherence, New Scripts for Diabetics, Patient Safety Outcome measures are the key new CMS focus for star ratings Getting Diabetic 5 Rx Adherence/Patient Safety Hypertensives on ACE/ARB measures each weighted at 3 points Collectively a huge part of the Part D High Risk 3 Adherence score Measures Medication in Elderly Plan scores for 4 of the 5 can be influenced significantly with “easy to  ACEs/ARBs for HTN  Cholesterol implement” communications  Diabetes Oral Meds 15 Points of interventions Weight* More comprehensive programs for each of the 5 can be introduced and sustained into 2012 For 2012 Stars Ratings, These 5 Measures Represent:  18% of the 81 points of weight for MAPD Plans  47% of the 32 points of weight for PDP Plans 20ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 21. 21ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 22. A Key Foundational Item Is Consumer Insights Combining the rightSocial-norm messaging sequence of mail and(savvy consumers like automated calls to Sending a wellnessyou...) is 20% more seniors improves message prior to aeffective for people response rates by 14- pre-ANOC messageunder 50 than for 24% on average and increases satisfactionseniors. as much as 100% in by 26%. some programs. 22ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 23. 23ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 24. But, We Can’t Forget SpecialtySource: EMD Serono Specialty Digest, 7th Edition 24ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 25. My View Of The Future1 Consolidation will continue2 There will be a shift to “outcomes-based contracting”3 Limited / Preferred networks will slowly take off4 Adherence will be a key service function5 Engagement is a differentiator6 Specialty is ripe for innovation7 Mobile, social media, and gamification is still TBD 25ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.
  • 26. ENGAGE. EDUCATE. EMPOWER. © 2011 Silverlink Communications, Inc. All rights reserved.