Health Care Goes to Silicon Valley: The Future of Managed Care Part 1
How much longer will it be before Amazon inserts itself into the drug distribution supply chain? When will apps from Apple and its competitors do more than simply track how many steps we take in a day—and actually change health outcomes? Will Verily Life Sciences (a sister company to Google) and businesses like it ever be able to find the sweet spot that produces real interventions borne from vast stores of data?
As Silicon Valley sets its sight on health care, First Report Managed Care asked a panel of experts to tell us which initiatives they think have the most traction, which will help payers the most (and which ones could hurt), and what health insurers can do now to stay on top of the rapidly-accelerating tech curve.
Our roundtable of managed care experts included Catherine Cooke, PharmD, research associate professor at the University of Maryland School of Pharmacy; Charles Karnack, PharmD, BCNSP, assistant professor of clinical pharmacy, Duquesne University; David Marcus, director of employee benefits, National Railway Labor Conference; Arthur Shinn, PharmD, president, Managed Pharmacy Consultants; Norm Smith, president, Viewpoint Consulting, Inc; and F Randy Vogenberg, PhD, RPh, principal, Institute for Integrated Healthcare.
Amazon and Drug Dispensing
Can Amazon realistically get into the drug dispensing business?
Mr Marcus: Yes. Amazon has dominated the online retail marketplace, and pharmacy is a logical path of expansion. The major pharmacy benefits managers (PBMs) already have mail order facilities that allow individuals to get larger fills at lower cost. Payers would likely be open to Amazon’s entry into the market. And even though the mail order pharmacy market is not yet heavily utilized, Amazon’s entry could be a game changer.
Dr Vogenberg: Absolutely, especially through joint ventures. Amazon could start as a supply chain solution or logistics alternative to FedEx and UPS. It is especially possible in major cities sooner than later.
Dr Shinn: Amazon has the resources, and I agree that a logical starting point is in distribution. However, it could take them a year-and-a-half to two years before they can get licensed in all 50 states with the state boards of pharmacy.
Dr Karnack: Amazon’s potential should be noted. They have had a major impact in other areas, so there’s no reason to think they would not try in this space. As a pharmacist, I'm concerned that dispensing and distributing drugs is not like selling and delivering widgets. Accountability, storage conditions, timeliness, and other issues need to be considered.
Where is Amazon likely to begin if it gets into the drug business?
Dr Shinn: They'll probably pursue mail order pharmacy, initially targeting the uninsured and people that have high-deductible plans. Such plans are usually [held by] younger people in their 20s, 30s, and early 40s. [When] they need drugs, they are looking for the most cost-effective way to get them. It’s a good fit because Amazon’s customer base is [primarily] the younger set.
Mr Smith: If Amazon gets in the drug store business, it is because they view the marketplace as if was retail. They will bundle the drug service with other classes of products they currently sell.
What types of partnerships will Amazon look to form?
Dr Shinn: I think they are probably already talking to some of the middle market PBMs in an effort to get arranged contracts.
Mr Smith: There is not enough margin in the mail order business to be very attractive for Amazon as a stand-alone. It will partner with either Caremark or Express Scripts. This will help overcome the state licensure barrier to entry.
Mr Marcus: I agree that the clearest path is to partner with an existing PBM to operate its mail order facilities. We know how well Amazon manages the online retail market. This would enable Amazon to quickly reach existing payers of the PBM it chooses to partner with.
Some have surmised that a good starting point for Amazon is cash pay. Do you agree?
Dr Vogenberg: Maybe, but it’s unlikely.
Mr Marcus: I do not think it will limit itself to cash payers. In fact, Amazon could establish itself as its own PBM with enhanced mail order capabilities, subject to potential legislative challenges. This would certainly be a tougher path, but it would be doable as mail order pharmacy becomes more commonplace.
Is there anything payers should be doing now to prepare?
Dr. Shinn: First of all, I think it's a positive for the payers because it's going to offer a more competitive distribution system. I don't think there's anything they can do until they see how viable and how fast Amazon is going to roll this out.
Mr Marcus: I agree. It will likely be a few years before Amazon can enter the market, and once it does, PBMs will have time to adjust to protect their business model. I think it is too early for payers to do anything. However, recognizing the cost-savings and improved adherence that accompanies mail order pharmacy benefits, I think this is something payers should keep an eye on.
Dr Vogenberg: This could be very disruptive to PBMs and plans who make money via central distribution pharmacies. Amazon does not spread its risk in a single business silo like Express Scripts or Caremark does.
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Health Tracking Devices
Apple and Aetna are exploring whether or not the Apple Watch can improve health outcomes in a meaningful way. Aetna’s employees have reportedly been using the watch and offering feedback, and a partnership could follow. Do you see the potential here?
Dr Shinn: Absolutely. Not only Apple, but Amazon’s Echo is being looked at for remote patient monitoring and telemedicine. I see it as an extension of what CVS is doing with glucometers. It monitors patients and sends that information to the CVS MinuteClinics as part of their diabetes program. The technology is there and will only expand.
Mr Marcus: This is not a new concept. Employers and plan administrators have established wellness programs to help their employees become more aware of the health status and outcomes. Payers adopting these programs believe that wellness programs, in the end, will lower the cost of maintaining health benefits. For some, the Apple Watch will be a useful tool and they actively strive toward better health outcomes. For others, it will simply be a cool watch that they can text from.
Dr Cooke: Devices that measure steps, and monitor other aspects that are interesting to people, have encouraged people to walk more. Additionally, challenges to reach or exceed a certain number of steps are motivating some to improve healthy behavior.
Dr Vogenberg: It has potential, but so far I am not impressed.
What are some of the issues you see?
Dr Vogenberg: Affordability remains a major issue beyond a tech driven early adopter mentality.
Mr Marcus: The affordability issue could be overcome by payers who could cover part of the cost of the technology as an incentive to get people involved. Or they could negotiate a reduced cost with the manufacturer.
Dr Karnack: I have questions about how payers and patients’ technology will interface based on lack of standardization. Will the same interoperability issues that plague EMRs be a challenge with meaningful health tracking? I am also concerned about privacy and security. Will payers pay if a glucose monitor is hacked and a patient is injured? Will a patient feel insecure knowing data from his or her body is being fed into a cloud-based system, but also wondering who really has access to it? Is the data vulnerable? I also have questions about technology’s dependability. What happens when systems crash?
Dr Cooke: Several questions remain: What are the short-term and long-term impacts of these devices? Do they improve healthy behavior, and for whom? Is there a difference in healthy behavior change if payers provide coverage for technology, vs. the value that self-selected users may be currently gaining?
Mr Smith: The biggest challenge will be with the so-called “worried well” -- people over 40 years old with money who are borderline hypochondriacs. After using these electronics, they will be demanding more services than ever. We may need to put a prior authorization process in place before a member gets such a tool.
Dr Shinn: Despite these concerns, I think movement into this area is inevitable, and payers should look at adoption if they have not done so already. The technology is going to quickly expand beyond diabetes to management of inflammatory diseases and other areas. I see financial arrangements being wrapped around these partnerships that make it a positive form both a clinical and financial perspective.
Find part 2 here.
