Opinion: Bending the Pharmacy Cost Curve with Population Health Management


Runaway drug costs call for a new approach to care management, such as a different way of thinking about managing the health of the employee population.

Drug prices

A perfect trifecta of big, big, and big has put an out-of-control bend in the healthcare cost curve.

This bend is affected by drug costs driven by big pharma, it’s manufacturer-driven, has rebate-based incentives propagated by big pharmacy benefit managers (PBMs) and big healthcare companies merging to create even bigger companies that create a “watch my other hand” distraction. This continues to take focus away from the proactive pursuit of appropriate pharmacy spend.

The problem is, the bigger these companies, their treasure chests and their shareholder requirements get, the less the incentive for them to embrace approaches that will truly disrupt the cost curve and create greater prescription affordability.

We need broad and disruptive thinking, not point solutions that haven’t worked for years.

The status quo isn’t working

The large PBMs, and some benefit consultants, will say that PBMs have been declaring flat trend for a couple of years. However, this declaration can be made only by artificially deflating the gross prescription spend via an unpredictable rebate check to get to a more manageable net-spend number.

This deflation of the trend via a rebate check does absolutely nothing to ensure the drug mix for an employee population is appropriate. The bottom line is that industry-standard clinical and care management programs have had a negligible impact on both containing prescription costs and driving appropriate patient-centric utilization, as demonstrated by the persistent dysfunction in pharmacy spending.

Examples of this are:

  • Prescription drug costs are now 25% of a plan sponsors’ healthcare expense.

  • The number of patients on seven or more drugs (polypharmacy) is up by 200% over the last 20 years.

  • Twelve percent to 18% year-over-year increase in gross prescription spend for plan sponsors.

This calls for a bold and different way of approaching the care management challenge. For example, a different way of thinking about managing the health of the employee population.

Related: Open Medicare Data Helps Uncover Potential Hidden Costs of Healthcare

Inadequacies of current clinical and population health strategies

We’ve all heard, nationally, 5% of the population is driving 50% of healthcare costs. Population health management has been a promising approach; by targeting costlier sub-groups, we can drive down costs with much more return on investment.

There’s wisdom here, but the execution, thus far, has been self-limiting. Here’s why:

  • PBMs and health plans continue to approach population health management from the standpoint of condition or disease management, with the clinical strategy focused on specific high-cost conditions.

  • PBMs also continue to do what they’ve always been doing from a clinical perspective-standard utilization management programs like prior authorization, step therapy and quantity limit management, with less-than-useful specialized clinical programs that operate with a condition-specific lens.

  • Focusing on high-cost conditions based on typical industry trends means a natural exclusion of other utilization that could not only have a higher short-term spend component, but also be based on comorbidities that could drive up higher costs in the future.

  • Finally, a focus on specific conditions based on a PBM’s clinical program suite means a lack of employer- or plan-sponsor-specific personalization as it pertains to the management of their overall clinical and financial outcomes.

Not all employee populations are alike and this complete lack of creativity in approaching population health management has resulted in plan sponsors consistently experiencing a 12% to 18% gross pharmacy trend.

Practical yet innovative Rx population health management solutions

True industry disruption requires a tailored approach to population health management, one that accounts for the very specific needs of a plan sponsor’s membership and their unique risk profile. This approach needs to be divorced from any preconceived notions of specific high-cost conditions and their ability to drive spend. What is needed is a holistic approach that addresses the higher risk levels within that specific population in a completely condition-neutral fashion.

Here’s what such a program looks like:

  • Data consumption includes prescription and medical claims with behavioral health claims and lab results being important additions, if available. Social determinants data is a huge plus if available and consumable by the population health management platform.

  • Stratification and creation of a risk profile for the distinct employee population that factors in morbidity and cost implications, like clinical and financial risk considerations.

  • Clinical intervention strategy includes:
  • Physician profiling to better understand behavior change motivators specific to that prescriber.

  • Evidence-based research to confidently recommend a therapeutic switch.

  • Personalized interventions that are targeted and tailored to the members with the highest risk profiles-across morbidity and predicted cost.

  • Deeper research and execution of physician engagement and associated behavior change strategies to be able to have a truly consultative relationship with the prescriber and drive a differentiated outcome.

  • Aligned communication and change management across all stakeholders that includes the physician, member, plan sponsor and benefit consultant to ensure congruence in planning, messaging and execution.

The output of a well-executed population health management strategy can reap major dividends in the pharmacy benefits space where results can be conclusively measured and monitored. This approach to population health is also congruent with the core philosophy of value-based care which is about doing the right thing in an aligned manner across all pertinent stakeholders.

The results of this approach can drive a 2% to 3% multi-year gross pharmacy trend with consistent clinical outcomes, 93% medication adherence and better managed gaps in care.

Karthik Ganesh is President of EmpiRx Health, a boutique risk-bearing PBM with a differentiated population health management solution and 2.3% book of business trend.

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