A prescription for smarter Rx spend

Can health payers improve member experiences and increase access to care by lowering prescription drug prices? Five Blues plans hope so. In June, they announced the launch of Evio, whose goal is to “change the trajectory” of pharmaceutical pricing. The for-profit company plans to leverage depersonalized aggregated data from 20 million Blues members to measure the effectiveness of prescription drugs, thus arming payers with negotiating power with drug makers.

In a similarly motivated move, Anthem and Humana have invested almost $140 million into a new pharmacy benefit manager (PBM), called DomaniRx. Eighty percent owned by fintech SS&C Technologies, DomaniRx will combine that company’s claims processing platform with analytics to give payers more transparency into their drug costs.

Both efforts reflect steadily growing pressure from employers, consumers and regulators to control their Rx spend. The question prospective customers of Evio and DomaniRx should ask is whether these ventures offer significant new value or just simplify the complex relationships among health plans, PBMs, pharmaceutical manufacturers and patients.

Assessing the latest moves to reduce Rx spend

Here are some factors to consider:

• Many payers already own or contract with PBMs. PBMs are supposed to negotiate advantageous pricing for their clients. Evio CEO Hank Schlissberg says Evio is not designed to cut out the middleman role of PBMs — yet. So why did the Blues need to create a new entity to aggregate and analyze prescription utilization data? Couldn’t they have just worked with PBMs to do so?
  
  One answer may be that PBMs are not always incented to include lower cost drugs on their formularies. PBMs receive rebates from pharma manufacturers that are based on the drug’s list price. This practice ends up being a disincentive to promoting cheaper drugs that don’t offer rebates. Whether that’s occurring and leading to greater use of higher cost drugs can be opaque to health insurers and employers.
  
  Payers that choose to participate in Evio will want to examine the company’s reimbursement structure, such as flat fee, percentage of savings, total drug cost or some combination, and ensure they are not paying their PBM or another entity for the same work. If that work is carved out, a PBM might raise its prices to offset that loss. Payers may also need to renegotiate their PBM contracts if their existing agreements do not require the PBMs to provide data to third parties such as Evio.
  
  As direct contracting grows between payers and drug manufacturers, PBMs will need to create a new value proposition. One idea is to enhance their drug utilization management programs. PBMs could require updated lab values when reviewing prior authorization requests and monitor adherence and results through refill and lab data. By combining this data with their clinical information, payers could get better insights into how adherence affects medical results.
  
  

• Payers already have their own pharmacy and medical data to analyze and use in direct contracting with pharma companies. Most payers have massive quantities of data that can be depersonalized and aggregated to study the efficacy of a given drug. Highmark, an investor in Evio, already has direct contracts with manufacturers.
  
  Evio implies its advantage will be economies of scale, as it can aggregate data from its 20 million members spread across five health payers initially, with possibly more to come if Evio opens to other payers. These data volumes should provide the company with better evidence about drug efficacy that either it or its clients could use to negotiate prices with manufacturers.
  
  If Evio were to broker performance-based payments on behalf of many payers, manufacturers might prefer working through one company to administer them. Such an arrangement would be more efficient than setting up and maintaining individual value-based arrangements with multiple plans.
  In that scenario, though, larger payers may receive preferential pricing because of their member numbers. That raises ethical questions. If it becomes known throughout the industry that Drug X performs well with a specific patient cohort, should its performance-based pricing vary with payer size? Will demand for that specific drug drive up its cost, or will manufacturers net sufficient return on higher volumes?
  If smaller payers share data with Evio or a similar company, they should ensure they receive the same agreement with manufacturers that larger payers do, simply by virtue of their participation. Their resource investment in data sharing likely would be equal to or even disproportionately larger than that of a larger payer and should be rewarded.
  
  

• Health data is poised to flow more freely as interoperability opens industry data silos. It’s not clear whether Evio’s findings will be available to all payers or just participating Blues plans. Another question is whether Evio will use existing industry data standards such as NCPDP or FHIR to collect data. It would be a step backward for a new entrant to create a proprietary data format when the industry is on the cusp of true data interoperability.
  

A different approach to lowering Rx costs

Rather than waiting for these questions to be answered, payers can choose to function in the same way that Evio hopes to by drawing on their existing data to contract directly with manufacturers. Here’s how:

• Target specific drug classes and disease states. Payers could focus on gathering information related to expensive specialty drugs, such as for statin-resistant cholesterol, rheumatoid arthritis, lupus, multiple sclerosis (MS), cancers and rare conditions. Most payers will want to see evidence that a drug therapy reduces medical costs associated with these health issues.

• Collect the right data. Be specific about the data required to evaluate drug performance when setting up preauthorization criteria for pricey specialty drugs. To create MS member cohorts and monitor the results of their drug therapies, for example, payers would need specifics such as type of MS, gender, age of disease onset, current age, mobility measures, etc.
  
  
• Analyze the results. Manufacturers can provide expected results data, such as percentage of MS relapses. If the projected results aren’t aligned with clinical and financial evidence, then manufacturers could adjust payments or issue refunds. The industry could use the existing drug rebate reconciliation framework for these adjustments. Being transparent with employers and members about these results can build trust.

This is not to say value-based prescription drug arrangements will be painless. Including medications traditionally covered under the medical benefit could lead to changes in existing provider agreements, benefit structures, financial accounting and underwriting.

Payers will also need to plan responses if the data shows poor clinical results. Conversely, if data points to a therapy being especially effective, how will payers work with members and physicians to ethically promote that therapy?

Regardless of how Evio performs, payers have the data and PBM partners to shift their own drug spending trajectories. Getting control over costs while delivering evidence-backed quality should net out to happier, healthier members and a strong competitive advantage.