In this episode, CSI Specialty Group President and CEO Suzette DiMascio, CHE, CMCE, CPC, discusses the top 3 questions and answers her team has received about the marketplace throughout the past few weeks.
Tune in to Discover:
- What the future holds for 340B and contract pharmacies
- How 340B will affect patient care in the near future
- The implications of copay and accumulator programs (and why PBMs are fighting tooth and nail against them)
- What the Berkshire-Hathaway/Amazon relationship signals for the rest of the industry
- What the Amazon-Pillpack deal means for healthcare and specialty pharmacy
About CSI Specialty Group
CSI Specialty Group is a globally recognized leadership, strategy and talent consulting firm dedicated to helping clients drive sustainable, accelerated growth while continually elevating the specialty pharmacy industry. By providing inventive specialty pharmacy consulting, workforce planning and talent acquisition solutions, CSI uniquely tailors its service offerings to help clients drive sustainable, accelerated growth. As the provider of the industry’s first, dedicated podcast for specialty pharmacy, CSI is at the forefront of pioneering innovative concepts to meet the changing needs of specialty pharmacy, home infusion, mail order/PBM, health systems and pharma/biotech clients across the USA and throughout Europe.
Hi, this is Suzette DiMascio and today I am going to do a little new twist on the podcast. We have been getting a lot of questions asked of us for the podcast and I thought I would pick the top three questions that I’ve been asked over the past couple of weeks, and do an Ask Suzette podcast today. So well I bet you all can imagine what the number one question will be, but I’m gonna work my way from number three down to number one. So the number three question on our podcast today that I’ve been getting from a lot of individuals is, “What does the future hold for 340B?” And so to answer this question, there are a couple of different things that you need to consider, both 340B from the inpatient and the outpatient side. For my reference point and my vantage point of expertise, I’m gonna address the outpatient aspect. It’s been an interesting couple of months since a lot of these directives have gone out. Actually had the opportunity recently to speak to members of the department … I can’t even think. Wrong word here. I’ve had time to speak with the energy and waves at NDC and that particular group does a lot with healthcare and they have been investigating the 340B arena.
So one of the questions that I was asked was the aspect of contract pharmacies and what they were most concerned with not is the fact that there are contract pharmacies for 340B, but that there were so many. And quite honestly I can totally understand their perspective on this. There are health system that have ridiculous amount of contract pharmacies and I say that because 90% of them aren’t being utilized. So it creates a lot of work not just for the health system, but for the government to keep up with all of the aspects of these contract relationships. So that’s one thing that they’ve been a little bit concerned about.
The other thing is the equality or the fairness of the 340B pricing for these disproportionate share facilities and I know that Pharma usually weighs in on this as well, but I’m gonna tell you from my perspective. I’ve walked the halls of these health systems. I’ve seen what they do out in the field with homeless people that forget to come in for their third dose of Sovaldi or Harvoni and subsequently … Well their therapy won’t work if they don’t have that third dose. I’ve seen them try and find them. I’ve seen patients that came in for a transplant that absolutely had no means to take care of themselves when they went home and they found step down units for them. They found facilities that would help take care of them and delivered their drugs to these patients’ homes. These are things that nobody can comment to unless you’ve walked in the shoes of these particular facilities across our country. The rural and rare … Excuse me. The rural hospitals, they are rare unfortunately. A lot of them are closing, but the plight of the rural hospitals is something that I’m most acutely aware of. I believe that they need a bloodline in order to continue their plight in communities that are very underserved and I can’t even imagine what they would without a 340B program, to be able just to afford bringing drugs into their facilities.
So it’s just a very necessary program that a lot of people think is being taken advantage of because of the specialty pharmacy top price on the products, and what the bottom line means to these facilities. But I want you to think about this. If one of these organizations happens to be profitable in the specialty pharmacy side of their 340B equation, that money goes right back in to the rest of the health system to support other programs and growth. So it isn’t like someone’s leaving the facility with a big check in their hands. This money is being reallocated into the community, it’s being reallocated to patient care and it’s essential for the fabric of our country to keep 340B in place from an outpatient perspective, and that’s my opinion.
The second question that we’re asked a lot about is the copay and accumulator programs and that is an interesting situation that’s happening right now. What I have seen quite honestly is a lot of … Oh boy. You know whenever there’s an opportunity to help people be successful in treatment through a foundation, a copay program or any type of patient assistance, the foundation as I mentioned. There’s always going to be someone that is going to look at the ulterior motive or assume the ulterior motive and that’s exactly what’s happened in this copay situation. So many of the drugs that we have in the specialty pharmacy arena are very expensive and for patients to just cover their deductible sometimes is a hardship. You take a look at the fact that over 50 to 70% of our population now thanks to Obama Care again in my humble opinion, have all been forced to be in a high deductible plan. And so if you’ve got MS or any other type of long term disease stat where you’re requiring maintenance meds, you’ve gotta learn to play the game and by playing the game, I mean figuring out how to maximize all of your copay potential in order for you to be able to take your drug.
So heres the dilemma and here’s the dichotomy of this. So now the PBMs who we know have never liked copay programs or foundation programs, they are taking that … Let’s say in January a manufacturer gives a patient $2,000.00 towards their deductible in order for them to receive one of their maintenance medications, then the next month, they give them another $2,000.00 and their deductible met. Now what’s happening is that if that patient isn’t spending or that $2,000.00 isn’t coming out of their pocket, that money is not counting towards their deductible. So until that patient pays the $4,000.00, the deductible is still there, which could mean that a lot of the progress that that patient has made in their care is going to be going by the wayside because that foundation or the copay program could dry up by month three or month four and they’re going to have to pay that $2,000.00 out of pocket themselves.
So let’s take this a step further. So let’s assume that the copay program does run out of funds. So they’ve gotten the $2,000.00 in January, they’ve gotten the $2,000.00 in February, now there isn’t any funding. The patient doesn’t have the $2,000.00 to spend on the medication themselves. So they have options. They can forego paying the rent, they can forego taking care of their family or they can forego the the drug. Of those three options, what do you think they’ll take? My guess is that they’ll forego getting the drug and they’ll wait until the foundation or someone else can help them get that product. Now what could happen at that point? They could have a reoccurrence or a [inaudible 00:08:49] … I can’t ever say that word. You know sometimes you get tongue tied on these podcasts, so I apologize. My passion sometimes overworks my ability for the words to come out properly. So they could have a reoccurrence of one of the issues of their therapy … of their disease state and end up back in the hospital because they weren’t able to be adherent on their product.
So now the health plan instead of paying $2,000.00 to get that drug to that patient or the patient having the $2,000.00 come from a manufacturer. They’re now gonna be spending tens of thousands, if not hundreds of thousands of dollars to get that particular patient back in a well being of their disease state, so that they can go back home and the system starts all over again. So it just seems kind of incredulous to me that the PBMs are doing this to counteract manufacturers paying for products that are keeping their own patients compliant and out of the hospital. Isn’t the whole reason that they are watching these chronically ill patients so that they stay compliant and on product? And if on product means they get assistance, what difference does it make to that health plan?
Now on the flip side what you’ll hear … And this is also equally a good argument. On the flip side you’ll hear, “Well, if I have a $4,000.00 deductible and I have to go get knee surgery, I have to make sure that that $4,000.00 deductible is paid before any of the fees are paid on my behalf. There isn’t a foundation or a copay program to help me get my knee surgery or my heart surgery or my hernia surgery or whatever surgery that’s on the medical benefit side of the world.” So that’s really the argument that is getting a lot of weight in the marketplace today. We saw Optum be the first group to fall into suit with the copay program, not counting towards the deductible. And now we’re seeing a whole cottage industry pop up of consultants that are going into employer groups and smaller health plans and PBMs to help them design this copay accumulator program to protect them from manufacturers reimbursing for these products. So where this is gonna fish out or flesh out, I have no idea. However, I do think it’s something that we’re gonna continue to watch and will continue to report on because again, it’s a double edged sword. It does help so many patients, but it also isn’t equitable when you look at it from the other side of the world, people on the medial benefit side. So let’s see what happens.
Now on to the number one question that I’m asked and it’s not who’s gonna win the Superbowl this year, because it’s tell you it’s the patriots. And it’s not who’s your favorite high … I mean college football team, because I’ll tell you it’s West Point. And it’s not who’s gonna win West Point or Navy this year in the game, ’cause it’s definitely gonna be West Point in the big game. The question is, “What do I think about this Amazon deal?” So this is a fun one, so I’m gonna chat through a couple of things. First of all, the national healthcare group … national employer healthcare group about two years ago started taking a look at what they could do to help make some difference in the world of healthcare, especially as it related to pharmacy cost. Rumor has it that Amazon was one of the organizations that they talked to and nothing ever came about. So that’s probably the preemptive process that started the dialogue with Amazon, thinking about how can we differentiate, how can we disrupt this marketplace. Let’s face, when Amazon gets into something that you do, as an organization you definitely have to pay attention to it because they do find a way to disrupt certain industries. So it was inevitable that they would have some play in pharmacy at some point.
The Berkshire Hathaway and Amazon relationship just shows me more that there is some money that they want to make in the healthcare arena and they’re just trying to quantify it. So a few weeks ago they named a new CEO and then last week, they announced that they were buying PillPack. Now I will tell you that there’s nothing novel about PillPack. PillPack is a organization, not unlike your typical long term care pharmacy that puts pills in packages for ease of use. What is novel about them is that they took that long term care mentality, which the CEO grew up around as his dad’s pharmacy, which was a long term care pharmacy and did that to the commercial side of the world. So anyone that had multiple drugs, it was very easy for them to take a couple packages if they were going on a trip and not have to worry about their pill container turning over and getting their pills all messed up. So from that perspective, they took a simple process that had been around for many, many years in long term care facility and moved into a commercial atmosphere.
What does make this acquisition … or what did make this acquisition interesting for Amazon are the following three things and I really believe when I look at a deal that takes place, it’s not always what’s on the mind or what’s on the top vision of the marketplace as to why they made this deal. Again, it’s not a novel concept, it’s not something that they couldn’t have done themselves.What PillPack also did very well at was advertise. Why Amazon was the … made the move to buy PillPack in my humble opinion were three reasons. One, by buying PillPack, they had the ability to access all the licenses across the country that PillPack have … has. Excuse me. If you remember a little while ago, there were some rumblings that Amazon was looking into getting pharmacy licenses and then they stopped. Well why’d they stop? They were doing due diligence on PillPack. Common sense would tell you that one, right?
The other reason … the second reason I believe that they purchased PillPack was that they wanted to have access to the contracts, the PBM contracts that they already had in place. Now one of the things that’ll be interesting to watch is to see if any of those contracts that are in place, the PBMs start making moves to discontinue. That will be something that will be very interesting to take a look at. The third reason that I believe that they bought PillPack was that they wanted to beat Walmart out of it. Walmart had made some hubbubs about looking at PillPack, which again I don’t understand why you would release that information. It was probably leaked. Any of the acquisitions that I’ve been involved in, no one really talks about anything until the paperwork is signed, it’s dried and the check’s in the bank. So I was really shocked to see that. But again, I truly believe that the reason Amazon made the move to purchase PillPack was have access to all their pharmacy licenses, access to their PBM contracts and to beat Walmart to the punch.
Now the ripple effect was actually quite interesting. Who in their lifetime has ever seen a 12 billion dollar marketplace loss in Wall Street in a day because of a move another organization made that wasn’t even in the industry? That’s exactly what happened on the day that Amazon bought PillPack. Walgreens, ESI, CVS, Rite Aid, all of their stocks tanked to the tune of 12 billion dollars. “OMG.”, is what I would say. That is incredible and scary, very, very scary. So that shows you that there is some market concern on what Amazon. I also think that it also caused a ripple effect because now you see CVS making announcements that they’re launching a delivery service. Walgreens and Walmart won’t be far away from it and if I was a delivery service, I would be happy, happy, happy because not only can I contract with some of these up and comers, we all know that Amazon now is out there looking for people to help them with their last mile delivery service, and I think that’s two fold. One, because of the new business model they’re building here with PillPack, but secondarily, they’re also well aware of the fact that Trump is not happy with the pricing that they’re getting from the post office for the last mile delivery. So I think you’ll see some drastic changes in their delivery model to keep up with their Prime membership.
So what does this mean for you, my specialty pharmacy professionals listening? Right now it means nothing. I do not see where in the next 12 months Amazon is going to do anything in the specialty pharmacy world. I think they’re going to learn the PillPack business, they’re going to try to accommodate that business into their online model and create some novel delivery options. I do not think that’s going to be inclusive to specialty today. Now it’s Amazon. We all know that the margins are very narrow in the specialty world. So it’s gonna take them a while to figure out how they can tear that price point away and get higher margins. Maybe it’s some direct to consumer programs that they do with manufacturers, not quite sure but we are watching this quite closely. I would say continue to do what you do best and just keep taking great care of your patients because that’s gonna be a hard marketplace for them to disrupt in specialty. But I’m watching them because this move that they’ve made with PillPack I think is going to make a lot of mail order organizations a little bit uneasy and it could be some interesting direct to employer models that created from this as well for maintenance meds. And let’s be realistic here, 80% of the medicines that are being taken are maintenance meds. So this is a good market, megalomanic type move for Amazon, which is what we expect from them.
So a little side anecdotal note, a very sad side anecdotal note, when I was moving about a year ago I was looking through some old documents and I came across a Schwab report or a Schwab statement that I had back from the 1990s, and I was brilliant enough to buy Amazon at $75.00 a share. Unfortunately, somewhere along the way I was also not brilliant enough to sell it. So when I looked at what that Amazon stock would be worth today, well let’s just say I wouldn’t be doing this podcast right now. I would be on Hawaii on a beach, having a cabana boy hand me a piña colada as I counted the dollars in my bank account, the many many millions of dollars.
So here’s Suzette’s tip of the week. Don’t sell, hold on to stocks unless they’re tanking because 20 years later you take a look at it and you’re like, “Oh, my God. If I’d only kept this stock.” Anyways, if we all were geniuses like that and we’d all be millionaires and not listening to this podcast. So I hope everyone had a great fourth of July and do some great things for your patients this week. Until we meet again, have a great week and thank you for being a loyal listener to CSI Specialty Group podcast. Adios.
Have you heard the news? The 2018 specialty pharmacy report is now available to download for free at csigroup.net/survey. For the report, we surveyed specialty pharmacy professionals of all level across all the main channels to uncover trends, opinions and future predictions about the specialty pharmacy industry. Please feel free to download the report today and find out what manufacturers, health systems and independent specialty pharmacy professionals across the nation say the biggest opportunity is, as well as the biggest challenges are as we all work toward improving the patient journey. Get your free download today at csigroup.net/survey.
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About The Specialty Pharmacy Podcast
Join host Suzette DiMascio, CHE, CMCE, CPC, President and CEO of CSI Specialty Group, as she answers questions, addresses concerns and discusses the news you need to stay on top of the ever evolving world of specialty pharmacy. Tune in every episode to hear real world examples of the good, the bad and the outrageous from the experts at CSI Specialty Group, and to learn about the limitless growth opportunities available in the specialty pharmacy industry.