Libratto

DEPARTMENT OF RANTS

In a previous post I noted that any effort for the Feds to negotiate directly with drug makers over pricing for Medicare was unlikely to generate significant savings. The reason is that drug makers pay for performance (i.e., shifts in market share), not volume. Moving share requires favoring some drugs over others (i.e., a formulary with some teeth) — something up with which Medicare beneficiaries will not put.

Bigger Savings Via Generics and Selected Retail Pharmacies

The single biggest opportunity for prescription drug savings is not better pricing, it’s improving the mix of drugs patients use. If medication mix was optimized, about 75% of prescriptions would be for generics — significantly higher than the current rate of about 55%. Moving the needle up 20 points on generic fill rate would mean about a 20% decrease in overall cost.

Another area for significant savings is a tighter retail network. Ten years ago, the number of stores in a retail network was a good surrogate for access: the more stores in the network, the lower the average distance from patient home to the nearest store. Today, however, many neighborhoods are saturated with pharmacies: nearly all grocery store and discount retailer chains have in-store pharmacies, and pharmacy chains have expanded rapidly as well. This explosion in the number of stores means 1) network size no longer serves as a meaningful surrogate for access, and 2) plan sponsors willing to tighten up their networks will be rewarded with deeper retail discounts.

POS vs POC Programs: Location, Location, Location

Plan sponsors aren’t availing themselves of these opportunities to the fullest possible extent because doing so means changing plan design or implementing new clinical programs. Such changes generate disruption to members, because they generally occur at the point of service (POS) rather than the point of care (POC). POS means in line at the pharmacy; POC means in the doctor’s office.

From the patient perspective, the difference in experience between POS and POC is significant. POS programs mean that you find out at the pharmacy counter that the prescription you got from your doctors isn’t covered, or will cost you more than you expected. On the other hand, POC programs go down much more smoothly: your doctor sees what’s covered, or that your plan requires that you try a less-costly generic before advancing to a more-expensive brand. In many cases, the patient would be completely unaware that a POC program was in use.

In short, POS = member disruption; POC = little/no disruption.

If the Fed mandated the use of electronic prescribing for Medicare beneficiaries, adoption of the technology — which has matured and works well today — would jump. Once e-prescribing gains enough penetration, plan sponsors (including plans that cover Medicare Part D beneficiaries) would be able to implement proven programs that drive to a more cost effective drug mix and lower-priced distribution channels.

These opinions are mine alone.