Phar­macy ben­e­fit man­agers are data div­ing to cut costs

▶ Com­pa­nies like Op­tumrx gain lever­age over drug­mak­ers ▶ “Dif­fi­cult de­ci­sions about hav­ing to cover one drug vs. an­other”

Bloomberg Businessweek (North America) - - Contents - �Zachary Tracer

Op­tumrx was do­ing a rou­tine anal­y­sis of a client’s pre­scrip­tion-drug claims when it no­ticed some­thing odd. The com­pany’s spend­ing on acne medicine seemed high com­pared with those of other cus­tomers. Dig­ging into the us­age data for clues, the phar­macy arm of the health in­surer, Unit­ed­health Group, found that em­ploy­ees had been pre­scribed newer brand-name acne drugs that were, for the most part, com­bi­na­tions of older generic medicines. Op­tumrx be­gan re­quir­ing pa­tients to be­gin treat­ment with the cheaper reme­dies and switch to the pricier ones only if the oth­ers proved in­ef­fec­tive. Within six months, the 60,000-em­ployee com­pany had saved more than $70,000, Op­tumrx says.

His­tor­i­cally, phar­macy ben­e­fit man­agers (PBMS) have been known more for their re­lent­less sup­ply ef­fi­ciency than their tech chops. But with the eas­i­est sav­ings al­ready in the past, Op­tumrx and ri­vals such as CVS Health and Ex­press Scripts have be­gun min­ing their huge troves of pre­scrip­tion data in search of economies. “Low­er­ing costs now means hav­ing to make re­ally dif­fi­cult de­ci­sions about hav­ing to cover one drug vs. an­other,” says Walid Gel­lad, who heads the Cen­ter for Phar­ma­ceu­ti­cal Pol­icy and Pre­scrib­ing at the Univer­sity of Pitts­burgh. “They’ve had to be­come more so­phis­ti­cated in how they make these de­ci­sions.”

Unit­ed­health be­gan lay­ing the ground­work for the data push in 2011, when it grouped an ar­ray of busi­nesses un­der the Op­tum brand. In a re­cent case, the com­pany no­ticed that at one client, drugs for at­ten­tion deficit hy­per­ac­tiv­ity dis­or­der were be­ing over­pre­scribed to adults. Some were us­ing the drug to im­prove their per­for­mance at work, ac­cord­ing to An­drea Marks, chief an­a­lyt­ics of­fi­cer at Op­tumrx. The ben­e­fit man­ager took ac­tion, sav­ing the 19,000-worker com­pany $110,000. “Some­times we’re look­ing at pat­terns at a very broad-based level,” Marks says. “Some­times at an in­di­vid­ual level.”

As they seek to ex­ert greater con­trol over costs on be­half of their clients, PBMS may be­come more open to le­gal chal­lenges. New York, In­di­ana, and West Vir­ginia all passed laws this year to curb their in­flu­ence over pre­scrib­ing de­ci­sions in re­sponse to lob­by­ing from pa­tient groups. Su­mit Dutta, Op­tumrx’s chief med­i­cal of­fi­cer, says the com­pany makes sure its cov­er­age de­ci­sions are med­i­cally ap­pro­pri­ate. “All of those have to be vet­ted clin­i­cally first,” he says. “You can’t say one drug is fa­vored over an­other drug un­less you’ve fully vet­ted that clin­i­cally.”

Op­tumrx says it’s also us­ing data an­a­lyt­ics to im­prove pa­tient health. For ex­am­ple, it can look at re­fill fre­quency to spot whether asthma suf­fer­ers are tak­ing too many puffs on their in­haler, an in­di­ca­tion they may re­quire a dif­fer­ent drug. Switch­ing pa­tients to more ef­fec­tive medicines pays off, even if these are more ex­pen­sive, if they help re­duce costly hos­pi­tal­iza­tions and vis­its to emer­gency rooms.

Em­ploy­ers should be skep­ti­cal of claims like that, ac­cord­ing to Linda Cahn, an at­tor­ney who’s rep­re­sented busi­nesses in law­suits against PBMS. If ben­e­fit man­agers prom­ise sav­ings, those should be spelled out in con­tracts, she says.

The fo­cus on Big Data dove­tails with an­other de­vel­op­ment in the in­dus­try: In­creas­ingly, in­sur­ers are ty­ing re­im­burse­ments for pre­scrip­tion drugs to mea­sures of their ef­fi­cacy. Cigna, for in­stance, is pay­ing for some new choles­terol drugs from Sanofi and Am­gen/re­gen­eron Phar­ma­ceu­ti­cals, known as PCSK9 in­hibitors, based on whether the drugs de­liver re­sults at least as good as those re­ported in clin­i­cal tri­als.

There’s lit­tle doubt PBMS will use their data to gain the up­per hand in price ne­go­ti­a­tions with drug­mak­ers, says Dan Ma­hony, a health-care in­vestor at as­set man­ager Po­lar Cap­i­tal. “They’re all look­ing at ways they can uti­lize the in­for­ma­tion they’ve got to es­sen­tially push for a bet­ter deal,” he says. “You’re just see­ing the be­gin­nings of it.”

The bot­tom line Phar­macy ben­e­fit man­agers are min­ing their data to mea­sure drug ef­fi­cacy and make de­ci­sion about cov­er­age.

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