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Conflicts in Business Models


Michael Thompson: Just picking up on the intermediary, I want to go to the price in a second. But first, the intermediaries. One of the things that 1 of our coalitions found was that it is in not only these high-priced drugs but also the low-value drugs where things seem to be askew. Things are being covered that shouldn’t be covered, for no other reason than that the business model rewards low value. Are you seeing that type of thing? Corollary to that, you know there are policy discussions right now about moving away from a rebate model. What are the implications of that? Is that a good thing, or is that a concern?

Patricia Haines: I don’t think I would know that yet. I know that it has lowered our cost by having direct share in rebates. We pass that on population-wide, so we have at least an interim concern if we were to reverse that. It would benefit patients, but we’d also have to increase our cost across the total population. It feels in many ways to me sort of like sin money. We’ll buy a lot, and you’ll give it. It’s a kickback. Let’s call it what it is—a kickback. It’s a little unnerving to begin with. I think I’d really rather just have transparent cost and guarantees if I were creating a slightly more perfect world.

Andrew Crighton, MD: I think the rebates have served their purpose. Like we need to move from fee-for-service, we need to move away from rebates. They served their purpose, and now they become a little bit skewed in the wrong way. The transparency needs to be there, but the rebates are inhibiting probably effective drugs for people too. New drugs may come out for rheumatoid arthritis, but they already got the rebates with these 2 drugs, and we’re going to just put this as a higher tier. Then it’s a barrier for that patient if that’s the drug that’s best for them. It’s like taking an ax to something that needs a scalpel right now.

Michael Thompson: Yeah.

Bruce Sherman, MD: Agreed. It’s 1 of a series of not-so-transparent components of contracting that makes at least me inherently suspicious of the delivery system. When we look at financial performance, should we be surprised that large healthcare companies have tremendous revenues? What are we missing? A transparent model would help us at least better understand how the pharmacy supply chain is working and where there may be some other opportunities for us to perhaps more effectively align our mutual interest.

Michael Thompson: Let’s talk on the pricing side of this thing. Some of those prices that we hear and read about are being driven in part because of the need to generate rebates. What we’re paying here in the United States versus other countries is outrageous. Is there a need for us to somehow push back on that? How do we deal with that? There are policy proposals, but it seems to me we’ve kind of given a blank check, and it continually gets abused. How do you deal with that issue?

Patricia Haines: I don’t think, as individual plans, that we could deal with it. I think that’s going to take a real volume effort. We’re not directly negotiating with pharma, so we’re kind of outside that negotiation path. Directly contracting would be meaningless for any organization, as an individual organization.

Andrew Crighton, MD: I know coalitions and other groups are combining to directly contract with hospitals. Why wouldn’t you come as a coalition and start directly contracting with manufacturers? Maybe it’s something. If they feel that they’re squeezed out of the PBM [pharmacy benefits management] by a tier, they may be open to this too. I don’t think anybody has really asked that question.

Bruce Sherman, MD: Yeah. I think 1 of the challenges has been how to disrupt the status quo. Is there a big enough entity—and I think this is where coalitions certainly could have a role—to think much in the way that we have created? Or has the marketplace of third-party administrators evolved relative to health plans? Maybe there’s an opportunity for a pharmacy benefit administrator that simply processes the claims data for pharmacy claims, and the direct contracting for the purchase of the drugs was done by another entity.

Michael Thompson: Yeah, I don’t pretend to say any of these are simple issues. But to say that there aren’t issues here would be a mistake too. It’s a big area that we’re trying to get our hands around too, in terms of where to take it.

Patricia Haines: I really worry about the affordability for patients. For most patients taking most drugs, they are the difference between quality of life and less quality of life. Most people don’t take drugs just because. They’re actually treating something—particularly diabetics. I hear story after story about the expense of just managing type 2 diabetes. Between test strips and insulin and doctor’s visits and the eye exams, it’s a really expensive disease. We want people to be adherent. The affordability issue on drugs is particularly a patient-centered issue.

Bruce Sherman, MD: I think you raise a really interesting point. And coming back to a topic of earlier discussion, the issue of prevention, I think, is critical. Much in the way with oncology, earlier detection of cancers can be potentially curative. Similarly, earlier attention to management of the prediabetic could potentially mitigate the need for some of those diabetic drugs. I think that’s where primary care has a significant role.

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