A startup PBM? Partnered up with Walmart to bring “everyday low prices” to prescription drug pricing? Is this too good to be true? A.J. Loiacono, founder & CEO at Capital Rx, gives us a quick primer on “Pharmacy Benefit Managers” (PBMs) and why they’ve become known for the element of mystery they bring to prescription drug pricing. With three big PBMs (CVS’s Caremark, Express Scripts, and UnitedHealth’s OptumRx) controlling three quarters of the total market, it’s no surprise that VC-backed challenger companies in this space are rare. So, how does A.J. believe Capital Rx will shake things up? Learning about this new kind of tech-enabled, customer-focused PBM not only inspires hope for a clear future of prescription drug price transparency, but also makes one wonder about the new vision for American healthcare unfolding at Walmart.
I have a bias, I admit it. I am sensitive to studies with a subtext of “those stupid patients, what are we going to do about them?” Read the following rant with that in mind.
A pharmacy benefits manager a/k/a PBM funds a study of patients nonadherent to chronic prescription medication. The premise of the study, Effect of Reminder Devices on Medication Adherence: The REMIND Randomized Clinical Trial (hiding behind a paywall, by the way), is that “forgetfulness is a major contributor to nonadherence to chronic disease medications and could be addressed with medication reminder devices.” Thus, the intervention consisted of sending a population which included folks taking meds for schizophrenia and bipolar disorder either “a pill bottle strip with toggles, digital timer cap or standard pillbox” along with their mail order meds. There was of course a control group who received neither notification or a device. Surprise, surprise! Getting a prize in your Crackerjack box from your PBM does not improve medication adherence. Those stupid patients! Why won’t they do what’s good for them?
The distribution of prescription pharmaceuticals is beginning to take on some of the characteristics of online videos and music. Traditionally, access to prescriptions works as follows:
Patient has a problem
Patients sees his/her physician
Physician diagnoses problem and writes prescription
Patient takes prescription to traditional pharmacy or PBM-owned mail order company
Pharmacy fills prescription with a drug manufactured by an FDA-regulated brand name or generic pharmaceutical company
Patient takes medication
If patient needs more medication after initial prescription and refills are exhausted, patient requests renewal from physician and repeats steps 4 to 7
But steps 2 through 7 are breaking down. Instead of seeing their physicians, increasing numbers of patients are either going directly online to order from pharmacies or are borrowing pills from friends and family who’ve received prescriptions. According to MedPage Today (Adults Commonly Share Prescription Drugs with Friends and Family) almost 30 percent of adults reported sharing prescription medications with others. Younger people are the most likely to share.
Meanwhile, shady web-based pharmacies that don’t require prescriptions and often sell counterfeit drugs are becoming increasingly sophisticated and impressive. MarketMonitor estimates that about 1000 shady pharmacy sites generate an average of 100,000 hits per day each and that such pharmacies spend about $25 million per year on search advertising. An acquaintance who works in the pharmaceutical security business told me that these pharmacies aren’t what they used to be. In fact they are adopting marketing and customer service best practices that are used by legitimate vendors. Rather than going for a quick score, the web-based companies are looking for repeat business and word-of-mouth referrals by providing products that work, offering easy-to-navigate websites and low prices.