Express Scripts 2020: Back to the Future?

The clocks are ticking for Express Scripts.  Having achieved formidable “size and scale,” how will the nation’s largest pharmacy benefit manager synchronize with value-based health care?  With each day, between the medical and pharmacy benefits, the time to value is diverging.

Time to Value

Under fee for service, the time to value is relatively short for both benefits.  The physician bills soon after an encounter.  Similarly, the patient (for the most part) uses her pharmacy benefit to get her prescription, after which Express Scripts pays the pharmacy, collects a rebate (on a brand) and bills its client.

In value-based health care, the time to value lengthens to include outcomes and, as a result, expands to include many more inputs.  As Michael Porter explained, using the Institute of Medicine as his source, “Because care activities are interdependent, value for patients is often revealed only over time and is manifested in longer-term outcomes.” According to Porter, “The only way to accurately measure value, then, is to track patient outcomes and costs longitudinally.”

Value-Based Health Care

By 2020, 75% of commercial payments will be through value-based arrangements, if the Health Care Transformation Task Force - a coalition of providers, payers, purchasers and patients – has its way. In 2014, 38% of payments to hospitals were value-oriented, compared to 10% for specialists and 24% primary care physicians in the outpatient setting, reported Catalyst for Payment Reform.

Meanwhile, the Centers for Medicare and Medicaid Services (CMS) wants 30% of Medicare payments in alternative payment models by the end of 2016 and 50% by the end of 2018.  The percentage stood at 20%.  Alternative payment models include Accountable Care Organizations (ACOs), advanced primary care medical home models, bundled payments for episodes of care, and integrated care.

Great Value from Express Scripts

To be sure, Express Scripts has added substantial value to the pharmacy benefit transaction.  It led the conversion to generic drugs, most notably and unprecedentedly when it moved against Pfizer’s Lipitor with simvastatin (generic Zocor) in 2006.  Now, Express Scripts’ drug exclusion announcements are routine events and its public campaign against high priced specialty drugs compelling.  The company has also narrowed retail networks and, for nearly a year, excluded Walgreens.

For years, Express Scripts has mined its mountain of data for insights and it pioneered the application of behavioral economics to the pharmacy benefit, in an effort called “consumerology.”   The company now has its own research laboratory, to which Medco’s Therapeutic Resource Centers and RationalMed program have been important additions.  Using these assets, the company has driven drug costs down, promoted greater use of lower cost drugs and achieved stronger adherence to drug regimens.

Better adherence can indeed lead to improved outcomes, thus increasing Express Scripts time to value, as demonstrated by its ScreenRx® program.  However, the company’s value proposition remains tethered to the pharmacy benefit transaction, instead of the ultimate clinical outcomes of value based health care.  At most, its contribution to those outcomes can be inferred, but not routinely measurable - yet.

Drug Payment Models

Take the pay-for-outcomes vs. pay-for-performance conversation now underway between Express Scripts and some drug manufacturers.   For its newly approved heart failure drug Entresto, Novartis proposed an initial discount with a performance bonus if it successfully lowered hospitalization rates in patients suffering from the condition.  The company said Entresto does a better job of preventing heart failure deaths and hospitalizations than lower cost alternatives already on the market.

Express Scripts was not buying it.  Instead, the company countered with an indication-based model, emphasizing its “elegance.”  It would differentiate pricing for specific cancer drugs based on how well they work against different types of tumors.

“Unlike the outcomes-based rebate systems that have been tried by others in the past, our model won’t require plans to reconcile payments long after-the-fact based on downstream health outcomes of a specific patient,” responded Express Scripts.

However, a leading pioneer of outcomes-based rebate systems has been Cigna, which Express Scripts client Anthem is set to acquire. Cigna’s arrangements have involved Merck’s diabetes drug Januvia (sitagliptin), the EMD Serono multiple sclerosis drug Rebif (interferon beta-1a) and, recently, Gilead’s hepatitis C drug Harvoni (ledipasvir/sofosbuvir).  Cigna based the Harvoni contract on elimination of the disease.

Hepatitis C

Arguably, disease elimination would reduce high cost liver transplants – a significant and valuable outcome.  Presumably, that is why Cigna, Anthem, Aetna, Humana and United Healthcare – with their longer, medical benefit time to value equation - all contracted with Gilead for Harvoni. They did so exclusively, presumably for better discounts.  Prime Therapeutics, owned by a number of Blue Cross plans contracted for both Harvoni and AbbVie’s Viekira Pak.

Meanwhile, Express Scripts contracted exclusively and presumably at a deep discount with AbbVie for Viekira Pak, excluding Harvoni from its 2015 formulary.  Viekira Pak is a four pill a day regimen to Harvoni’s one pill, with similar effectiveness and different safety profiles.  The latter comes from a review by Advera Health Analytics, which analyzes real world outcomes data.

Payer Cost

Advera Executive Vice President, Jim Davis, argued that exclusive deals emphasize the payer trend of focusing on immediate savings rather than overall outcomes, total cost of care and most importantly patient safety.

He echoed findings of a 2014 survey by the consulting firm EY that found “payers are highly focused on immediate cost containment, which means that the longer-view approach that emphasizes outcomes and keeping total costs down is irrelevant to payers.”

Express Scripts clearly is not alone in its short-term focus on controlling immediate costs.  However, it alone of the major PBM’s has the shortest time to value horizon because its “center of gravity” remains the pharmacy benefit transaction.

Competitor Time to Value

Both Caremark and EnvisionRx are subsidiaries of providers CVS and RiteAid respectively.  CVS recently inked a big data deal with IBM’s Watson cloud to predict patient health and RiteAid is pursuing innovative care initiatives with EnvisionRx.  OptumRx, and now Catamaran, are part of UnitedHealth Group, which concentrates on linking “demographic, lab, pharmaceutical, behavioral and medical treatment data.”

Synchronizing Express Scripts

Often offered in answer to the question of how Express Scripts will synchronize with value-based health care is a merger or other arrangement with Walgreens mirroring CVS/Caremark.  That may be part of a solution, but it will not be the entire or sufficient answer.

Also not the answer, but still important, Express Scripts should remain independent and continue to leverage its size and scale to lower drug prices.  Ironically, its assault on Giliad’s Solvadi and Harvoni, and then its exclusive contract with AbbVie, lowered Giliad’s prices, benefiting Express Scripts’ competitors.

Anthem Contract

It is through Express Scripts’ relationship with Anthem that the PBM can extend its time to value horizon and synchronize with value based health care.

Key will be the creation of a new, outcomes-focused collaborative thrust involving Anthem’s HealthCore, which is conducting real world evidence research with drug manufacturers, Cigna and its innovative payment models and the Lab at Express Scripts.  The only alternatives would be losing the Anthem business or relegation to functional role, much like Medco’s with UnitedHealth Group, the pending 2013 loss of which led to Express Scripts’ acquisition of Medco in 2012.

Notably, Anthem CEO Joe Swedish told investment analysts during a conference call on his company’s acquisition of Cigna “We do believe there’s significant value and opportunity from a better pharmacy contract.”  Cigna CEO David Cordani, who will serve as COO of the combined company added, regarding Cigna’s PBM business, “We have meaningful optionality relative to the program as it stands, and you should think about that optionality as being preserved and further expanded.”

Back to the Future

In the face of this challenge, Express Scripts would do well to go back to the future, twenty years ago when it launched a visionary effort to link pharmacy and medical claims.  Embodied in a “before-its-time” subsidiary called Practice Patterns Science (PPS), the initiative sought to build clinical data warehouses for health plans that organized all of a patient’s financial medical claims into meaningful, condition-specific, longitudinal episodes of care.”

Express Scripts’ CEO at the time, Barrett Toan, explained, “Having identified an episode of care for a patient, the drug therapy costs for the episode are compared to the associated medical costs.  What we’re finding is, in some cases, the drug costs are helping us control the overall costs.”   He pointed to a $380 reduction in epilepsy medical costs resulting from using a newly approved drug costing just $30 more.   An episode is a time line, which may be long or short depending on the nature of the disease.

Epilogue

With the DeLorean time machine at the ready, enter target destination California and target date April 3, 2015.   Flux capacitor powered, you will arrive in a Federal court where Dr. Douglas Cave won a $12 million patent infringement suit against UnitedHealth Group over the PPS technology.

Cave had been president of PPS and, when Express Scripts shut down the subsidiary.  The company gave him the intellectual property rights, including the disputed patent for physician efficiency measurement.  He now operates Cave Consulting Group in San Mateo, California, and filed an anti-trust suit in July against UnitedHealth Group alleging UHG obtained its patent laws fraudulently and violated anti-trust laws.

Stephen Littlejohn is President of Climb the Curve Communications. He can be reached at selj@climbthecurve.com and on Twitter @ClimbtheCurve. This article was originally posted on his website.