Online Rx Price Comparison Tools, Drug Discount Card Use Soars in Weak Economy

Obama Administration Pushes Rx Imports; PBMs and Pharmacies Stand to Benefit

After nearly a decade of fitful starts and half measures, the U.S. may be poised to start large-scale importation of pharmaceuticals from abroad. Lawmakers pushing the initiative are confident this is the year drug importation legislation will finally be enacted without the poison pill”provision that had allowed HHS secretaries to block the practice under previous laws by refusing to certify that the drugs coming into the U.S. were safe. Both President Obama and his nominee for HHS secretary strongly support drug importation, which advocates say would save the U.S. roughly $50 billion over 10 years. Industry observers tell DBN that the effort this time is “the real deal,” but contend that such a plan remains fraught with safety issues, including the potential to let in counterfeit drugs. And some critics claim the only entities that would gain financially are intermediaries, such as PBMs, wholesalers and pharmacies. Meanwhile, a pharmacy executive at a large health plan that borders Canada says Rx importation would bring new challenges, dilemmas and complexity”for health plans and PBMs. Still, the latest momentum for Rx importation stems from a bipartisan group of senators who on March 4 reintroduced the “Pharmaceutical Market Access and Drug Safety Act” (S. 525). The bill would allow licensed U.S. pharmacies and wholesalers to import FDA-approved pharmaceuticals from a limited number of industrialized nations, where brand-drug prices can be half of what they are in the U.S.

Online Rx Price Comparison Tools, Drug Discount Card Use Soars in Weak Economy

Utilization of Web-based prescription drug pricing tools and Rx discount programs has spiked dramatically in recent months, according to pharmacy executives who point to the weak economy and greater employee cost sharing as likely reasons for the trend. The likelihood of a drawn-out recession could mean that such programs will see even more demand in the coming months, they tell DBN. Aiming to address the demand, at least one large health plan, WellPoint, Inc., intends to significantly increase marketing for its own prescription assistance card, which already is soaring in usage. According to a Families USA report on March 4, roughly 86.7 million Americans were uninsured at some point during 2007 and 2008. Adding to the gloom, the Labor Department on March 6 reported that the unemployment rate in February soared to 8.1%, the highest level in 25 years. And Hewitt Associates on March 4 released a survey of 340 employers that finds 65% of companies plan to shift more health coverage costs to employees in 2010. Pharmacy executives in the trenches say they are starting to see the dramatic consequences of this economy on their services.PatientAssistance.com, for example, is experiencing a 25% to 30% increase in daily hits to the site compared with last year, says Rex Bowden, president of the online nonprofit group that helps individuals find lower-priced drugs through the thousands of existing patient assistance programs, including free programs offered by manufacturers and cash-coupon programs. “There is a phenomenal amount of interest and inquiry,”Bowden tells DBN. “670,000 Americans got laid off last month, and maybe 20% of those took COBRA. So that means 80% — 500,000 people — didn’t. Of that 500,000 people, about 20% of them take prescriptions. That’s a lot.”Bowden also says that 80% of the time, his organization is able to find a discount that gets the pricing equal to that of a PBM’s price. “And if there is any type of copay program available, we try to match those up as well.”Online price comparison firm DestinationRx, Inc. is seeing an even greater uptick in utilization of the tool, according to James Yocum, executive vice president. He says that from 2005 to 2006, traffic at the site dropped off by an average of 60% following the introduction of Medicare Part D. And from January 2007 to May 2007, there was no growth whatsoever, Yocum tells DBN. Then growth started picking up in June 2007, he says. “From June ’07 to October of ’08, we had a 144% compounded annual growth rate,” Yocum says. “The growth rate has been unbelievable.”Yocum says he’s “never seen this kind of price sensitivity before,” and attributes the increased utilization in part to more employers shifting health care costs onto employees through coinsurance plan designs.“It’s a combination of factors,” he says. “The pain of the employer, and they’re making that a shared pain by changing to coinsurance, and the pain that the employees themselves feel. Maybe they had a teaser-rate mortgage, or a spouse has lost a job. So they’re using the tool a lot more in this environment.”The same story is being played out at Medco Health Solutions, Inc., where the PBM is seeing significant utilization increases for its online tool, My Rx Choices. Visits to the site increased following Medco’s win in 2007 of the Blue Cross and Blue Shield Association’s Federal Employee Program (FEP) pharmacy benefit contract, says Tom Feitel, chief Web officer at Medco. “But what I saw was a rather amazing, dramatic increase in yearover-year views as soon as the FEP volume was filtered out,” he says in an interview with DBN. “Beginning at the end of January, we’re seeing anywhere between a 20% and 25% increase in both the daily use of the tool, and more importantly, the number of kits that get printed out at the back end so that people can go talk to their doctors,” Feitel says. “It looks like the inflection point is in January and continues at an accelerated pace since then over the last six weeks.” The tool had more than 10 million visits last year, he adds. Some of the recent increase may be due to promotional efforts, he notes. But other factors are at play, including the economy. “For us to be running at over 20% over the last six weeks is a very powerful indicator that there has been renewed interest in people trying to do everything they can to pay the least amount they can for their medications,” Feitel says.

Making Sense of Discount Rx Marketplace

With booming demand for discounted pharmaceuticals, and many players seeking to meet that demand, some consultants are trying to make sense of the changing marketplace. “Everyone is struggling to organize their operating environment around these programs and to understand them,” says John Singer, founder of Blue Spoon Consulting, which released a “briefing note” recently on the market dynamics of Rx assistance programs. Chris Soderquist, president of Pontifex Consulting and a co-author of the note, says many players are trying to deliver safety-net services. “But those pieces are isolated and not working in concert,” he tells DBN. “There are gaps and redundancies, and without really being able to get some framework for seeing how those components dynamically fit together to achieve some sort of large systemic goal, you’re going to see inefficiencies in the system.”

Use of WellPoint Discount Card Increases

WellPoint is one major industry player that has stepped into the patient assistance marketplace. The insurance giant last year launched its NextRx Prescription Savings Card, which is available at no cost to people who don’t have pharmacy benefits. It can provide consumers with average savings of up to 22% on brand drugs and 50% on generic drugs, says Chris Rodino, the product development consultant at WellPoint who oversees the program. In 2008, the program processed 115,000 prescriptions, he explains. In the first two months of 2009, it has already processed 164,000 prescriptions, he tells DBN. “We’re on course to create something that is much bigger than what we did originally,” says Rodino, noting his goal is to process 1 million prescriptions in 2009 and greatly expand marketing through a dedicated Web site. More than 53,000 pharmacies participate in the program. The card is financed by a small member transaction fee and does not provide a revenue source for WellPoint, Rodino says. But that’s not the aim of the card, he adds. The card is designed to help individuals without pharmacy benefits, including former WellPoint members who have lost group and individual coverage. “We can target those people flat out if this is occurring,” he says. “We know times are tough; we want to do something that indicates our commitment to making things better. Here, have this discount card, you can utilize it [and] anybody in your family can utilize it.”Rodino too sees evidence that the uncertain economy is driving demand for such programs. In 2008, for example, the average savings per prescription was $16.50, but so far in 2009, the average savings has been $23.46, he says. “Where we’re seeing an increase in dollar savings per script, somewhere along the line there was a contribution going to that prescription that is now no longer there,” he says. For example, if a person loses coverage for Lipitor and now runs that costly script through the discount card, his or her savings is going to go up, Rodino explains. Contact Bowden at rx@group-net.org, Yocum at jim.yocum@destinationrx.com, Feitel through Jennifer Luddy at Jennifer_Luddy@medco.com and Rodino through Lori McLaughlin at Lori.McLaughlin2@anthem.com

WellPoint May Seek to Sell PBM; Stand-Alone PBMs Eyed as Buyers

Health plan giant WellPoint, Inc. reportedly has put its PBM NextRx on the auction block, a move that has long been urged by some in the investment world and could provide a significant market opportunity for a potential buyer. The “Big 3” PBMs — Express Scripts, Inc., Medco Health Solutions, Inc. and CVS Caremark Corp. — are seen as likely suitors for NextRx, the largest PBM owned by a health plan. WellPoint has roughly 35 million covered lives. But one analyst tells DBN that pharmacy chain Walgreen Co. also could be eyeing the PBM as a way to compete with rival CVS Caremark and jump into the Medicare Part D market. The rumored potential sale, valued at up to $5 billion, was first reported in the March 5 edition of the Financial Times. A WellPoint spokeswoman told DBN that it “does not comment on rumors or speculation” regarding potential mergers, acquisition or divesture activities. But that hasn’t stopped others from speculating. “This is an issue that investors have been asking the company about over the last several quarters,” Matt Perry, an equity analyst with Wachovia Capital Markets, LLC, said in a March 5 research note. WellPoint’s PBM primarily serves its 12 million commercial fully insured customers, he said. The firm has not disclosed the profitability of the PBM, but has reported that it processed 420 million claims in 2008, and that its PBM mail penetration is low, perhaps 5% to 10%, Perry said. WellPoint’s PBM “generates a significantly lower margin than the Big 3 PBMs, in our view,” he added. While the stocks of Medco and Express Scripts trade at roughly 14 times earnings, WellPoint trades at less than six times earnings, he said. NextRx could be worth between $2 billion and $3 billion, Perry added. “By potentially selling the PBM, [WellPoint] could unlock this unrecognized value, while focusing more narrowly on its health insurance business instead of operating a PBM as well,”Perry said.

Might Walgreens Be a Suitor?

One analyst says that Walgreens may have its eye on purchasing the PBM, particularly as it competes head-tohead with CVS Caremark. Ever since Caremark and CVS merged in 2007 (DBN 4/6/07, p. 3), there has been a recurring rumor about whether Walgreens is going to buy a PBM, said B. Kemp Dolliver, managing director at Cherrystone Hill Capital. The retail/PBM model works well with the Part D market, he tells DBN. “It’s an individual sale. You’ve got that relationship with the pharmacist that can be very influential,” he says. Walgreens is one of the few significant drug retailers that didn’t set up a Part D plan to participate in Medicare, Dolliver explains. “This could be a way for them to get into that game,” he adds. A Walgreens spokesman said that the company doesn’t comment on speculation regarding acquisitions. “But I’d also point out that in the past we’ve stated that we’re not interested in large-scale PBM acquisitions,” says Michael Polzin. He also notes that while Walgreens does not have a direct Part D product, it does provide PBM services for a few Part D clients. One of the issues confronting any potential buyer will be to preserve the PBM’s customer base, says Dolliver, who notes that all of the client relationships are a function of the Blue Cross brand and WellPoint’s operations. Whoever buys this…they’re going to have to rely on WellPoint to continue to market the product,” he adds. “It’s not a deal killer; it makes it complex.”CMS in January sanctioned WellPoint for various Part D compliance violations, which the agency said included improperly denying thousands of beneficiaries access to drugs that treat serious conditions (DBN 1/16/09, p. 6). Dolliver says WellPoint’s recent problems with CMS might be prompting the rumored sale. “In the eyes of CMS, [WellPoint] can’t run the Medicare benefit, fairly or unfairly,” he says. “That’s the box they’re in.” As such, he adds, WellPoint may be exploring this sale as a way of addressing the “nasty headline” that competitors are using against the firm aggressively in marketing. Contact Dolliver at mailto:kdolliver@gmail.com and Perry through Nicole Nesmith at nicole.nesmith@wachovia.com

Personalized Medicine Is Growing; Plans Need Policies for Coverage

The pace of personalized medicine is accelerating, with roughly a dozen new therapies expected to hit the market between now and mid-2010 that will be paired with a genetic test, according to some experts. Pharmacy executives at health plans and PBMs say new data also are expected soon that will help Rx payers sort out which of these and many other pharmacogenomic screenings provide true clinical value and should be covered. The use of personalized medicine will become increasingly popular in the coming years as both providers and payers recognize the ability of tailored therapies to enhance the practice of medicine and reduce costs over time, including by avoiding adverse events, say proponents. “Making such tests the standard of care can significantly reduce waste, improve patient care and raise the safety profile for powerful new medications,” according to Felix Frueh, vice president of personalized medicine research and development at Medco Health Solutions, Inc. But Frueh also noted the need for more comparative data of genomic testing versus standard of care without the use of personalized medicine.“Pharmacogenomic outcome studies are key and critically important, and they are also growing in number,”he told a Feb. 26 AIS audioconference on personalized medicine. “In the next few years, we will see the results of many of these studies [that] really help us make decisions on whether or not the clinical impact is sufficient and the economic considerations are affordable.”

Determining a Return on Investment

Such data will help health plans, PBMs and other Rx payers determine whether the tests demonstrate a positive return on investment (ROI). Frueh noted that potential savings from the testing include a reduction in the number of hospitalizations and physician visits because patients are put on the right medication at the right dose earlier, he said. Savings also include the potential for increased productivity as a result of patients being less ill and missing fewer days from work, he added. For example, a $500 test for the HER-2 gene could determine whether spending $50,000 for the breast cancer therapy Herceptin (trastuzumab) makes sense, since the drug fails to work in two-thirds of patients who are HER-2 negative. “If you calculate the return on investment as the savings ratio to the cost, it ends up being about 17 to 1,” Frueh said. “The very significant ROI ratio points to the simple fact that this is probably not a problem test for clinical use as well as for reimbursement.”
On the other hand, it is more difficult to determine an ROI for genetic testing used with the blood thinner warfarin. The test costs roughly $150, and the cost of hospitalization due to hemorrhage is roughly $13,500, Frueh said. It would require testing 50 individuals to prevent one hospitalization, for a total cost of $7,500. This works out to a roughly 1.8 to 1 ROI, he said, pointing out that other factors may also come into play. “The point is, the ROI here is less clear,” he added. Meanwhile, some genomic testing should not be viewed from the perspective of a financial ROI, he said. A genetic screening can help prevent potentially fatal hypersensitivity reactions from the use of the HIV drug abacavir and epilepsy drug carbamazepine in patients with a genetic predisposition, he explained. “Even if the cost calculation would return an unfavorable return on investment, these ethical considerations may trump the ROI assessment.” Payers making coverage decisions for genetic tests must, among other things, weigh the tests’ effect on reducing absolute risks versus relative risks, he explained. “If we reduce the risk by 20%, that may sound very intriguing,” he says. “However, if that improvement is over a 1% absolute risk, that may not be all that relevant.”Still, he acknowledges that even a 20% improvement over a 1% absolute risk in the area of cancer might be viewed as a move in the right direction. The Regence Group takes a three-pronged approach to reviewing evidence around genomic testing, said Diane Priebe, supervisor of medical policy at the insurer that operates Blue Cross and Blue Shield plans in the Northwest and another speaker in the audioconference. These are:

• Analytic validity: Does the test accurately identify the gene marker of interest?
• Clinical validity: Does the test accurately identify/predict the clinical response to a drug?
• Clinical utility: Compared to establish treatments, does the test provide information that will improve decisions concerning drug selection or dosing?

“When determining the clinical utility, we feel the best evidence comes from prospective randomized trials that compare treatment decisions with genotyping with treatment decisions made on the best current standard of care,” Priebe told the audioconference. “That’s not always possible, and there are some issues where we need to look at evidence that doesn’t come from randomized trials,” she said. The value of many marketed genetic tests is unknown, said Lynn Nishida, director of pharmacy services at Regence. “Even if it is FDA approved, the question of its clinical utility is not always answered,” Nishida told the audioconference, noting that the tests may range in price from $50 to $2,000 and higher. Nishida also pointed out that genomics is a growing industry, which includes direct-to-consumer advertising and marketing. In 2007, Regence received 55,100 medical claims for genetic tests, representing more than $5 million in billed claims. “That is the genetic tests we could identify using CPT codes,” Nishida said. “That doesn’t even address some of these other tests that are bundled and billed when they receive them in the hospital.”In designing policies, health plans should first identify the tests that can be automatically approved, she said. “What you’re trying to do is narrow down your focus to those genetic tests that you are going to have a more thorough review for medical records,” she said of the tests that may be considered investigational or have not yet been shown to have value. Contact Frueh through Jennifer Luddy at Jennifer_Luddy@medco.com, and Nishida and Priebe through Samantha Meese at sxmeese@regence.com. To purchase a recording of the Feb. 26 AIS audioconference on personalized medicine, please call (800) 521-4323 or visit www.AISHealth.com, and click on MarketPlace.