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Breaking Down Walls

Breaking Down Walls: The Importance for Pharmacy to Connect with the Larger Healthcare Team

I want to tell you about a wall. One that stands between you and the value you create for your patients and the rest of the healthcare system. This wall may be preventing you from helping patients improve their health and preventing sustainable community-based pharmacy business models. The wall wasn’t built intentionally; rather it’s the result of rapid innovation and drug discovery. But, it’s now getting in the way of progress.

The modern version of the Food and Drug Administration was created in 1938. Back then, physicians and pharmacists worked together without barriers. Since then, we’ve had a steady increase in new, exciting drugs. They’ve transformed the practice of medicine and pharmacy. By the 1980s, many new drugs were entering the market. The drug pipeline rapidly accelerated. There were more advanced drugs, more expensive drugs and more patients with chronic diseases.

Prior to expansion, in 1960, drug cost equaled 10 percent of the total healthcare expenditure. That steadily increased, which created market pressure to contain the cost. As a result, the pharmacy benefit was conceived and the pharmacy benefit manager (PBM) born. This created a disconnect between pharmacies and the rest of the healthcare team. A majority of the things we don’t like about the system today are a result of this separation.

As PBMs evolved, they had to discover new ways to generate revenue. Over time, we ended up with concepts like negotiated rates, prior authorizations, co-payments, co-insurance, formularies, maximum allowable cost (MAC), rebate programs, supplemental rebate programs, preferred mail-order, onerous recoupment and, of course, direct and indirect remuneration (DIR) fees. DIRs weren’t the first brick in the wall though, and they most certainly won’t be the last.

The problem is fundamental misalignment. On the pharmacy side of the industry, an arms race ensues to counter lower reimbursement rates. Pharmacies merge and consolidate to achieve lower costs and gain supply chain leverage. The focus becomes entirely on price and not outcomes. This leaves community pharmacies struggling, fighting a losing battle in a game they were never meant to play. Meanwhile, in the rest of the healthcare system, there was an evolution of a similar type. The fee-for-service model grew, causing the system to lose sight of improving patient outcomes. Physicians and hospitals were getting paid for more exams, more tests, more surgeries, more hospitalizations and ultimately more diseases. As a result, our nation’s healthcare bill increased dramatically.

From 1960 until 2008, our country’s healthcare expenses, as a proportion of our gross domestic product, increased from four percent to 17 percent, and we’re heading toward 20 percent. That’s $0.20 on every dollar in our entire economy going towards healthcare. That is, and will remain, completely unsustainable. The Congressional Budget Office has estimated that the entire federal budget will be consumed by healthcare in 20 to 30 years.

In response to these trends, purchasers of healthcare, principally taxpayers and employers, have pushed for a new payment system. Along comes payment reform, and we end up with concepts like 30-day readmission penalties, shared savings programs, bundled payments, merit-based incentive and alternative payment models and narrow networks based on quality of care delivery. New payment models are meant to focus not on doing more, not fee-for-service, but on outcomes, creating an outcomes marketplace.

The larger healthcare system is already starting down this path. We are at the beginning of payment reform, not the end. Care team members are now looking to each other for help. You now have a common cause with them. Making patients better is part of the new business model − a national realization.

We invest $300 billion in outpatient drugs, but we don’t get nearly the return we could if we optimized the use of those drugs. So, for the $3 trillion we spend on healthcare today, only 10 percent of that is on outpatient drugs.

An outcomes marketplace will make medication-use support an investment and not a cost center. The healthcare system will call for help − your help. Payment reform cannot be successful without medication-use support. The average, chronically ill Medicare recipient with multiple chronic illnesses sees 13 different prescribers in one year, fills 50 unique medications in that year and is 100 times more likely to undergo a preventable hospitalization.

For the past few decades, the focus has been on drug cost minimization, at the expense of care delivery. For the next few decades, new incentives to optimize drug use will be ushered in where the left-hand side of the equation is seen as an investment to reduce the right-hand side of the equation. Pharmacists and physicians working together with the rest of the healthcare team is transformative, but there are many financial structures preventing this marriage. The only way to break down the wall dividing them is to come together. Once that happens, we can focus on the care team as a whole, care delivery and patients.

PBMs are playing the game, and they play rough. However, we can change the game. Average complex patients see their primary care doctor 3.5 times a year. They visit pharmacies 35 times a year. You are accessible and well positioned for medication-use support and coordination. A Harvard Business Review article discusses two ways to have a successful business strategy: compete on price or compete on differentiation. All of you will have difficulty competing on price. The price route requires purchasing leverage. Differentiation requires creating customized supports, establishing local relationships and honing your care delivery craft. More outcomes create more payment leverage. Differentiate yourselves by producing outcomes. That is the game you are meant to play.

Bifurcation is occurring in the marketplace: complex patients and complex care vs. convenience care. The complex-care population requires a different set of services: patient-centeredness and local relationships. The convenience care marketplace includes low-risk patients who don’t use a lot of resources.

You have the ability, the capacity and perhaps the privilege, of turning narrow networks on their heads. You have local relationships, professional autonomy and programmatic agility. You can deliver on outcomes. Remember the fundamentals. A diagram exists, but something is wrong with it. There is no arrow between you and the entity that benefits most when you take care of your patients. Your patients want that arrow to exist. We use medications to prevent poor outcomes and downstream costs, and 10 percent of the budget is a small price to pay. You are invested in your patients and your communities. You are an investment, not a cost center. The opportunity to pivot is now. The opportunity to do what feels right and good and effective is now. Train for the race toward better outcomes. Refocus your energy and your efforts. If you do, you’ll thrive in the new healthcare system. You don’t need to wait on regulators or payers. Care team members need you now! Gain sustainability now!

Community Pharmacy Enhanced Services Networks (CPESNsSM

) are helping community pharmacies join together to take advantage of the changes that are happening in the healthcare marketplace. By supporting community pharmacies as they organize, we can help each other know our value, express our value and leverage our value. It has to be expressed correctly and optimally to the rest of the healthcare team. Our goal at CPESN USA, LLC is to build a nationwide network of local CPESNs, focused on quality assurance, quality improvement and practice transformation that is breaking down walls instead of keeping them erected.

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