Updated: The Tale of Phil and Pill

Update:

Please note that PillPack and ESI settled their differences and PillPack is now in ESI’s network.  Please note this story.  Some days, nice guys do finish first.

http://www.bostonglobe.com/business/2016/04/29/pillpack-patches-contract-spat-with-huge-benefits-companhy/dDS6AKjGmqfnh0lSSfM08H/story.html?event=event25

 

By Susan Hayes

Over the last few weeks, I have had the opportunity to present at several conferences on prescription drugs. The focus was very typical, if you have sat through any of these presentations: How can benefit managers lower cost (or reduce the anticipated trend of10% to 15% increases in cost) and maintain higher quality outcomes for patients? What is my PBM doing to help me in this area?

If you talk to a PBM representative the focus of many of their “cost containment” programs are on adherence and steerage into the PBM-owned mail service or specialty programs. I certainly think keeping patients on their medication is a worthwhile effort. But unless PBMs have become creepy spies in our bathrooms, few can determine if patients actually take a medication. Most PBMs determine “adherence” by the fact that the PBM sent you the medication and assumes you take it. But medication possession, which is how many PBMs determine compliance, is not medication adherence. So sending you boatloads of medication is only driving PBM profits, not helping your health outcomes.

There is little talk in any PBM presentation about narrower network or really any effort at network transformation. It is about time we take to task the PBM industry on how they construct the retail, mail and specialty channels or networks. Does a 1,000 employee company with all the members in Illinois really need 65,000 pharmacies? Of course not. Why don’t PBMs configure retail networks around their clients? After all, if I can get Starbucks to make me a double expresso shot latte soy frappuccino, why can’t an employer, union or health plan, get the network that makes sense to their membership or workforce?

The overarching reason is of course that many PBMs do not reimburse pharmacies the same amount that they charge plan sponsors for the same transaction, commonly known as taking spread pricing. So if you want to construct your own network, you need to know how much the pharmacy is getting reimbursed so you can select the most cost effective pharmacies. PBMs don’t want you to know what is being reimbursed, hence, no custom networks.

But is there an even worse reason for PBMs not wanting to create networks around patients and plan sponsors? To answer that question, let’s talk about two Phil(idor) and Pill(Pack): Philidor and PillPack.

Philidor is a closed pharmacy that was kicked out of many PBM networks after it was exposed that Philidor and Valeant (a drug manufacturer) was involved in an Enron-esque scheme. The scheme worked like this:   All shipments to Philidor and other pharmacies in the Philidor pharmacy network were not recorded in Valeant’s consolidated net revenue. Sales were recorded only when the product was dispensed to the patient. All sales to Philidor and Philidor network pharmacies were accounted for as intercompany sales and were eliminated in consolidation. Sales were not included in the consolidated financial results that Valeant reports externally. Any inventory at pharmacies in the Philidor pharmacy network were included in Valeant’s consolidated inventory balances – there were no sales benefit from any inventory held at these specialty pharmacies and inventory held at the Philidor pharmacies is reflected in Valeant’s reported inventory levels. The $69 million at wholesaler acquisition cost of products shipped by Valeant to Philidor were not recorded as revenue to Valeant when shipped to Philidor. When Philidor dispensed those products Valeant recognized the net realized amount due from patients and payors (approximately $25 million) and reduced the associated inventory from Valeant’s balance sheet. In this case, it is estimated the net amount of revenue for the $69 million at WAC would be approximately $25 million (website of Wall Street Oasis).

Point being, Philidor was a bad apple and yet it wasn’t until months later that the big PBMs kicked Philidor out of their networks. Well, since Philidor was in the headlines, the PBMs didn’t have much choice. Before Philidor was in the headlines and out of the network, many PBMs including Express Scripts, CVS/Caremark and Optum/Catamaran reimbursed Philidor and charged clients for Philidor’s dispensing without ever “credentialing” Philidor or even asking a question about the large amounts of Jublia being dispensed (a run on America’s toenails?). Or at least, let’s hope that when clients funded the PBMs for these prescriptions, the PBM had not already suspended payment, because that would be fraud, right?

Now let’s talk about PillPack. PillPack promotes itself as a full-service pharmacy that “makes it easy for people with complex medication regimens,” and it does so by managing their refills and coordinating with their insurer, along with pre-sorting and packaging their medications “into individual packs organized by date and time.” Doesn’t this pharmacy sound like a breath of fresh air that gets at the issues of compliance in a much better way than the PBMs who just ship products in hopes that patients take their medication? You would think that PBMs would welcome a partner like PillPack. But what happens? Express Scripts boots them from the network last week. Yes, you read right. A pharmacy that is actually innovative and promotes the very thing PBMs talk about – adherence – is kicked from the network, as opposed to a pharmacy that is kicked from Express Scripts network months after it has been exposed as a fraud.

What reasons did Express Scripts kick PillPack from the network? On Express Script’s webpage it states that (website of Express Scripts):

“PillPack falsely claimed it was a retail pharmacy when in fact the majority of its prescriptions are delivered via mail; it does not possess the necessary URAC accreditation that Express Scripts requires; and it shipped medications to at least one state where it was not licensed by the state to do so.”

If PillPack conveniently packages medication for patients to drive better adherence, why should Express Scripts have a problem with that? If you provide 30 days supply of medication to a member, what is any difference in shipping the medication, hand delivering the medication or handing a 30 day supply to a member over the counter? Maybe Express Scripts just doesn’t want the competition of another “mail order” vendor. And I can assure you that only a handful of retail pharmacies in any PBM’s network are URAC accredited. URAC cannot possibly accredit all 65,000 retail pharmacies in America, nor should all retail pharmacies be expected to be URAC accredited.

As stated by TJ Parker, founder of PillPack:

“PillPack has been working with Express Scripts for the past two years. We entered their network as a retail pharmacy, using the retail license we hold from the State of New Hampshire. Because PillPack is a new model of pharmacy, we don’t fit cleanly within Express Scripts’ operating framework. They distinguish between retail and mail-order pharmacies. This is their internal distinction— not a legal one. This discrepancy (the “misrepresentation”) is a reason they cite for our removal.

This is about Express Scripts’ business framework. It has nothing to do with our ability to operate legally as a pharmacy. We successfully partner with other PBMs and are in good standing with all of our state-issued licenses across the country.

Additionally, the misrepresentation claim holds little water when you consider the fact that we had multiple conversations with more than 15 people across the organization including multiple senior executives dating as far back as early 2015 where we disclosed the number of customers we had, our business model, internal process and policies, and the states we delivered prescriptions to.

PillPack is currently licensed in the entire continental United States as a non-resident pharmacy and all licenses are currently in good standing with their respective boards of pharmacy.

Historically, there were three states in the country that did not require non-resident pharmacies to register to deliver medications to their state. In 2015, 2 of those 3 states changed their regulations. We immediately applied and were licensed in 1 of them, but unfortunately, did not realize the other changed their rules as well. As soon as we realized this, we immediately filed for licensure and stopped accepting any new customers in the state. We were issued the license shortly thereafter and we are currently licensed and in good standing with the state previously referenced.”

Who is doing the misrepresentation now?

If we are to find ways to improve patient health, we must continue to task our Pharmacy Benefit Manager community to get it right. We must ask them to better monitor the networks so that $69 million of drugs are not dispensed and paid for by plan sponsors to fraudulent pharmacies. We must also push PBMs to look for new and innovative programs, like PillPack and not find excuses to kick these valuable partners out of the network.

When can network customization in the PBM industry be as easy and common as a double expresso shot latte soy Frappuccino?

References

Martin, D (2016). PillPack Is About to Lose a Third of Its Customers. Boston Info. Retrieved from: http://bostinno.streetwise.co/2016/04/14/pillpack-vs-express-scripts-over-customers-it-will-lose/

Website of Express Scripts (2016). Maintianing Quality Pharmacy Netwowrks. Retrieved from http://lab.express-scripts.com/lab/insights/pharmacy-options/maintaining-quality-pharmacy-networks

Website of Wall Street Oasis. WSO Decides: Valeant Pharmaceuticals, fraud or not? October 24, 2015.   Retrieved from: http://www.wallstreetoasis.com/forums/wso-decides-valeant-pharmaceuticals-fraud-or-not