CVS pharmacy recently made an offer to acquire Aetna Health Plan for $66 billion.1 This is a true game changer for two reasons: first, it represents the most significant national integration of service provider and payer. Second, this defensive play by CVS is ahead of Amazon entering the pharmaceutical distribution market. Amazon’s presence will result in consumers having much more control. This shift in control to patients and providers will have an impact on how clinical pathways are used and designed.
CVS is uniquely positioned, because it serves as a pharmacy benefit manager, pharmaceutical distribution channel, and retail provider. As a retail provider, CVS not only has its pharmacies, which have prescribing authority in several states and can act as treatment providers in certain areas, such as vaccination. It also has the ability to operate clinics in many locations.
Pharmacist as Payer
By merging with Aetna, CVS can now wield more clout in price negotiations with drugmakers. CVS is already quite large, managing medications for nearly 90 million customers at almost 10,000 retail locations. CVS can also more effectively manage care as a payer through the ever-expanding role of a health care provider, via its nurse practitioner–staffed clinics and pharmacies.
CVS has been actively moving beyond simple medication dispensing to playing an ever-increasing role in population health. In September, CVS was the first national retail chain to restrict how many pain pills physicians could prescribe.2 Specifically, CVS will be limiting opioid prescriptions to a 7-day supply compared with as much as 20-day prescriptions filled elsewhere.
This move is consistent with the prior decision by CVS to stop selling cigarettes and other tobacco products at its stores. That move made CVS the first chain of national pharmacies to take tobacco products off the shelves. Stopping cigarette sales resulted in an annual loss of $2 billion from tobacco shoppers: a $1.5 billion loss in tobacco sales, with the rest coming from other products tobacco shoppers purchased while in-store. But these moves by CVS to limit opioid prescriptions and tobacco use are consistent with a full-risk health care company focusing on population health, due to their clinical and financial responsibilities.
Center for Value-Based Purchasing for Pharmaceuticals
The shift of providers to payers has occurred before. Kaiser is perhaps the best example of a provider taking on full risk. This recently occurred in response to market conditions in Pittsburgh, with the largest health plan and providers going into each other’s business. University of Pittsburg Medical Center (UPMC) is now a major health plan, while Highmark, the large area Blues Plan, acquired several health systems to enter the provider market.
To improve the delivery of population health, UPMC recently established a Center for Value-Based Purchasing for Pharmaceuticals.3 The objective of this center is to leverage their assets and resources to fundamentally change the way medications are paid for in the United States. This center is being led by UPMC Health Plan’s Chief Medical Officer, William Shrank, MD, who ironically came via a leadership position at CVS.
The Center for Value-Based Purchasing for Pharmaceuticals, which will be housed within the UPMC academic medical center, will bring together the most credible providers and scientists to assist in establishing outcome measures, allowing them to evaluate outcomes. The plan is for this center to provide guidance to payers and at-risk providers that will surely play into how clinical pathways are developed.
As the health care system shifts reimbursement from volume to value, there has been increasing interest in new and more progressive ways for payers and pharmaceutical manufacturers to create partnership contracts that create greater alignment between both parties. Despite this growing interest, such contracts have been hindered by several barriers, including limited collaboration; consensus between prescribers and payers; difficulty measuring value, due to fragmented and limited data sets and lack of consensus on measures; and regulatory concerns.
The stated priorities for the UPMC Center for Value-Based Purchasing for Pharmaceuticals include:
- Dedicated study of various payment models and their simulated impact on cost, quality, and health outcomes,
- Clinical expert development of optimal measures and appropriate outcomes for medications in specific populations,
- Development and testing of new payment models for medications in multiple clinical domains, and
- A commitment to transparency, scientific publication, and broad dissemination of findings
As an initial step, UPMC Health Plan has partnered with RxAnte, Inc to begin measuring and reporting drug performance in several therapeutic categories of interest.4 Results will inform the Center for Value-Based Purchasing for Pharmaceuticals, where success will be measured by its ability to develop, implement, and broadly scale new value-based payment models within UPMC and beyond.
Amazon’s Pharmacy Push
The move by CVS to acquire Aetna is driven in part by concern with Amazon entering the prescription drug business through its application to become a pharmaceutical distributor in 12 states.5 Those states include Nevada, Arizona, North Dakota, Louisiana, Alabama, New Jersey, Michigan, Connecticut, Idaho, New Hampshire, Oregon, and Tennessee, with an application pending in Maine. Interestingly, Washington State, where Amazon headquarters is located, is not included.
This report adds fuel to the growing speculation that Amazon is preparing to sell prescription drugs online. These licenses could be part of an effort to sell directly to hospitals and doctors through Amazon business, which includes a new Amazon Prime shipping program focused specifically on businesses.6
Conclusion
The health care market is quickly seeing a change with regard to treatments being managed by atypical players. Recently, this has meant major pharmacies and health systems taking on risk. This also means a development of tools and channels that will allow patients and providers to be more in control of treatment selection, resulting in clinical pathways being used to assure the right treatment for the right patient, by providers as well as payers. These relationships will be different not only because of changing players, but changing relationships through value-based purchasing. In the future, we should prepare to see many changes happening in the who and the how regarding pharmacy management.
References
1. O’Donnell C, Roumeliotis G. CVS makes more than $66 billion bid for Aetna: sources. Reuters Business News. October 26, 2017. https://www.reuters.com/article/us-aetna-m-a-cvs-health/cvs-makes-more-than-66-billion-bid-for-aetna-sources-idUSKBN1CV3CM. Accessed October 31, 2017.
2. Charles S. CVS to limit opioid prescriptions to 7-day supply. NBC News. September 29, 2017. https://www.nbcnews.com/storyline/americas-heroin-epidemic/cvs-limit-opioid-prescriptions-7-day-supply-n803486. Accessed October 31, 2017.
3. Benner J, Shrank W. Case study: Analyze the priorities, processes, and analytics platforms to support transparency and partnership amongst stakeholders to accelerate value-based purchasing of pharmaceuticals. Presented at: Value-Based Health Care Congress; October 23-24, 2017; Alexandria, VA.
4. Monegain B. UPMC invests in predictive analytics, population health company RxAnte. Healthcare IT News. October 6, 2016. https://www.healthcareitnews.com/news/upmc-invests-predictive-analytics-population-health-company-rxante. Accessed October 31, 2017.
5. Court E. Is Amazon getting into the pharmacy business? This is what you need to know. Market Watch. October 31, 2017. https://www.marketwatch.com/story/is-amazon-getting-into-the-pharmacy-business-this-is-what-you-need-to-know-2017-10-09. Accessed October 31, 2017.
6. Farr C. Amazon is on the brink of deciding if it will make a big move into selling drugs online. CNBC. October 6, 2017. https://www.cnbc.com/2017/10/06/amazon-considering-selling-online-prescriptions-decision-coming-soon.html. Accessed October 31, 2017.
