MANAGED CARE March 2002. ©MediMedia USA
The CMO of the nation's largest pharmacy benefits manager says that the company's mission has broadened. One new area of focus: worker productivity.
Alan T. Wright, MD, MPh, is at the center of efforts by the nation's largest pharmacy benefits manager, AdvancePCS, to redefine itself as a "health improvement company." Built through a series of mergers, including the $1 billion purchase of PCS Health Systems from Rite-Aid in 2000, AdvancePCS provides services to 75 million Americans. Last year, the company created the Centers for Health Improvement to conduct population-based research and develop programs focused on improving the total health of specific groups, such as workers, senior citizens, women, and children.
As senior vice president and chief medical officer for the company, Wright oversees disease management research and product development and outcomes research and programs. He draws on extensive health plan and hospital experience, having worked with Maryland Blue Cross Blue Shield, Aetna Health Plans, and Freestate Health Plan.
Wright holds a BS from Pennsylvania State University, an MD from the University of Pennsylvania, and a master's in public health from the Johns Hopkins School of Hygiene and Public Health, where he holds a faculty position. Wright spoke recently with Senior Contributing Editor Patrick Mullen.
MANAGED CARE: How does a health-improvement company, which is what AdvancePCS calls itself, differ from a pharmacy-benefit manager?
WRIGHT: A pharmacy-benefit company focuses primarily on managing and maintaining the pharmacy benefit for its beneficiaries. In contrast, a health-improvement company has a greater mission, to enable the right treatments to get to the right patients. We need to understand how technology moves society, why treatments are used or aren't used, and identify leverage points where we can enhance the delivery system.
MC: How do you persuade nonmedical plan administrators of the value of a health improvement program?
WRIGHT: We can only manage what we can measure, so we need to understand what we can measure. People always are looking for a cause and effect. In the case of managers of health care and in particular payers, traditionally that has been defined as a direct cost offset. If I spend X dollars on pharmacy, I expect Y dollars in reduction of health care costs. That argument has on occasion been difficult to advance. In the modern ambulatory formulary, new innovations are coming out for treating symptomatic diseases. There have been a lot of technological innovations and improvements in drugs that address conditions such as seasonal allergies. People benefit from those medications, but there isn't an obvious cost offset as defined by the traditional direct-payer model. People aren't hospitalized for hay fever. Such treatments make people feel better and make people more functional, yet they don't reduce hospitalizations from surgery, simply because they don't address diseases that require hospitalization or surgery.
MC: Still, those patients' quality of life is better.
WRIGHT: Correct, and quality of life is a good example of an indirect outcome. One issue we encounter as we introduce new ways to measure the benefits of different types of therapies is that they need to be understandable to purchasers of health care. While quality of life makes conceptual sense to everybody, it becomes difficult for a payer of health care to plug into a cost-benefit equation. Quality of life isn't a tangible metric to a payer. Even if the decision maker at that payer understands quality of life, it can be difficult to persuade the rest of the organization to buy in.
MC: What were AdvancePCS's goals in starting the Centers for Health Improvement, covering work and health; health and aging; women's health; school and health, and others?
WRIGHT: The Centers for Health Improvement were created to act as a focus for developing research agendas, projects, and ultimately products that help advance and improve health in society. The Centers can do everything from health services research to improving understanding of how treatments are used in society and understanding obstacles to appropriate treatment, to developing interventions which try to overcome those obstacles. For example, the Center for Work and Health focuses on understanding how illness and decreased functional status related to illness affect work. The primary metric that the Center for Work and Health focuses on is productive time, rather than productivity. The reason for that is that the metric has to be transportable across all types of work settings. Traditional productivity studies tend to measure rates of production, which makes sense in a manufacturing setting but isn't transportable into a white-collar environment. Productive time, which measures the amount of time affected by illness, is a much more understandable type of metric base that all industrial sectors can understand.
MC: What kinds of projects are under way?
WRIGHT: One of the studies that we're doing is the American Productivity Audit, a telephone survey of 25,000 households. We ask if, over the last two weeks, an employed member of the household has missed work, left work early or, very interestingly and uniquely, been at work but functioned at less than optimal capacity. We ask if these things are related to an illness and, if so, which illness. The goal is to create a national reference database that will provide objective measures. We'll then interface with the monthly survey done by the Bureau of Labor Statistics and get a better picture of how illness affects work in the workplace in America.
MC: How soon will the database be robust enough to be useful?
WRIGHT: We have finished about 20,000 interviews. It will be completed in June 2002 with 25,000 interviews. It spans a one-year time frame.
MC: This is all self-reported information?
WRIGHT: It is all self reported. The center uses a survey capability developed by a research company called IMR that AdvancePCS purchased in 1998. One of IMR's core capabilities is survey research focusing on epidemiology. We've done formal rigorous validation studies that support this survey.
MC: How do you foresee the structure and function of managed care plans changing over the next few years? What do they need to do differently to succeed?
WRIGHT: There will be much more attention paid to physician networks. While we've certainly heard about nursing shortages, I've also seen recent reports showing a dramatic decrease in the oversupply of not only physicians but of other types of health care providers. There will be a renewed emphasis in managed care on network management, on improving relationships with provider networks to retain loyalty and build satisfaction. The days of driving down unit prices are gone.
MC: What needs to happen for plans to win over physician networks?
WRIGHT: Over the years, a lot of managed care processes have impacted all types of health care providers in negative ways. Just about every way that managed care approached a physician network had a negative side — how plans required pre-authorization calls, and how they kept changing reimbursement rates and methods. There will always be some dynamic tension between plans and physicians, as there is in any business relationship, but the pendulum is going to swing a little more toward the provider side, which means that managed care will have to reassess some of its business practices. More health plans are going to be assessing the effectiveness of pre-authorization programs and other types of managed care interventions, rather than reflexively saying, "It's a high-cost drug, so we need to pre-authorize it." More and more health plans are going to look at the overall budget impact of the drug or the trend of the drug and then develop simulations to see if, in fact, it is even worth risking the provider network relationship in order to manage the consumption of a given drug. Any kind of pre-authorization program can create some ill will among providers. If you're going to generate that ill will, at least make sure that it's controlling costs. We'll see an increasing trend toward analysis before implementation of pre-authorization, which is a positive step in the managed care industry.
MC: What are some strategies for getting physicians to embrace electronic prescribing?
WRIGHT: Physicians need to be shown how this improves their practice of medicine. Any kind of electronic connectivity initiative needs to make them more efficient, make their lives easier, and help them provide quality health care. To date, that business case hasn't been made in a tangible way to physicians. I expect the gradual adoption of electronic connectivity by the physician community. There's evidence that use of this technology does make the practice of medicine more efficient. As new more electronically savvy physicians enter the marketplace, the barriers to adoption of this type of connectivity will naturally fall. I think within the next three to five years we'll see a dramatic upswing in the use of these devices.
MC: Has the main obstacle so far been that the devices are not efficient enough or that physicians are just not willing to try them?
WRIGHT: The devices have not been viewed as helpful. The fact that physicians need to change how they work creates a barrier to change. The capabilities and the services offered by the devices have been insufficient to overcome that barrier.
MC: How are the expectations of your customers changing as you compete for business?
WRIGHT: On the PBM side of our health improvement business, drug trends and the resulting rising costs of the pharmacy benefit are foremost in their minds. Customers are interested in what we think the trend drivers are, whether this trend is appropriate or inappropriate, and if rising drug costs aren't producing global health improvements, how we can control the cost.
MC: How do you answer those questions?
WRIGHT: One of the remarkable things about the Center for Work and Health is that when you look at the relationship between an ambulatory formulary and direct costs, there's not evidence of the effect of the ambulatory formulary on direct costs. The biggest direct cost drivers in a commercial plan are birth and delivery, OB/GYN, psychiatry, and cardiovascular disease. The biggest direct cost drivers in an ambulatory formulary are antidepressants, proton pump inhibitors, and nonsedating antihistamines. You have to go down to the fourth highest cost driver on an ambulatory formulary, cardiovascular disease and lipid-management agents, before you get to drugs that uniformly save life and limb and easily reflect back into the direct costs. So right off the bat, 10 percent of the cost of an ambulatory formulary doesn't have a great effect on direct costs. It's very difficult to show that increased consumption of antidepressants independently has affected psychiatric costs. But when you look at the drivers of productive time, there is a nice alignment with an ambulatory formulary.
MC: So it's less a question of keeping people out of hospitals than of keeping them at their desks.
WRIGHT: That's an excellent way to crystallize the concept. What we saw in the American Productivity Audit was that the top cost drivers are headache and pain. We call it sad and blue because there is the whole range of melancholy feelings from feeling sad or having problems with daily living, all the way up to formal diagnosis for clinical depression. Other cost drivers of lost productive time are seasonal allergies, abdominal pain, menstrual symptoms, and cold and flu. These fit much better with an ambulatory formulary. When you combine direct costs with those indirect costs, you have almost complete accountability of the cost of an ambulatory formulary.
MC: To what degree have employers and other payers bought into this notion of productive time?
WRIGHT: It's a new notion and there's certainly not uniform acceptance. There are a couple of reasons for that. Traditionally benefit managers have been accountable for the cost of benefits, so their goal is to purchase an efficient and inexpensive benefit. Productive time is more of an issue for a line manager, so you have to go further up in the organization. That is not a traditional sales point for health plans. Persuading employers that maintaining their employees' health is at least as important as maintaining their machinery is a relatively new concept. It's going to take some time to move through the market.
MC: There's been a lot of talk in recent years about the growing role of consumers in the whole health dynamic. What are the implications of that for your business?
WRIGHT: There may be some benefits for consumers in that they know more about therapies. One thing we encounter is that it makes it more difficult to migrate consumers to generics, because of brand loyalty. We're doing some studies now that show that brand loyalty may make some brands' demand curves inelastic. Demand does not drop over time, as we would typically expect. That means they're more resistant to changes in benefit design and to medical-management interventions. It becomes more difficult to move people into more cost-effective therapies.
MC: Thank you.