How Employers Are Changing Health Care and Its Impact on Life Science Business Models
Spend 1 hour a day listening to our curated selection of podcasts during your commute and, if you start on Monday, by Friday you will have a good sense of the massive changes in thinking and activity taking place within the employer marketplace. This understanding will help you pinpoint what you need to learn next and/or how to determine the impact these trends will have on your business. The curriculum “courses” are conversations between our co-president, Stacey Richter, and luminaries at the intersection of health care and employer payers. The conversations take place on Relentless Health Value, a podcast sponsored by Aventria Health Group that features thought leaders from within our network of contacts.
The Why
At a recent pharma conference, a keynote speaker and renowned life sciences strategist said to the audience of pharma executives, “If you want your drugs to get paid for, you better pay attention to what employer plan sponsors want.”
The Backdrop
Renya Spak, a partner at Mercer Health & Benefits, clearly communicated the idea that in the past, employers have not claimed a level of health care influence commensurate with their purchasing power; but this is changing. There are nationwide and very robust campaigns by thought leaders like David Contorno, Dave Chase, Health Rosetta, and others with one main ambition: to drive employers to take control of the value of health care their employees receive for the dollars spent. And the dollars spent are massive. Currently employers pay for two-thirds of the health care delivered in this country, dwarfing the dollars spent by Medicare and Medicaid. Starbucks pays more for health care than they do for coffee beans. GM spends more on health care than they do on steel. Employer health care costs escalate year over year, compounding at a rate far larger than the GDP. And while the spending trend is steep for employers, increases in employee out-of-pocket costs are even more staggering.
It is crystal clear that the current level of employer and employee health care spend is unsustainable. The rate of cost increases must not just stop but reverse. We are past the tipping point.
Implications for the Life Sciences Industry
The more that employers begin to understand and independently manage the way their dollars are being spent, the less power insurance carriers and PBMs will wield. This trend also gives rise to the influence of other players, such as data informaticists, brokers, medical management firms, benefit design consultants, and more.
If it could be considered a sign of the times, 2 pharma executives in the past month have asked us if it would be a good idea to bring on an employer account executive team. Maybe your company is asking itself the same question. We also have more than 1 employer-focused project ongoing, so other companies, including possibly yours, are further along the continuum. In either case, getting a current lay of the land as part of your strategic process is always a sound approach.
2 Ways to Listen
Bookmark this page on your device and click on the links below one by one.
Click on this link on your device, which pulls up a podcast playlist. (Be sure to sort from “oldest to newest.”)
The Basic Scenario
Begin by listening to this 35-minute conversation with David Contorno, who articulates the mind-set of employers and forward-thinking advisors. Pay attention to the underlying theme of his commentary—that employers should not trust intermediaries like insurance carriers or PBMs to work in the best interest of employee health. His advice is to disregard their provider networks and cut out the big PBMs in favor of those like Pramod John (see Day 3) runs. He advises hiring medical managers who intervene on behalf of patients who have just been prescribed a high-cost or not-evidence-based therapy. Notice how the main thrust of his advice is to help employees get to centers of excellence or high-quality providers. Those clinicians who do not have standardized and regimented approaches to deliver evidence-based medicine will not make the cut. That has implications to prescribing. It also elevates pursuing better patient outcomes from a nice-to-have to a must-have.
Next is an 11-minute TED Talk from Dave Chase that outlines the devastating impact of low-value health care in this country. He also covers the results 1 employer enjoyed when taking control of how their money was spent.
Or, alternately, if you need audio only:
What Top-tier National Consultants Are Saying
Spend 33 minutes listening to Renya Spak, a partner at Mercer Health & Benefits, which is arguably the largest employee benefit consultant in the world. Renya talks about how employers are currently “rewriting health care” and their history of disrupting the health care marketplace.
Next up is a 31-minute conversation with Alex Jung, a true thought leader. Alex is a global strategist at Ernst & Young and has a reputation for speaking the unvarnished truth, and such truths are a necessary underpinning for strategies and business plans that will actually work. She speaks about the gag clauses between PBMs and pharma manufacturers and the impact they have on employers. She says that if an employer, in this time and place, doesn’t realize how many parties are taking a slice of their health care spend and cutting secret deals, “they aren’t paying attention.” She also covers “rationalizing resources” like getting rid of the excessive numbers of pharmacies, redundant technologies, and administrative functions. “We have not performed our duty as an industry to ensure that the dollars we’re collecting in premiums … are being effectively used to pay for care.” This includes using data to be proactive about the care employees will get and also to understand how pharma drugs are priced and how much they are costing the employer and why.
Now take a minute or two and look at this PDF, which is a list of the top actions Alex recommends employers take to get better value from their pharmacy benefit spend.
How Employers Are Controlling Pharmacy Spend—Part 1
Listen to Pramod John from Vivio Health talk for 24 minutes about a new kind of specialty PBM that works for a flat administrative fee. These upstart PBMs negotiate directly with pharma manufacturers on behalf of employers and transparently reveal the net-net of the deals cut. They also actively manage patients on specialty medications, including weaning people off expensive drugs that they are not clinically indicated for and removing prior authorization barriers for clearly evidence-based prescriptions.
And then Ross Bjella answers questions for 32 minutes about the impact of high-deductible plans, surprise billing, and a lack of cost transparency. He sees patients delaying or forgoing care because they fear the potential costs. He sees employers backfilling health systems’ lack of population health management. Employers are opening on-site clinics and hiring informaticists to run population health programs for chronic conditions. At the same time, they pore over the details of their health care spend in order to flag low-value purchases—for example, an expensive branded drug which is simply a combination of 2 OTCs or generics that can be purchased at literally 5% to 10% of the cost of the branded product.
How Employers Are Controlling Pharmacy and Other Health Care Spends—Part 2
Listen as Mike Dendy spends 31 minutes on the definition and practical implementation of reference-based pricing and defined contribution health care plans. He speaks with fervor about how employers must understand the prices they are actually paying for services and drugs. This boils down to altering benefit designs to incent employees to be consumers and find the provider organizations that meet their cost and convenience needs. The objective is for employees to understand how much the services and tests they are receiving actually cost.
Next, consider what Richard Steinhart, a former school board officer from Connecticut, has to say. In this 32-minute interview, he speaks to the realization that his school district was facing a hard choice: pay for employee health care or provide students with a quality education and teachers with raises. Hear how he went about reducing health care spend with no diminishment of the care school district employees received. It’s interesting how he pragmatically and successfully approached rationalizing health care spend and cutting out waste, even in the face of a unionized employee base. The plan involved giving employees HSA funds, meaning patients become consumers because they become more aware of the cost of services and drugs.
Last-Day Roundup
On your last day, listen for 32 minutes to Joe Murad, CEO of PokitDok, talk about the impact of high-deductible plans. He also speaks to the growing number of eyeballs on the multitude of middle people who have their hands in employers’ pockets, snatching the hard-earned dollars of both employees and employers alike. Joe talks about ways patients are being empowered to truly consider the costs of services and know what their outlay will be prior to treatment. Patients knowing costs in advance means providers might get more questions about the necessity of services rendered. And it is a short step from there to providers considering how interventions will lead to better patient outcomes. Ask yourself how this consideration spills over into the realm of pharmaceutical products. It has been said that Pharma needs to transform from being purveyors of pills into outcomes companies—and against the backdrop of growing employer influence, this seems reasonable.
Finally, Darren White, founder and CEO of Aduro, chats for 32 minutes about the ways employers are actively striving to improve health outcomes and cut costs. Darren talks about concerns employers have that insurance carriers and providers are generally not particularly interested in. For example, employers have a vested interest to reduce absenteeism and presenteeism. They also want employees who are “better spenders.” Darren does an excellent job articulating how employers think about what good looks like relative to employee health care. This information could be a useful starting point when devising value propositions for employers.
Congratulations!
You can now consider yourself more knowledgeable than 95% of your peers in the latest employer marketplace trends. You can speak up at meetings with total confidence that your points are validated. You have the ammunition to contribute meaningfully in strategic discussions and have a baseline to make decisions. Your expertise spans not only that which impacts employers directly but also extends to insurance carriers, health systems, and PBMs. Employers are their customers after all, and now you are aware of the obstacles and opportunities they face.
One final note that is self-serving but meaningful nonetheless: Aventria Health Group has deep expertise and a long history helping pharmaceutical manufacturers collaborate with employers in pursuit of shared priorities. We have launched and implemented more number one and acclaimed programs than arguably any other agency or consultancy. Our team also includes individuals who have a wide network of contacts and are able to springboard or deepen your foray into the employer space. Furthermore, this is not our first day at the rodeo. We can provide the advice you need to avoid common pitfalls or spending budget dollars that are better allocated in other ways.
Contact David Dierk for more information.
— Stacey Richter is co-president of Aventria Health Group.
The views and opinions expressed are those of the author and do not imply endorsement by Aventria Health Group.