The Takeaways: Week 39 of 2021

A periodic review of articles, newsletters, and podcasts that I found interesting, inspiring, or otherwise worth remembering.

Closed Tab of the Week

Maitreyee Joshi, The Prescription. A Drug’s Convoluted Journey from Factory to Patient (April 5, 2021)

Joshi's account focuses on the role of PBMs: pharmacy benefit managers.

As prescription drug coverage expanded in the 1960s, health insurance companies found the parallel increase in administrative overhead for tracking benefits and claims extremely burdensome. While this was different from the core competency of an insurance company (managing benefits and claims for medical treatment, not tracking the disbursement of drugs to patients or negotiating pricing with drug companies), the increase in scale was also the consequence of the creation of Medicare and Medicaid. Taken together, these trends opened a space in the economy for the emergence of a type of business that would be dedicated to solving the problems that the insurance companies didn't want to tackle: the PBM.

Once in that space, over time the PBMs took steps to formalize it and give it a distinct and wide-ranging set of rules and systems that define their relationships with pharmaceutical companies, pharmacies, insurance companies, and individuals.

[Today,] PBMs are the ones who decide which drugs you can get at the pharmacy and how much you pay for them. They do this by managing prescription drug benefits on behalf of insurance companies, employers, Medicare Part D drug plans, and other payers. They negotiate drug prices with manufacturers as well as negotiate and process reimbursements for dispensing drugs with pharmacies. They also evaluate the performance of pharmacies.

Additionally, these different functions often have a very low level of transparency. One-sided or misaligned incentive structures arise. For example, Joshi discusses the pharmaceutical formulary and its tiers. The tiers are intended to steer pharmacists and other providers toward preferred drugs rather than others (and ostensibly to give patients a lever for keeping their out-of-pocket costs down). But formulary tiering can get tied into the rebates that PBMs negotiate with pharmaceutical manufacturers.

Drug manufacturers selling expensive brand drugs can afford to pay a lot in rebates while manufacturers selling cheaper generic drugs can’t. Thus, more expensive, less effective drugs may end up being covered by payers while cheaper, more effective drugs may not.

If rebates get too great, drug manufacturers can raise prices to keep their bottom line stable.

There are similarly slippery and hard-to-see dynamics happening in the PBMs relationship with pharmacies and insurers. The PBM is paid by the payer for its role. The "spread" between that revenue and what the PBM pays the pharmacy can be surprisingly wide. The PBM also levies fees on pharmacies, along with penalties for failing to meet quality measures. Finally, the PBM landscape has seen significant consolidation over the last decade.

Joshi contrasts this system with quick accounts of two emerging disruptors: GoodRX, and Amazon Pharmacy. Instead of trying to work within the obscurity of the PBMs typical flows of rebates, reimbursement, and other financial vehicles, here the model starts with cash transactions in situations where insurance is not a factor. This can be because the patient has no insurance, or the prescribed drug is not covered by insurance.

The post closes with a summary of current ideas for reform, but also with a warning about how easily a shallow reform could be absorbed and annulled:

As much as I like all of these reforms, we have to be careful and tackle the underlying structural factors giving rise to these issues or else the same phenomena — rebates, spread pricing, etc. — but under a different name would emerge.

CMD-W

Podcasts

Melissa Perri, host. Product Thinking. Episode 35: Dear Melissa - Answering Questions About Experimentation (September 29, 2021)

Newsletters

Ted Gioia, The Honest Broker. Drone Attacks: The New Sound of Contemporary Music (September 29, 2021)

As a final thought, let me suggest that the current trend is the latest episode in a 2,500-year battle between two opposed visions of music—a conflict that began with what I’ve described elsewhere as the Pythagorean rupture. Pythagoras, with his championing of tuning systems for Western scales, wanted music to consist of notes—each one crisp and clear, and played with mathematical precision. This vision has dominated Western music for centuries, but it has never completely eradicated an alternative perspective which creates music out of sounds, not notes, and refuses to be limited by the conventional notions of playing in tune. It takes full advantage of all the resources hidden between the individual notes in the scale.

Chas Roades and Lisa Bielamowicz, MD, The Weekly Gist. October 1, 2021

On Thursday the Department of Health and Human Services (HHS), along with other federal agencies, released the long-awaited second half of its proposed regulations implementing the No Surprises Act, passed by Congress at the end of last year, which bans “surprise billing” of patients who unsuspectingly receive care from out-of-network providers. The interim final rule, which will take effect on January 1st after a comment and review period, lays out a process for addressing disputed patient bills, first through a 30-day “open negotiation” between the patient’s insurer and the out-of-network provider, and then through a federally-managed arbitration process. Of most interest to insurers and providers who have lobbied fiercely for months to ensure a favorable interpretation of the law, the new regulation specifies that the outsider arbitrator, to be agreed upon by both parties, must begin with the presumption that the median in-network rate for services in the local market is the correct one.

Olivia Webb, Acute Condition. The AMA is more than a trade organization (September 30, 2021)

On one hand, the AMA has helped standardize medical training for more than 100 years. On the other, the AMA partially controls residency slots, makes hundreds of millions of dollars a year on licensing fees for an essential billing mechanism, and has perpetuated the primacy of specialists over generalists. All of these have served to harm independent physicians, keep the physician labor market tight, and otherwise make it more difficult or complicated for patients to receive care. Reforming these aspects of healthcare requires getting the AMA on board.

Articles

Evan Allen, The Boston Globe and STAT News. Prosecutors allege two individuals preyed on those searching for addiction recovery help (October 1, 2021)

The charges paint a picture of profiteers who saw America’s opioid crisis as a personal boon, raking in cash to send fragile, hopeful people far from their homes and support systems to facilities that often offered little in the way of real treatment, and frequently kicked them out.

See also Desperate for addiction treatment, patients are pawns in lucrative insurance fraud scheme from 2017.

Michaela Althouse, Technical.ly. On its fifth anniversary, here’s a look at how Black Code Collective has impacted the DC tech community (Septemb 28, 2021)

“As we’ve grown, the founders have had to find ways to make sure that this can last the long-term,” [cofounder and software engineer Taylor] Poindexter said. “Because one thing we wanted to really differentiate us from other tech meetups that we had seen when we started this, is that we didn’t want to be around for a couple of years and fizzle. We wanted to be able to give people long-term quality.”

Erin Brodwin, STAT News. Telehealth has rapidly expanded. But companies are still struggling to reach rural populations (September 30, 2021)

Even now, as employers rush to add virtual care to their benefits, many telehealth companies have avoided rural areas. Several acknowledged to STAT that most of their users remain in urban and suburban areas, and they’ve made far less progress than they’d like to in reaching rural patients. The companies recognize they face an uphill battle. Beyond the foundational barrier of broadband access, providers must contend with questions about reimbursement rates, strict rules on interstate licensing, and a hazy road map without clear inroads for reaching rural patients and providers.

Austin Z. Henley. When users never use the features they asked for (September 29, 2021)

This is a story of a time I built exactly what developers told me they wanted, and then they didn't use it. But this time it isn't that simple. I had a lot of evidence showing the need for these features. So why weren't they using it?!

Adam Johnson. This Blog Is Now a Pythonic Pelican-Powered Publication (September 13, 2021)

Johnson's blog was previously a Jekyll site. Like him, I moved this site to Pelican - and for a number of the same reasons.

Rebecca Pifer, Healthcare Dive. AMA calls out shrinking payer competition amid rising antitrust interest in Washington (September 29, 2021)

But large health insurer consolidation has been rare since the DOJ opposed the mergers of Anthem and Cigna and of Aetna and Humana in 2016.

Instead, most recent market concentration has occurred when health plans exit relevant markets, leaving a greater share for the companies that remain.

Darius Tahir, Politico Future Pulse. When the price isn't right (September 29, 2021)

It turns out, Harvard economist Amitabh Chandra says, that patients don’t really like to shop around after all. In research Chandra helped conduct on price transparency results, patients barely used the products — and often decided on higher-priced medical services.

“At some point, we should realize shopping for health care is not like shopping for cars and computers,” he said. “When I’m shopping for computers, I’m fit, I’m well-rested. When I’m shopping for health care, I’m tired, I’m confused.” And, tech promises aside, that makes all the difference.