The Healthcare System’s $200B Black Hole: How the Broken Patient Journey Is Driving Costs

Each year in the U.S., the improper prescribing and management of prescription drugs results in more than $200 billion in avoidable healthcare costs. This figure, while staggering, isn’t altogether surprising. When you examine the underlying incentives of key stakeholders in the prescription drug supply chain, it becomes clear that little alignment exists between those who prescribe our drugs, those who dispense them, and those who take them.

This disparity, in turn, leads us to the real problem driving up avoidable costs: a fundamentally broken patient journey that no one party is responsible for quarterbacking. While misaligned incentives hurt multiple players in this system in various ways, those with the most to lose are:

• Patients, who face a complex, confusing system without proper guidance, and are at risk of high costs and poor outcomes.
  
• Employers, who are on the hook for the avoidable costs that result from patients’ nonadherence, medication abandonment, adverse drug events, emergency room visits, and hospitalizations.
  
  

What is more difficult to extract, however, is who is responsible for managing these costs and ensuring that patients are receiving the safest, most effective therapies. Which link in the supply chain needs to be examined further in order to mitigate excessive costs that result from our lackluster system?

What problems exist in the current patient journey?

Some would argue that accountability should ultimately fall to PBMs, who oversee many of the clinical aspects of their clients’ health plans. In 2020, PBMs are responsible for designing and managing drug formularies and pharmacy networks, implementing utilization management strategies, and overseeing drug education and medication therapy management programs.

Based on this, it would seem to follow that PBMs would also be held accountable to delivering results that support the legitimacy and effectiveness of these initiatives. This, however, is not the case. In reality, traditional PBMs are not financially incentivized to deliver material outcomes on any of these additional services. At the end of the day, PBMs are still making the majority of their profits on a transactional basis, collecting fees each time a drug is dispensed.

In an ideal world, the effective and safe utilization of medications would be a concerted effort between doctors, health plans, PBMs, pharmacies, and patients. Each of these stakeholders is aware that there are multiple boxes that must be checked in order for a drug to achieve its intended therapeutic impact. Still, there is very little coordination happening between the major players in our current system.

First, the healthcare provider must prescribe the right drug at the right dose. From there, a pharmacist must accurately dispense that medication. The patient then must proceed to take the medication as directed. Ideally, the patient’s progress would be tracked by a healthcare professional in order to ensure that the intended outcomes are being achieved, and that adjustments are not necessary. While this process may seem easily manageable on its face, in reality, each of these steps is a common point of failure in the patient journey.

In that first step alone, dire mistakes can be made. Many patients, especially those who are older or suffering from multiple chronic conditions, obtain care and receive prescriptions from multiple specialists. In many cases, these various providers are unaware of the medications a patient may have been prescribed previously. This, of course, can lead to a patient taking two or more drugs that are not compatible, which can in turn lead to an adverse drug event. Adverse drug reactions are a lot more common than we’d like to think. In fact, they are a leading cause of death in the United States, accounting for more than 700,000 emergency room visits and 100,000 fatalities each year. To get an idea of the scale of this problem, these numbers are on par with the fatalities that result from diabetes, the flu, and Alzheimer’s disease each year.

In another common point of failure, many patients will never even attempt to fill a new prescription ordered by their provider. Even when they do make their way to a pharmacy, there is no guarantee that they will take the medication as directed, or even begin the treatment at all. Some patients will abandon their medication at the counter, unable or unwilling to cover the high cost. The outlook for those who do leave the pharmacy with their drugs in tow isn’t much better. Non-adherence affects up to 50% of patients using prescription medications to manage chronic conditions, and this single issue is responsible for more than $100 billion dollars in preventable costs and more than 100,000 preventable deaths each year.

When patients do take their medications as directed, they are more likely to obtain better outcomes; however, with nobody in charge of overseeing their care and tracking their response to the therapy, this isn’t guaranteed by any means. Oftentimes, the need to adjust medications or dosages is missed, as are the opportunities to mitigate adverse effects, improve a patient’s outcomes, or circumvent additional measures and costs that could have otherwise been avoided.

Who do we hold accountable for improving outcomes and reducing excessive costs?

Some would argue that accountability should ultimately fall to PBMs, who oversee many of the clinical aspects of their clients’ health plans. In 2020, PBMs are responsible for designing and managing drug formularies and pharmacy networks, implementing utilization management strategies, and overseeing drug education and medication therapy management programs.

Based on this, it would seem to follow that PBMs would also be held accountable to delivering results that support the legitimacy and effectiveness of these initiatives. This, however, is not the case. In reality, traditional PBMs are not financially incentivized to deliver material outcomes on any of these additional services. At the end of the day, PBMs are still making the majority of their profits on a transactional basis, collecting fees each time a drug is dispensed.

While PBMs do care about adherence in the sense that it keeps patients coming back to the pharmacy, they have little reason to proactively ensure that the drug the patient refills is truly the most effective option available. Despite being the entity that furnishes clinical services meant to improve patient outcomes, the underlying PBM business model provides little motivation for real or meaningful innovation when it comes to the patient experience.

The patient journey is repairable, but it requires a fundamental shift in the PBM business model

We believe that moving from transactional-based profits to a flat monthly fee per member is an essential first step toward aligning employer, PBM, and patient incentives. In coordination with this change, we believe that a PBM that puts meaningful funds at risk based on achieving measurable results across fundamental areas like adherence and outcomes will be more deeply committed to driving innovative solutions that can move those needles.

By tying PBM incentives to improving outcomes, costs, and member experiences, they will be encouraged to educate, guide, and advocate on behalf of patients. With the financial motivations to do so as effectively as possible, PBMs will ensure patients are getting the optimal drug and dose at the most affordable site of fill or care. After validating that the member has started the appropriate therapy, PBMs could check in with patients on a consistent basis to see how they’re responding to that therapy. If they’re not responding as intended, PBMs, in coordination with the patient’s provider, can initiate a new therapeutic course of action.

How can we realize these goals?

Hand in hand with this new business model, PBMs will also need to adopt new methods of delivery to most effectively execute on these goals. In our approach, this consists of an independent, clinical point of view, made available to members 24/7 via a high-touch guidance model, which is enabled by a flexible and scalable technology platform.We believe that this patient-focused approach will, in turn, benefit employers by reducing the occurrence of those unnecessary expenditures currently caused by poor medication management and lackluster member experiences. This modern, more human approach to pharmacy benefits management could radically reduce employer costs, improve clinical outcomes, and, ultimately, drive material improvements to our larger healthcare system. Looking beyond the obvious benefits this system offers employers, making this shift is simply the right thing to do on behalf of the millions of American patients who rely on prescription drugs to survive.