NCPA Executive Update

NCPA Executive Update delivers insights on legislative, regulatory, policy, and industry developments from NCPA CEO B. Douglas Hoey, Pharmacist, MBA, to NCPA members and pharmacy leaders every Friday.

Is a Health Care Industry Reset Afoot?| NCPA Executive Update | February 2, 2018

by NCPA | Feb 05, 2018

Dear Colleague,

Doug Hoey

Warren Buffet, considered by some to be the greatest investor of our era, has an eye for successful businesses. His Berkshire Hathaway company includes a collection of household names that range from Dairy Queen to Duracell to Kraft Heinz to Fruit of the Loom. This week he announced he is taking on health care.

Amazon, JPMorgan Chase, and Berkshire Hathaway — three companies with combined revenues approaching $500 billion — announced that they are "partnering on ways to address health care for their U.S. employees, with the aim of improving employee satisfaction and reducing costs."

That announcement is notable for several reasons. One, because these three companies employ more than 1 million people. Add those employees' dependents, and that represents health care coverage for 2-3 million people. Two, because of the resources of these three companies. While their combined revenue numbers are huge, maybe the most noteworthy part of the announcement is that the new company "will pursue this objective through an independent company that is free from profit-making incentives and constraints." Again, this is just speculation, but I read that as code for dumping the middlemen who are contributing to the high cost of health care.

My guess is that the massive waste and inefficiency in the U.S. health care system is what drove the three companies to make this announcement. Just this week I spoke with a colleague whose father had an extended admission in the hospital. She shared that the family is constantly ricocheted between providers and hospital officials trying to track down information, next steps, and get a game plan to make sure that everyone is on the same page about the care of their dad. The lack of coordination, information, and waste is not only frustrating, it's dangerous, and monstrously costly.

Who among us has not personally had a similar frustrating experience or knows someone who has? It's one of the reasons the amount the United States spends on health care is about twice as much as peer countries around the world. All of those wasted dollars put the U.S. — including these three companies — at an enormous competitive disadvantage in global business.

In many ways, this announcement makes sense as a next step for self-insured employers. Self-insured still means reliance on the current middlemen — PBMs and others — who are adding costs — perhaps 25-30 percent — with little tangible benefit to justify such a hefty premium.

Normally, an industry full of waste, inefficiency, and dissatisfied consumers feels competitive pressure to change, but health care is so complex, and the incentives are so misaligned that it has avoided wholesale changes despite grandiose attempts by the U.S. government. Perhaps these three companies have had enough and are deciding to do a health care industry reset.

If that speculation is even close to right, I suspect these three companies won't be the only ones to make a run at resetting health care.

What does this mean for community pharmacy? Details from the announcement are scant but, if these three companies actually are trying to change the health care system, community pharmacy has the opportunity to be a major part of the solution — lowering health care costs and improving the whole health care experience. The current system makes health care providers indentured servants to the middlemen. A new, efficient model of health care would empower community pharmacists. In a new model, dispensing prescriptions will be a means to an end — not the end. The end will be optimizing the use of the medication pharmacists are dispensing and coordinating its use with the entire health care system — not in a prescription drug silo.

CPESN® USA positions retail pharmacy in a way that could be perfect for a health care reset. It aggregates the services many community pharmacies are already providing in a clinically integrated network. That's key, because a clinically integrated network allows pharmacies to group together to improve quality and lower costs.

This week's announcement is yet another sign that how health care is currently done in America is unsustainable. If the government won't or can't fix it, the private sector just might.

Doug Hoey

P.S. On Wednesday, the Arkansas House of Representatives Healthcare Marketplace Subcommittee held an extraordinary meeting on pharmacy reimbursements that I think you'll find interesting (and heartening). It's lengthy, but worth your time. Kudos to the Arkansas Pharmacists Association leaders for masterfully presenting a story that more policymakers need to hear.