Consolidations impact generic, prescription pricing
Mergers and acquisitions among pharmaceutical companies has kicked into high gear this year, mirroring the larger trend sweeping across the entire spectrum of the health care industry since the implementation of the Affordable Care Act two years ago.
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According to a recent report from S&P Capital IQ, there were $89 billion in healthcare mergers and acquisitions by the end of March, compared with $56 billion during the first quarter of 2014.
The largest of these deals, by far, has been Actavis’ $66 billion takeover of Allergan. Approved by shareholders at both companies in mid-March, the deal creates a global company with projected annual revenues topping $23 billion and a portfolio that includes more than 1,000 generics, branded generics, established brands and over-the-counter medications.
On the other side of the spectrum was AbbVie’s announcement in March that it would pay more than $19 billion to acquire specialty drug maker Pharmacyclics.
Pharmacyclics markets only one drug, the cancer medication Imbruvica. However, analysts said the deal could provide a windfall for AbbVie since Imburvica retails for about $90 per pill and, depending on the types of cancer they have, patients need to take three or four pills a day for the rest of their lives. AbbVie said it expects the drug to record $1.5 billion in sales this year.
As of press time, the latest round of consolidation involved Mylan attempting to purchase Perrigo, while Teva Pharmaceutical offered $40 billion to buy Mylan.
Critics of the recent spate of pharmaceutical company mergers said the shrinking of the supplier pool that is coming from these combined companies is one of a handful of reasons for recent spikes in the price of generic and branded drugs that made 2014 a record year for drug spending.
To a lesser extent, consolidation has had an affect on overall spending. According to the Express Scripts Drug Trend Report released earlier this year, prescription drug spending in the United States increased 13.1% in 2014 — the largest annual increase since 2003.
Retail clinics benefit operators, their patients
As the country’s healthcare system continues to move away from a fee-for-service structure, retail-based clinics are taking on added significance for the operators of these facilities and their patients.
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For consumers, the growing number of clinics across the country promise convenience and affordability. For retailers, they mean increased traffic and the opportunity to position themselves firmly as key players in the nation’s new healthcare system.
According to the Convenient Care Association, over the past decade the number of retail clinics across the country has grown from slightly more than 100 to nearly 1,900. Estimates are that the number will top 3,000 by the end of next year.
As clinics become a viable option for more patients, operators are forming alliances with other healthcare providers to ensure that they are part of a comprehensive care team that helps drive outcomes.
Executives at the retailers who operate clinics say that forging these partnerships has become particularly critical in light of the Obama administration’s announcement earlier this year that by 2018 half of all payments from the Centers for Medicare and Medicaid Services to providers will be based on performance and health outcomes. In addition, they noted, a growing number of private insurers are moving in the same direction by contracting with health systems and accredited care organizations to provide a full menu of patient services, including access to pharmacies and their retail clinics.
CVS Health has approximately 50 affiliations with health systems and physicians groups across the country. Walgreens Boots Alliance, which operates more than 400 clinics under the HealthcareClinic name, has developed about 25 such affiliations.
Meanwhile, Rite Aid — which operates clinics under the RediClinic banner — has taken a slightly different approach, forming the Rite Aid Health Alliance, a comprehensive care effort that offers medication-adherence programs, medication reviews and reconciliation, nutrition and weight management services, disease education, exercise coaching, and tobacco-cessation programs. So far, Rite Aid has partnered with seven health systems and ACOs across the country.
Serving the medically underserved: Walmart gears up for Care Clinic rollout
A new and radically different concept for frontline health care emerged last year when Walmart unveiled its first Walmart Care Clinics in Texas, Georgia and South Carolina. If things go according to plan, patients and health plan payers across the United States can look forward to a cheaper and more affordable alternative to the family doctor for nearly all their primary care needs.
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The chain quietly opened 17 Care Clinics in 2014 in a multi-market pilot, offering patients not only walk-in acute care, but many of the services patients would get from their local physician practice — and at a far lower cost. If Walmart rolls out the new clinic model nationwide, its potential for disruption in the primary healthcare space is anybody’s guess.
“Since 2005, Walmart has leased space in its stores to local health systems and other healthcare providers, who provide basic acute care” in about 90 stores with pharmacies across the United States, explained Jennifer LaPerre, senior director of retail clinics. “he Walmart Care Clinic is different — it is owned by Walmart.”
More important, said LaPerre, “the Walmart Care Clinic also goes beyond basic acute care and offers the services expected from a primary care provider, such as wellness and preventive care and management of chronic conditions.”
Staffed by licensed nurse practitioners and overseen by a supervising physician in a hub-and-spoke advisory framework, the clinics offer “a number of primary care healthcare services,” LaPerre added, including:
- Wellness and preventive care, including health screenings, vaccinations and lab testing;
- Basic acute care, including diagnosis and treatment of illnesses like flu and strep;
- Management of certain chronic conditions, such as diabetes, asthma and high blood pressure; and
- Referrals to specialists as needed.
“It’s just like going to your primary care physician,” noted Labeed Diab, Walmart president of health-and-wellness. “This is not just acute care or chronic care; this is all of the above. We’ll see you for a cough or upper respiratory condition, but we’ll also see you for diabetes, hypertension or high cholesterol.”
For the 17 clinics opened last year on a trial basis, Walmart worked with outside clinic-care providers, LaPerre explained, “to help source and manage the nurse practitioners, medical assistants and supervisory physicians.”
The launch of Care Clinic came after careful study of the current state of primary care in the United States — and of the unmet or underserved needs of millions of Americans. “We really looked at the [clinic] space,” said LaPerre. What her team found, she said, is that “75% of the healthcare industry spend is in chronic condition management. So it would not be diligent of us to enter the space where everybody exists if we didn’t serve the chronic condition needs. So in addition to prevention and wellness and acute care, we want to be able to serve the diabetic. And we spent a lot of time talking about that.”
Besides effectively replicating the frontline services offered by primary care doctors, said LaPerre, “the Walmart Care Clinic creates a new price position for retail health services that aims to give our associates and customers greater access to quality, affordable health care.”
That new price position is revolutionary. “For most Walmart associates and their families who are on a Walmart health plan, the … Care Clinic office visit costs them only $4, and qualified preventive services received at the clinic will cost them zero dollars.” LaPerre noted. “For our customers, an office visit to the Walmart Care Clinic will cost $40.”
In addition, said LaPerre, “the Walmart Care Clinic will also accept traditional fee-for-service Medicare and Medicaid,” and is “currently looking into accepting third-party commercial insurance as part of the pilot program.”
Serving the underserved
Behind the concept: the recognition by Walmart healthcare managers that “many of the communities we serve need greater access to affordable healthcare solutions,” LaPerre said.
“Our goal is to join the continuum of medical care in the communities where we operate,” said LaPerre. “The services we provide within the clinic are all within the scope of services of a nurse practitioner. We also have a referral network in place if the needs of the patient are beyond the nurse practitioner’s care.”
Thus, she said, “we work collaboratively with patients’ primary care physicians.”
That’s not always an immediate option, since “nearly half of the patients we see do not have a primary care doctor,” LaPerre added. Indeed, she said, “47% of our patients are coming to our clinics without a PCP relationship. So we believe it’s a win for the industry, because … we’re serving where [patients] weren’t receiving care in the past. So we’re creating consumption.”
“Secondarily, we’re also serving as part of a continuum of care in the community. So we do not look at our strategy in isolation of the communities in which we serve,” added LaPerre. “It’s all about connecting to other providers, so that we can have a synergistic relationship.”
When choosing where to locate a clinic, Walmart will weigh several key factors. One big one, said LaPerre, will be to open a Care Clinic in communities “where there are primary care provider shortages … today and in the future.”
Also important to the location strategy, she said, are areas that have a high population of Walmart store associates, whom she anticipates will be a prime beneficiary of the Care Clinic model. “It was super important to us. It’s very strategic that we focused on our associates, and where our associate density exists,” she said.
“Thirdly, we’ll look at locations where there’s a high propensity for chronic disease,” LaPerre added. “And last but not least, where there’s an underserved, uninsured or high Medicaid population.”
Besides lowering primary health costs and boosting patient access to care, Walmart has another goal for its Care Clinics, said LaPerre: to make the notoriously opaque and complex pricing structure of the U.S. healthcare system more transparent and understandable. Along with that need, she said, most patients today don’t have the information they need to make an informed decision about which primary care doctor or practice they should choose.
“We have more work to do on this,” LaPerre explained. “Part of our assessment is looking at technological solutions. We have a lot of opportunity to become more sophisticated. And one of our great focal points — especially given the fact that we’re serving both associates and our customers — is how we build solutions that identify high-quality, low-cost providers. And there’s not really an off-the-shelf solution to identify that today, but it’s something we’re working toward solving.”
Paul Beahm, Walmart SVP health-and-wellness operations, called the company’s new clinics “a core component of our strategy around bringing the right products and services together to form solutions and value-based … transactions.”
“It’s serving the underserved, but also, as we continue to roll these out, we’ll have another tool in our toolkit to help drive costs down in our relationships with third-party payers,” he told DSN. “We’re being very thoughtful about how these pieces fit together to form a more cohesive strategy.”
Added LaPerre, “What we have found … is that people love the model … and they are responding. We’re spending our time now assessing what’s working and what we need to do differently to better serve our customers. But we are seeing great success.”