This start-up is a great example as to why it's important to understand who the players are that deliver healthcare in the US.
You have the insurance companies that pay the costs (drug and non-drug). However, many insurance companies partner with PBMs (pharmacy benefit managers) and let them handle all of the processing (for a fee).
Guess who one of the biggest PBMs are? CVS Caremark. Yes, the same CVS as the retail pharmacies.
If this product is going to work, it needs to figure out how to create an incentive for the existing players to get involved.
If you look at your drug benefit card, it likely has a list of "preferred pharmacies". Go there and you pay less, go somewhere else and pay more. The PBMs control where you get the best deal. And yes, it's typically at their own pharmacies (e.g. CVS).
If this company were to approach a retail pharmacy with their idea, I'll bet the pharmacy says "no". Retail pharmacies already have contracts with PBMs/insurance companies that pays them a certain fee for dispensing. A retail pharmacy would likely lose money if they had this company repackage a prescription. The only way to make this attractive to the retail pharmacy is to make sure they either make the same or more money. That's up to the PBMs/insurers.
So if you take a step back and think about what drivers insurance companies, it's all about cost. Not just dollars, but improved outcomes for patients since that lowers costs as well.
Compliance (taking the right drug at the right time) is a huge issue in terms of drug costs. An insurance company might plop down $5K for a prescription. The patient may only take 3/4 of the doses and end up no better. That $5K was a waste. Asthma is a great example. Insurers are more than happy to pay $300/month for a drug that reduces ER visits. One ER visit can cost $1000K.
Now prove to an insurer/PBM that this type of packaging saves more than it costs (e.g. improved compliance) and they will come knocking on your door.
This of course entirely ignores the issue of drug distribution. There are some huge players out there and this company needs to figure out how to insert itself between the company that sends the drugs to the pharmacy and the pharmacy itself. I'll leave that for another time.
If this product is going to work, it needs to figure out how to create an incentive for the existing players to get involved.
I agree with your writeup, but I'd like to call this out in particular:
What if all the existing players are the source of the problem?
That's the real trouble facing startups in healthcare: everyone wants to partner with the existing players, but they're all basically profiteering bastards.
(note that the govt. measure causing the shortage of residency slots was supported by the physicians themselves--only to later recant after the damage had been done)
There are some players who have a hard time making an obnoxious profit, sure, but let's not pretend that's the general case.
Those shiny new hospitals going up in your local medical center? That money isn't there because healthcare is so affordable and easy to get.
As it happens, despite the parent comment's hypothesis, it's clear from their website that most insurance companies (and also Caremark) do cover Pillpack for the standard co-pay.
Oddly enough, risk bearing entities like insurance companies actually follow financial incentives and want policy holders to take needed drugs. The profiteering bastards.
I think the large retail pharmacies definitely have the advantage here. They already do blister packs, which is not too far off from PillPack's solution. They can also provide other compliance solutions (eg. http://www.glowcaps.com/) that can relay information back to caregivers, among other things.
They would seem to have a few more hard to replicate advantages, a couple off the top of my head: It is probably easier for them to provide medications in form factors other than pills (eg. inhalers), and I would guess that most folks don't want two different sources for their drugs. If you happen to misplace your medication only a physical pharmacy is going to be able to cost effectively provide you medication on short notice.
> Now prove to an insurer/PBM that this type of packaging saves more than it costs (e.g. improved compliance) and they will come knocking on your door.
Emphasis mine.
I think this is often the key to healthcare startups. You need to generate hard evidence to really make a case. To begin you don't necessarily need to actually have the evidence, but you may need to conduct a clinical trial just to have room at the table to talk. People want to see, ultimately, ROI, and they're used to a standard of evidence where people have to sink considerable resources into objective proof before anything can move forward.
So there's a barrier here. How does a small company conduct clinical trials? It's not impossible, but it's very difficult, and your power is likely to be small.
It doesn't necessarily need to be an "official" clinical trail like those done for FDA approval. That would be overkill in terms of how rigorous it is (which also means it's expensive).
Probably the best way to get the data would be a pilot with a pharmacy or PBM. Offer to cover the costs of the pilot (yes it won't be cheap) and I think you could find someone who would be game.
"Now prove to an insurer/PBM that this type of packaging saves more than it costs (e.g. improved compliance) and they will come knocking on your door."
PBMs don't have same sensitivity to costs and compliance as insurance companies do. Drug adherence, comparative effectiveness, utilization review, all make good sales pitch, but PBMs ultimately profit more from higher drug utilization, narrow-network, generics, formulary, rebate, and home delivery. PBMs just have to pretend they're managing cost effectively on behalf of payors.
He basically needs to convince the payors (ie customers of insurance companies) that this will improve adherence, resulting in lower costs. Large health plans such as UHG, Aetna, just like PBMs, make money off of sicker people and higher utilization on the long run. Anything that improves health is existential threat to them.
He will need to partner up with boutique PBMs or insurance companies for trial runs and prove its effectiveness, and scale up. Perhaps start with specialty meds.
Ultimate goal is to get the largest payor involved (Medicaid and Medicare) and get their backing. They have the most to gain from this.
Another problem he faces is this: Mail-order PBMs already have sophisticated automatic dispensing facilities. Yes, much of their machines are designed to fill white pill-bottles, but it won't take that much investment to make daily packs like this, and do it at lower labor cost and higher accuracy.
This product does have the major players involved. From their website: "We accept most major insurance plans, including most forms of Medicare Part D." And CVS Caremark.
As you note: medication non-compliance is a huge issue--a 300 billion dollar problem in the US. Organizations that bear financial risk for populations aren't standing by twiddling their thumbs. The challenge for this company is ensuring that they remained at the forefront of addressing non-adherence, as opposed to being disintermediated, or disrupted by a better solution.
From their website: "We accept most major insurance plans, including most forms of Medicare Part D." And CVS Caremark.
I was thinking something different. Is PillPack in network for CVS Caremark? Many insurance companies will pay for your drugs out of network. It just costs more.
If it is in network then great! They are obviously further ahead than I thought.
Amazon should clearly buy this company and mount an attack on the PBMs; automatic delivery of this sort of product would fit well with their core competencies. They could also come out with their own versions of store-brand generic over-the-counter medications. There's gotta be a lot of juice to be squeezed out of this market given the fact that new pharmacies are sprouting up like weeds everywhere.
So simple, but such an improvement over the current system. Excellent idea.
I just looked up how many people are taking prescription drugs and was shocked; almost 50% during the last 30 days (http://www.cdc.gov/nchs/fastats/drug-use-therapeutic.htm). A big chunk of that is probably birth control and blood measure meds, but still that seems like a really high fraction of people (and an excellent market size for this business).
This is quite common here in The Netherlands; if you have trouble taking your medication on time (especially elderly people do), your pharmacy will pack the pills in plastic bags on a roll, labelled with a description of its contents and date+time it should be taken. See e.g. https://www.efarma.nl/PAGES/sectieinfo.asp?SC=VP (in Dutch, but has photos).
Standard practice in Sweden, too. Pills are packaged in regional locations (called "dosage pharmacies"), shipped out, and then collected by customers in their local pharmacies.
Many hospitals use such a system internally. Sometimes it doesn't work. See "How technology led a hospital to give a patient 38 times his dosage"[1]. This new mail-order system has far fewer crosschecks than that hospital system.
That hospital used robotic packaging of pills, labeled for each patient. That's very similar to the consumer-grade system discussed here, but with fewer crosschecks.
A similar service for horse feed supplements has been available for years.[1]
I take care of my elderly parents, who each have over a dozen different pills to take each day, and this kind of repackaging is really helpful; although I would have thought it's the kind of thing that drugstores already do.
(At least two of the (non-chain, family owned) local drugstores where I live already do this. For example,
This is definitely not a novel idea, but it's well-executed. Anyway, my personal issue with this is the excessive packaging and possibly non-compact storage if you have to, for example, go abroad for a month.
Regardless of the company's ambition, the firm still has to compete with all of the other small businesses marketing the same packaging services in every city. Many actually have very similar machines manufactured by AmerisourceBergen.
The role of a PBM is to create value for the payer; this typically occurs by the company using the collective power of its membership to negotiate down drug prices, specialty or otherwise. If creating value for the payer means increasing adherence then why not. At least that's what many PBM executives have said that I have spoken with.
The largest customer is the pbm/ payer/ private insurer market where the benefits of adherence can be marketed to those who pay for the cost of patient noncompliance.
I had a project very similar to this. However, my focus was the backend data system as my perspective was each patient may need a different compliance solution.
In Australia this is standard for the elderly already and every pharmacy does it. That said, the US and Canada could stand to make it standard practice there as well.
We've had these in Australia for years. It's called the Webster Pak and is a method of packaging done by pharmacies. It was invaluable for my grandparents when they were too old to see/sort their own pills.
I think the webster pak looks more functional than lots of baggies. It's a less ambitious company though, it's not trying to be the whole pharmacy, just a method of packaging.
There's a big advantage in the bags, in that you can grab one when you're heading out for the day or a handful when you're gonna be gone for the weekend. It's hard to do that with a giant week-sized card.
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28 comments
[ 2.9 ms ] story [ 68.0 ms ] threadYou have the insurance companies that pay the costs (drug and non-drug). However, many insurance companies partner with PBMs (pharmacy benefit managers) and let them handle all of the processing (for a fee).
Guess who one of the biggest PBMs are? CVS Caremark. Yes, the same CVS as the retail pharmacies.
If this product is going to work, it needs to figure out how to create an incentive for the existing players to get involved.
If you look at your drug benefit card, it likely has a list of "preferred pharmacies". Go there and you pay less, go somewhere else and pay more. The PBMs control where you get the best deal. And yes, it's typically at their own pharmacies (e.g. CVS).
If this company were to approach a retail pharmacy with their idea, I'll bet the pharmacy says "no". Retail pharmacies already have contracts with PBMs/insurance companies that pays them a certain fee for dispensing. A retail pharmacy would likely lose money if they had this company repackage a prescription. The only way to make this attractive to the retail pharmacy is to make sure they either make the same or more money. That's up to the PBMs/insurers.
So if you take a step back and think about what drivers insurance companies, it's all about cost. Not just dollars, but improved outcomes for patients since that lowers costs as well.
Compliance (taking the right drug at the right time) is a huge issue in terms of drug costs. An insurance company might plop down $5K for a prescription. The patient may only take 3/4 of the doses and end up no better. That $5K was a waste. Asthma is a great example. Insurers are more than happy to pay $300/month for a drug that reduces ER visits. One ER visit can cost $1000K.
Now prove to an insurer/PBM that this type of packaging saves more than it costs (e.g. improved compliance) and they will come knocking on your door.
This of course entirely ignores the issue of drug distribution. There are some huge players out there and this company needs to figure out how to insert itself between the company that sends the drugs to the pharmacy and the pharmacy itself. I'll leave that for another time.
I agree with your writeup, but I'd like to call this out in particular:
What if all the existing players are the source of the problem?
That's the real trouble facing startups in healthcare: everyone wants to partner with the existing players, but they're all basically profiteering bastards.
I was thinking this while reading refurb's comment and pleasantly surprised to get down to yours where its explicitly called out.
PBMs are also pretty competitive and I don't think they make a ton of money either.
As for insurance companies, the ACA put limits on profit.
http://www.google.com/finance?q=NYSE%3AAET&ei=yIswVam_LOuJsg...
So does Humana:
http://www.google.com/finance?q=NYSE%3AHUM&ei=44swVcjiAcSGsg...
And Anthem:
http://www.google.com/finance?q=NYSE%3AANTM&ei=OIwwVYr5OIWDs...
And Pfizer:
http://www.google.com/finance?q=NYSE%3APFE&ei=uYwwVeG2DezwsQ...
And Bayer:
http://www.google.com/finance?q=ETR%3ABAYN&ei=Fo0wVcmsE6qysQ...
And that's without even getting started on the corruption of equipment purchasing:
http://www.washingtonmonthly.com/features/2010/1007.blake.ht...
Or the FDA:
http://www.forbes.com/sites/davidmaris/2012/10/10/fda-recall...
Or even the physician trade union itself:
http://seattlepostglobe.org/2011/03/07/warnings-of-doctor-sh...
(note that the govt. measure causing the shortage of residency slots was supported by the physicians themselves--only to later recant after the damage had been done)
There are some players who have a hard time making an obnoxious profit, sure, but let's not pretend that's the general case.
Those shiny new hospitals going up in your local medical center? That money isn't there because healthcare is so affordable and easy to get.
Oddly enough, risk bearing entities like insurance companies actually follow financial incentives and want policy holders to take needed drugs. The profiteering bastards.
They would seem to have a few more hard to replicate advantages, a couple off the top of my head: It is probably easier for them to provide medications in form factors other than pills (eg. inhalers), and I would guess that most folks don't want two different sources for their drugs. If you happen to misplace your medication only a physical pharmacy is going to be able to cost effectively provide you medication on short notice.
Emphasis mine.
I think this is often the key to healthcare startups. You need to generate hard evidence to really make a case. To begin you don't necessarily need to actually have the evidence, but you may need to conduct a clinical trial just to have room at the table to talk. People want to see, ultimately, ROI, and they're used to a standard of evidence where people have to sink considerable resources into objective proof before anything can move forward.
So there's a barrier here. How does a small company conduct clinical trials? It's not impossible, but it's very difficult, and your power is likely to be small.
Probably the best way to get the data would be a pilot with a pharmacy or PBM. Offer to cover the costs of the pilot (yes it won't be cheap) and I think you could find someone who would be game.
PBMs don't have same sensitivity to costs and compliance as insurance companies do. Drug adherence, comparative effectiveness, utilization review, all make good sales pitch, but PBMs ultimately profit more from higher drug utilization, narrow-network, generics, formulary, rebate, and home delivery. PBMs just have to pretend they're managing cost effectively on behalf of payors.
He basically needs to convince the payors (ie customers of insurance companies) that this will improve adherence, resulting in lower costs. Large health plans such as UHG, Aetna, just like PBMs, make money off of sicker people and higher utilization on the long run. Anything that improves health is existential threat to them.
He will need to partner up with boutique PBMs or insurance companies for trial runs and prove its effectiveness, and scale up. Perhaps start with specialty meds.
Ultimate goal is to get the largest payor involved (Medicaid and Medicare) and get their backing. They have the most to gain from this.
Another problem he faces is this: Mail-order PBMs already have sophisticated automatic dispensing facilities. Yes, much of their machines are designed to fill white pill-bottles, but it won't take that much investment to make daily packs like this, and do it at lower labor cost and higher accuracy.
PBMs do make most of their money based on drug volume. That said, it's not unusual for a payer to hold a PBM to certain financial goals.
As you note: medication non-compliance is a huge issue--a 300 billion dollar problem in the US. Organizations that bear financial risk for populations aren't standing by twiddling their thumbs. The challenge for this company is ensuring that they remained at the forefront of addressing non-adherence, as opposed to being disintermediated, or disrupted by a better solution.
I was thinking something different. Is PillPack in network for CVS Caremark? Many insurance companies will pay for your drugs out of network. It just costs more.
If it is in network then great! They are obviously further ahead than I thought.
I just looked up how many people are taking prescription drugs and was shocked; almost 50% during the last 30 days (http://www.cdc.gov/nchs/fastats/drug-use-therapeutic.htm). A big chunk of that is probably birth control and blood measure meds, but still that seems like a really high fraction of people (and an excellent market size for this business).
[1] https://medium.com/backchannel/how-technology-led-a-hospital...
A similar service for horse feed supplements has been available for years.[1]
[1] https://www.smartpakequine.com/WhySmartPak.aspx
(At least two of the (non-chain, family owned) local drugstores where I live already do this. For example,
http://findleyspharmacy.com/rxmap.html )
The role of a PBM is to create value for the payer; this typically occurs by the company using the collective power of its membership to negotiate down drug prices, specialty or otherwise. If creating value for the payer means increasing adherence then why not. At least that's what many PBM executives have said that I have spoken with.
The largest customer is the pbm/ payer/ private insurer market where the benefits of adherence can be marketed to those who pay for the cost of patient noncompliance.
I had a project very similar to this. However, my focus was the backend data system as my perspective was each patient may need a different compliance solution.
I think the webster pak looks more functional than lots of baggies. It's a less ambitious company though, it's not trying to be the whole pharmacy, just a method of packaging.
http://www.webstercare.com.au/shop/item/community-webster-pa...