It was with disappointment that I read about the recent bankruptcy of PCAS Patient Care Automation Services Inc., and the related companies that were commonly known as PharmaTrust, the manufacturer of remote dispensing machines. It’s unfortunate to see fellow entrepreneurs—and a group that had such a bold vision for technological innovation and $60 million in start-up capital—not reach the finish line.

Reflecting on the PharmaTrust situation, I think there may be some lessons that can be highlighted for plan sponsors and advisors with respect to how their prescription drug benefits plans are managed.

Worth the wait?
It is remarkable what constitutes innovation in the area of drug plan management in Canada, and how vendors aren’t held more accountable for the products and services they market. How many times in the last few years (since the topic of drug pricing has become sexy) have we heard of innovative new ideas that are “coming soon” and then disappear off the radar, in some cases indefinitely. Initiatives such as buying groups, rebates based on the consumption of preferred products or use of preferred providers, flexible pricing, specialty drug management and a list of others get thrown out into the market, but then plan sponsors and advisors are told to wait while the gift wrap is carefully opened.

What is the cost to the plan of waiting to implement change?

The PharmaTrust situation represents a different kind of waiting game because the utilization of these machines required government regulatory approval (Ontario’s Bill 179), followed by required regulatory approval from licensing bodies (Ontario College of Pharmacists). Unlike marketing initiatives that are thrown out primarily for publicity or to gauge interest, the challenge here is that the main hurdles for execution are externally controlled.

Whatever the reason for the wait, plan sponsors and advisors who are sitting on the sidelines waiting for the golden goose to save the day are missing a great opportunity to implement meaningful change today. Drug plans renew annually. Any changes that result in better plan management produce an annuity that can be realized every year. There is a huge cost to sitting on the sidelines.

The key is to understand what’s behind the wait. Is it out of your control (i.e., regulatory), or is it because your vendor(s) can’t execute? Whatever the reason, it’s costing you money.

Focus on plan design—not cost
In the PharmaTrust court filings, it was disclosed that the remote dispensing kiosks sold for $130,000 each, in addition to ongoing licensing fees. That is a material cost structure depending on the volume of claims running through these machines. What happens now if you are a plan sponsor looking to leverage this technology? The high-cost structure (which makes sense given the innovative technology that PharmaTrust developed—technology they have every right to be fiercely proud of) has an impact on the potential return to plan sponsors if the focus is solely on cost.

I’m not suggesting that the focus should be solely on cost; there are infinite arguments that health outcomes and value are far more important considerations (and I don’t disagree with those points). But many plan sponsors face material cost containment issues that need to be addressed. However, in the world of prescription drug plan management, it isn’t possible to achieve the appropriate health outcomes and ensure sustainability from just focusing on claims cost alone. The initial focus needs to be on plan design—that is something that is entirely in the control of the plan sponsor.

If plan sponsors and advisors leverage their control in plan design, they can ensure appropriate execution. If their current vendor(s) can’t support them, they can find someone who can.

Beware commoditization
Even if it had survived, PharmaTrust would have faced significant challenges in serving private sector plan sponsors and their members because of the evolving pharmacy trend of commoditization. Thanks to generic drug pricing reform across the country, there is a trend now toward the commoditization of the pharmacy offering. If we look south of the border, this is a development that is not likely to reverse itself in the years ahead, as the lid gets blown off the top of the pharmacy business model box.

A perfect example is Shoppers Drug Mart, the country’s largest pharmacy chain. In order to compete and meet the needs of its shareholders, it has made a decision to waive the $2 co-payment on all government-subsidized drug claims in Ontario, to increase market share. How long until this type of competition starts to heat up on the private side?

Very recently, in London, ON, one pharmacy has decided to absorb the entire $6.11 co-payment per prescription that is payable by Ontario Drug Benefit beneficiaries. If you bring in your prescription(s), you walk out paying $0, even if you walk out to the parking lot, jump into your BMW, and spend the next four months at the million-dollar cottage in Muskoka. As a pharmacist, this type of development is profoundly embarrassing, but not unexpected. That is simply where the market is going.

In an effort to increase market share to recoup lost revenues, pharmacies are trying aggressive techniques to lure customers on both the public and private side. If plan sponsors had tied themselves into a solution such as PharmaTrust solely on the basis of expecting significant savings, the commoditization of the pharmacy offering among retail players may have muted the benefits of introducing a PharmaTrust solution on the private side. Maybe or maybe not, but when PharmaTrust got its start in March 2006—long before the realm of pricing reform and the new era of commoditized pharmacy practice—the current environment would very likely not have been foreseen.

An example of where increasing commoditization has a potential impact for current plan sponsors and their advisors is with the revived interest in mail-order pharmacy. Plan sponsors and advisors need to understand that in the absence of very significant claims volumes, the value of a solution such as mail-order pharmacy cannot be seen solely by looking at ingredient cost savings. The value has to consider other factors such as increased adherence and appropriate claims management. If cost containment is the sole focus, beware of the impact of commoditization on your vendor relationships.

Mike Sullivan (msullivan@cubichealth.ca) is president of Cubic Health, an analytics and drug plan management company based in Toronto. Follow Mike on Twitter at @cubichealth.

These are the views of the author and not necessarily those of Benefits Canada.

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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See all comments Recent Comments

Robert:

Excellent article, I was too disappointed to hear the news. As for the cost of the device, not only did they offer convenince, but also security and accountability, they provided extra steps toward reducing prescription fraud, by recording the transaction. I wish they could have gotten over whatever barrier they had to face, it would have improved many aspects of pharmaceutical distribution with respect to both availability and security.

Wednesday, July 18 at 9:07 am | Reply

Henry:

What happened to this company? I understand it went bankrupt, but who bought it? Is the technology still available for purchase? Is someone trying to fix these issues and start over? Any comparison to InstyMeds in the US? Thank you!

Wednesday, August 08 at 9:29 pm

John:

it is still an excellent and viable solution and demonstrates the corruptness in healthcare and how governing bodies have so much influence in ensuring poor patient care. Who currently owns the patents if any? Do the share holders have these rights?

Wednesday, December 18 at 6:21 pm

Joe:

They got what they deserved…failure in management…management had no vision….

Wednesday, August 08 at 11:00 pm | Reply

Michel Gregoire:

I could not agree more with the content of your article.
I work for a start-up company that has developped and is distributing an electronic weekly bister-pack.
This device is programmed by the pharmacist, guides the patient with visual and sound effects in order that they follow doctor’s precription.
But more than that, it can send alerts to caregiver or health professionnal, in case of missed or not in time doses.
In doing so it helps patients being more compliant and thus avoid hospitalization or getting back to work quicker.
I have been presenting to insurers, but they stay in the side lines not seing the benefit of mid or long term economic savings.
Pharmacists, like you stated, are hesitant because they more likely look at the cost of the service instead of the service to patient benefit.
We are looking at going south of the border to test the american market.
Do you have any comments or suggestions ?

Michel Gregoire
projectquebec@yahoo.ca

Monday, August 27 at 9:34 am | Reply

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