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The nation’s health care system is in upheaval, with, to borrow a phrase from William Wordsworth, “the meagre, stale, forbidding ways of custom” under siege. The combination of the world’s highest per capita costs and substandard results when measured against other industrialized nations has finally spurred decision makers in both the public and private sectors to take action.
The drive to reform the system and alter the unsustainable fiscal trajectory that has already pushed the share of GDP devoted to health care to almost 18%, together with advances in technology and the manipulation of big data, are even now beginning to bring about substantive change. All segments of the health care system are being affected, and community pharmacy is no exception.
The IMS Institute for Healthcare Informatics has just released a report that examines some of the factors that it says will cause disruptive change in the utilization of pharmaceutical products over the next decade. Several of them will have a particularly strong impact on retail pharmacy operators.
The first of those — the formation of three large purchasing groups for pharmaceutical products — is the work of leading drug retailers and distributors. Walgreens’ merger with Alliance Boots and those two companies’ partnership with AmerisourceBergen; McKesson’s acquisition of Celesio; and CVS Health’s alliance with Cardinal Health give those entities unprecedented leverage in negotiations with drug makers. IMS predicts their clout will spur manufacturers of generic drugs to strive to differentiate their offerings with proprietary formulations, delivery vehicles or services, and could result in further consolidation in that field, which remains fragmented.
In addition, the presence of the mega purchasing organizations in the pharmaceutical market will complicate things considerably for pharmacy operators that are not, in one way or another, affiliated with them. Retailers in the United States and Europe that are unable to benefit from the buying power of the big three players will have a much tougher time making a go of it than those that do.
The IMS report cites the type of innovation represented by new hepatitis C medications as a catalyst that will cause third-party payers to reconsider their approaches to treating beneficiaries. Gilead Sciences’ Sovaldi has shown the ability, in many cases, to cure a chronic, potentially fatal disease, but at a cost of $84,000 per patient. In light of those factors, a recalculation of immediate costs versus long-term savings is inevitable.
Biotech products like Sovaldi represent the cutting edge in the pharmaceutical market and will be the primary source of breakthrough treatments going forward. That means community pharmacies will have to expand their capabilities if they want to compete successfully in that space, where the bar is higher in terms of everything from storage and handling of products to patient counseling and interaction with other health care providers and insurers. Several of the big chains, including CVS and Walgreens, have already made substantial progress on that journey; for small chains and indepedents biopharmaceuticals remain a formidable challenge.
Another development that all retail pharmacies will have to contend with is the shift toward remuneration based on patient outcomes. The IMS report says that 10% of Americans are now covered by accountable care organizations or similar delivery models that put a premium on coordination of care as a means of cutting expenditures, reducing errors and making patients healthier. IMS predicts that such approaches will spur an increase in the use of medications, which, despite all the controversy about drug prices, are among the most cost-effective alternatives in health care, and galvanize efforts to ensure those treatments are used properly.
The challenge for pharmacies is to secure a central role in the new paradigm, an area where much progress has been made of late, and payments that are commensurate with it. Even if all goes well, the transition from the current system of product-based remuneration to one centered on outcomes will be difficult and will require a great deal of skill to manage effectively.
Those are just some of the forces examined by IMS that are reshaping health care delivery. For some community pharmacies, the breakdown of the old order may be disconcerting, but for those willing to expand their horizons, it is an unprecedented opportunity to raise the stature and effectiveness of the profession.
