Digital pharmacies on the rise. But who is going to pay?

Today consumers are used to getting just about everything delivered at their doorstep. But historically, getting medication required a trip to the doctor’s office and then a stop at the pharmacy. However, digital may interrupt this paradigm. 

It’s no secret that medication adherence is a major issue in healthcare. While medication costs have often been pointed to as the main barrier to adherence, transportation is another obstacle. 

“In a lot of the surveys we’ve seen, only 16% of our patients are saying that it is financial. It’s typically that the pharmacy is too far away, or I just don’t have time, or they have a medical disability, or they don’t have a car,” Amanda Epp, CEO of ScriptDrop, said at HLTH 2021 this morning. “So being able to provide transportation to those patients to get what they need, to provide therapy is really the first step. What we like to do is we look at the medication, where the patients are at, where the pharmacy is. We use the power of the brick and mortar pharmacy. Almost all patients are within five miles of their pharmacy. So taking in all of those data points to determine if it is an antibiotic and the patient needs it within an hour to get on therapy.”

Alternative to traditional pharmacies 

The traditional healthcare system takes a lot of time for patients to navigate, according to Dr. Melynda Barnes, chief medical officer at Ro, said during a panel at HLTH. 

“The average American will wait 24 days after they make an appointment to see their provider. They will then go to the provider and see that person for 12 minutes, and that visit will cost them over $100. On average, they will then go to a pharmacy with a wait of 45 minutes,” Barnes said. 

Today we are seeing the rise of consumer-focused digital pharmacies, like Ro, that let patients access care virtually and then order medication online. 

“We’ve built a virtually integrated platform. It allows us to deliver nationwide telehealth services, diagnostic and home care as well as pharmacy services,” Barnes said. “We have 10 nationwide pharmacies and will have 12 by the end of the year. And then we’ve also acquired a company called Workpath, which is an in-home API, which allows us to send healthcare professionals into the home. We also acquired a company called Kit, which allows us to send diagnostics into the home as well.”  

Barnes noted that not all care can be done virtually. But that’s where many of Ro’s new acquisitions come in. The company can now send healthcare workers into the home. 

Consumers are also expecting more transparency than the traditional healthcare system previously provided. 

“You need to provide a modern consumer experience. Well, today, none of us can imagine buying something online and not getting a tracking URL, for example. But when you look at how these systems are architected from a technology standpoint and experience standpoint, that can actually be [the case],” Sid Viswanathan, cofounder and president of Truepill, said at HLTH. 

“And then the next step is you come off the website to see what the price of your medication is. Well, today there are hundreds of millions of insured Americans in this country. The details on how you show a Medicare Advantage member their price for their co-pays, how you show a managed Medicaid member their price or a commercial payer. There’s nuances behind these that are very complex and non-trivial, just to show you your price before you check out. And if you think about it from an e-commerce standpoint, it doesn’t get more basic than that in terms of, ‘I see a price.’”

The major players in healthcare are also growing their digital capabilities to meet consumer needs. 

“When you look at their core competencies, a drug manufacturer is not designed to build direct-to-consumer experiences. They are focused on designing to deliver a molecule or a drug to market. But that doesn’t mean they should be precluded from this virtual health or telehealth model,” Viswanathan said.  

Who pays for it? 

When it comes to digital health, who pays for this service is still a big question. According to Viswanathan, it is going to take various stakeholders to buy in. 

“I think we’re talking about how the pressure point has to come starting with the payer opening up their wallets, but it’s not going to happen overnight,” he said. “You need pressure from everyone from the digital health side incumbents kind of operating in this model. We haven’t talked about the employers. You need a lot of pressure coming from the employers as well to drive some of this change. If you keep kind of pushing from all angles, you’ll start to see the payer and the PBM [pharmacy benefit manager] model hopefully start to evolve to support some of these cases because, at the end of the day, the pharma manufacturer wants to take your money. The payer wants you to stay on therapies so you don’t get really sick. It’s all tied together.”

However, other companies are taking a radically different approach. 

“We are 100% cash pay,” Barnes said. “We feel that when we put the power in the hands of the patient … these patients can vote with their feet. So if we are no longer providing value to our patients, they will go completely. We have one incentive and one goal, and that is to provide the best basic, high-quality, affordable patient care experience, period.”  

Barnes noted that while the bulk of Ro’s patients are insured, many do not have insurance, so this model is an alternative to traditional care. 

The prescription medication space won’t change overnight, especially when it comes to reimbursement, and it will take the efforts of many stakeholders. 

“It takes building things together. It’s not just one disruptor, it’s how do you stitch everything together and focus on the patient, but do it in a really collaborative way?” said Epp.

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