Healthcare
Home  »  Community News  »  Healthcare
Oct
23
Sandeep Singh Dhillon
Amazon Is About To Disrupt The Drug Industry, But Not The Way Most Think – Forbes
Pharma Extra, Pharma Notables
0
, , ,

By Steve Brozak, CONTRIBUTOR

It’s now a foregone conclusion that Amazon.com will enter the healthcare sector. Every day there is another article on how Amazon is planning to dominate some new corner of the American economy. One day Amazon is taking down Grainger and Home Depot. The next it’s single-handedly taking down not only FedEx, but also UPS and the United States Postal Service. No sector seems safe as Amazon sails its ship into new waters. But those expecting Amazon to cannon ball into healthcare may need to bide their time.

Two years ago I wrote in Forbes about how Amazon’s entry into healthcare could decimate CVS and Walgreens. I think it’s still possible, but not in the way the markets and media are anticipating today. Amazon’s entry into healthcare will not be sudden. It is likely to be similar to the acquisition of Whole Foods which developed over years as Amazon evolved its strategy in home grocery delivery, one part of the incredibly valuable consumables market. It was accomplished through trial, error and recognition that Amazon needed a bricks and mortar approach to the segment that led to the Whole Foods acquisition. Sudden and complete immersion into the healthcare system as it currently exists could taint the Amazon brand and will make the company vulnerable to regulatory risk. But there are segments of the healthcare market that offer an opportunity for Amazon’s unique capabilities, and there is evidence that Amazon has been making those slow and steady moves toward healthcare.

Becoming A PBM Could Be Amazon’s Healthcare Market Entry

Pharmacy Benefit Managers are the gate-keeping middlemen of the healthcare system. PBMs administer health plans for insurance companies and employers. They manage benefits and treatment costs for these organizations. The more organizations a PBM services, the greater number of patients (or lives, in insurance lingo) under its umbrella. With more lives comes more leverage when a PBM negotiates with pharmaceutical manufacturers for drug prices.

The three largest PBMs are Express Scripts, CVS and OptumRx, covering more than 80% of insured Americans. A PBM that manages tens of millions of lives has greater purchasing and negotiating power than a standalone company with 3,000 employees, or a pension plan with 20,000 lives, or even an independent insurance plan with just a few million lives. Among a slew of other services, PBMs primarily work with their clients to construct and administer a pharmacy benefit program, which is often referred to as a drug formulary. Formularies are just the lists of drugs that are approved or that have preferred pricing for the insurance company through a PBM’s negotiations with the drug’s maker. In exchange for placing its drug on formulary, a PBM receives a preferred price and a cash rebate from the drug’s manufacturer for every prescription it processes. Your insurance plan’s formulary is a major reason why your doctor prescribes you one drug company’s medicine over a competitor’s. Being the preferred drug is the goal. PBMs share a portion of the rebate it receives with their clients (the health plans) and patients receive the benefit of a drug at a preferred price. PBMs also collect fees for transactions and services it processes for its clients.

Target and Walmart learned that merely selling pharmacies in their bricks and mortar operations or through the mail doesn’t equal profits, although a case can be made that it certainly increases foot traffic and store loyalty. Margins are incredibly thin for the kinds of drugs they sell most routinely. In fact, Target sold its in-store pharmacy business to CVS, a pharmacy and a PBM, and Walmart has partnered with McKesson to source its drugs. Becoming a full service PBM would have allowed Target and Walmart to have greater control over margin, but it wasn’t in the cards for either company. While becoming a PBM could be the key to unlocking profits for Amazon, the current political and social environment is unfriendly toward PBMs and drug makers and comes with its own risks.

Despite this, a gamble in healthcare has to happen sooner rather than later. Amazon’s primary customer is between 30 and 45 years old, and that’s a demographic that will soon be looking to fill more and more prescriptions. And if you don’t think their customers’ life cycle milestones are part of retailers’ strategic plans, just look at the pace of acquisitions around baby startups just under a decade ago. Amazon bought diapers.com while Bed Bath & Beyond acquired Buy Buy Baby. Finding an algorithm that figures out when you’re going to have a child before you even think of having one yourself is the holy grail of E-commerce. The birth of a child is a significant milestone around which there is a burst of spending to capture. Likewise, as its consumers age and continue to change their habits through online shopping, healthcare has become the next frontier. Amazon has already made an entry and is setting prices for over the counter medications (OTC). On average, its OTC products, like Tylenol, are cheaper on its website than most bricks and mortar stores. There are several theories circulating around Amazon’s entry into healthcare. Here are my thoughts on three of the most common scenarios being discussed.

Scenario 1: Amazon Acquires Or Partners With A Large PBM

One of the more popular scenarios bandied about is that Amazon may acquire a large PBM player. This is unlikely for a few reasons. Foremost, while it would allow Amazon to quickly enter the healthcare market, integrating the processes and services from a large operation into Amazon would be complicated and chaotic. As the drug pricing debate continues in the mainstream, PBMs have been painted with a big target on their backs as more light is thrown on their opaque and very misunderstood segment of the healthcare system. Just this week, Senator Lamar Alexander (R-TN) wondered out loud why PBMs even need rebates, which is the lifeblood of the industry.

It will be very difficult to recreate the frustration-free consumer experience Amazon currently offers and replicate it through healthcare services as healthcare currently exists. Therefore Amazon will want to separate any healthcare services it offers from its main brand and ease into the business. You could argue that Amazon is already easing in by selling prescription drugs on their Japanese website, perhaps a test case for an American entry (supporting the case for Scenario 3). If you think Amazon can do no wrong, remember this is the company that thought it would be a good idea to emblazon Amazon.com on the back of its Fire Phone, a complete flop. Amazon can’t afford a flameout in healthcare, and making another transformative purchase that could easily eclipse the purchase of Whole Foods so soon, while entirely possible for a company the size of Amazon, would be wholly inadvisable.

As far as partnering goes, sure, Amazon could attempt to partner with a Prime Therapeutics or an Express Scripts. As others have pointed out, Amazon has a strong history of partnering with companies, leveraging its consumer reach and logistical magic to tap into and offer lifelines to companies like Circuit City and Toys R Us. But then what happened? The companies Amazon partners with tend to go out of business as Amazon upends the market.

Scenario 2: Amazon Re-engineers The Wheel With A Smaller PBM

It’s clear that Amazon needs to either re-engineer the PBM wheel or partner with a creative player who already is. While a partnership with a conventional middle market PBM will give Amazon a good entry point in healthcare, a better route would be to partner with an even smaller PBM to really learn the business, gain valuable insights on the industry and bring the PBM model into the 21st century. There are already reports that Amazon, with its 350,000 employees, is trying to administer its own health plan internally as its own PBM. While hiring executives from industry to construct its own virtual PBM is a good way for Amazon to start, it’s still just virtual. An even better path forward would be to acquire or partner with a smaller PBM that already manages millions of lives, self adjudicates (processes its own claims) and can easily manage an additional 350,000 Amazon employees. Through the smart acquisition of a creative PBM, Amazon would learn the business model and incorporate a PBM-like service into an expanding slate of healthcare programs and service offerings.

Scenario 3: Amazon Becomes A Bricks And Mortar Pharmacy In Order To Become A Mail Order Pharmacy

Amazon is well positioned to enter the mail order pharmacy business. Most mail order services are contracted out to a handful of other pharmacies that specialize in mail order delivery. For a while, insurance companies preferred their patients to enlist in a mail order pharmacy because the pricing was competitive compared to going to CVS or Rite Aid. Over the last several years that gap has narrowed. But mail delivery is what Amazon does very well, and combining a mail delivery strategy with a bricks and mortar strategy makes an incredible amount of sense for the company, especially now that it has acquired Whole Foods.

Before acquiring Whole Foods, it never made sense for Amazon to build or to acquire a network of independent pharmacies. Since none of the Whole Foods stores have a pharmacy, Amazon has an opportunity to establish in-store pharmacies that are powered by mail order fulfillment centers. A bricks and mortar strategy should be based around having an in store pharmacist fill as few prescriptions as possible. Rather, a regional prescription fulfillment center could fill and deliver the majority of prescriptions to both the store and to the patient’s doorstep. This is not unlike the current pharmacy model whereby local bricks and mortar pharmacists fill immediately needed prescriptions in the store, while chronically needed medications are filled and delivered to the store by a regional fulfillment center for monthly pickup by the patient. A model in which Amazon combines its mail delivery capabilities with its Whole Foods bricks and mortar would begin to draw two-way traffic from the stores and onto Amazon’s website. As patients sign up and manage their medications, they would create an essential link between the virtual and bricks and mortar Amazon. Shopping for eggs at Whole Foods isn’t going to compel me to go to Amazon.com no matter how many signs Whole Foods hangs in its stores to remind me that they’re now owned by Amazon. But managing my pick up/drop off of medications at my local Whole Foods through my Amazon health portal would draw me into both. Amazon seems to understand this and has already begun to blend its online business in Whole Foods by placing its innovative pick up/return locker system in Whole Foods lobbies.

Of course, while a current generation of Americans prefer to have the personal touch of interacting with and picking up their prescriptions, the trend will soon be to have most drugs delivered by mail. I have even evaluated companies that are working on fill-on-demand drug dispensing vending machines, which may also one day make their way into Whole Foods stores (let’s call them Locker 2.0). To date the one area of true weakness for mail order pharmacy services has been providing essential prescriptions immediately, say, on the day a patient is discharged from the hospital. That’s a weakness Amazon could easily topple with its tests of Prime Now, its same-day two-hour delivery service, another incremental step as Amazon inches toward the healthcare market.

Amazon’s customer base may be young, averaging 35 years old, but they are aging and in the midst of the child-rearing cycle, which requires frequent trips to the pharmacy. Amazon’s customers will need more prescriptions for themselves and for their children. Soon an entire generation will be even more used to buying things online. Right now Amazon has announced it is preparing to make two very big decisions public. The first is whether or not it will get into healthcare, to be announced, supposedly, sometime around Thanksgiving. The second is where it will locate its second world headquarters. If Amazon wants to capture as much of the purchasing a customer can do, it will need to mature with its consumers and formally enter into the healthcare market.

And as for my prediction for Amazon HQ2: It’s Boston.

Oct
2
Sandeep Singh Dhillon
Malaysia’s healthcare budget below WHO recommendation – The Malaysian Insight
Pharma News, Pharma Notables
0
, , ,

By Noel Achariam

MALAYSIA’S budget for healthcare is 3% lower than the World Health Organisation (WHO) recommendation and needs to be raised, said a consultant.

InfoMed chief executive officer Mohan Manthiry said the nation’s current budget for healthcare was 4% of the gross domestic product, and the government must spend more to provide quality care especially in public hospitals.

“The general population, where a majority are hard-pressed by inflation, are now flocking to government hospitals.

“Malaysians can’t afford proper healthcare because of stagnant salaries, poor revenues and negative growth.

“The government needs to provide more services, improve facilities and reduce congestion.

“To do this effectively, the government needs to allocate more funds for healthcare,” he said after speaking at the Malaysian Insurance Institute on Medical Health and Insurance Seminar today.

It was reported that the Health Ministry would seek a bigger allocation under Budget 2018 due to increasing medical costs.

Its minister, Dr S. Subramaniam, said the RM23 billion allocated for this year was insufficient, which prompted the ministry’s request for an increased allocation.

He said the ministry was committed to providing the people with quality healthcare.

Budget 2018 will be unveiled in Parliament on October 27. In past budgets, the ministry had received between 10% and 15% more in the annual allocation.

Mohan said according to WHO, the recommended budget for healthcare in Malaysia should be 7%.

“Malaysia’s current budget (for healthcare) is 4% of GDP. Singapore, whose healthcare is among the best in the world, is only spending 5% of its GDP, and is still able to provide quality healthcare.

“This is because the funds have to be efficiently utilised. Otherwise, quality healthcare is not going to be felt by the public.”

Mohan said the healthcare sector should be geared towards prevention and enhancing the education system to reduce incidences of chronic diseases.

“There is a worrying trend in non-communicable diseases, such as diabetes and obesity. This is something we should focus on, which is consuming most of the resources in healthcare. ”

WHO had stated that almost 70% of the global mortality rate was due to such diseases, he said, adding that in Malaysia, the number of patients was on the rise, with the country being No. 1 in diabetes and obesity in the region.

“To manage this, we need to get individuals to take charge. We cannot leave it to the government, doctors and hospitals.

“This has got to do with lifestyle, and one of the major causes is the food we eat.

“We need to have a long-term plan, and I have been advocating the need for education in healthcare.”

Mohan said it was crucial for healthcare to be taught as a subject at the primary school level.

“It should be in the curriculum, where children are taught everything in healthcare and matters related to health, from food and the environment to exercising.

“Such education should start at home, but it’s not happening. So, it has to become part of formal education.

“It is good if this can be implemented in primary schools. Then, the government would not have to spend so much money (in its healthcare budget) because it’s part of the curriculum.”

The original article can be viewed at https://www.themalaysianinsight.com/s/16128/

Aug
17
Sandeep Singh Dhillon
Goldman Sachs breaks down how Amazon can jump into health care – CNBC
Pharma Extra, Pharma News
0
, , ,

By Christina Farr, CNBC

Amazon is speeding its efforts to crack the health care market, hiring a number of high-profile executives, testing Echo technology in top hospitals and creating a secret “1492” team dedicated to health-technology opportunities like telemedicine and electronic medical records.

Goldman Sachs is now out with a 30-page report from five research analysts on Amazon’s likely ambitions in the $560 billion prescription drug market. The note cites CNBC’s reporting on the 1492 group and Amazon’s hiring of a general manager to lead its pharmacy unit.

Here are some of the key insights from the report:

  • Rather than replacing pharmacies right away, Amazon might start by partnering with a pharmacy benefits manager (PBM), which acts as an intermediary between payers, like health insurers, and the rest of the health system. That would provide “access to patient data and the potential to cross-sell related products.”
  • Amazon could ultimately improve price transparency for the consumer and reduce out-of-pocket drug costs. But it would likely start by speeding up the drug delivery process and facilitating at-home delivery.
  • Amazon could also become an online pharmacy, retail and online pharmacy, integrated PBM and online pharmacy, or handle drug distribution to pharmacies.
  • One potential — and overlooked — challenge for Amazon might be the so-called “age gap.” Amazon’s customers tend to be younger and healthier than people who typically take prescription drugs.
  • Amazon could move into digital health by using the Echo in clinical settings and developing tools for telemedicine and remote patient monitoring. “Imagine seeing a virtual doctor on your Amazon app, having it prescribe you a certain medication, and then tapping a ‘buy now’ button — all without leaving your home.”

Jul
10
ragupathyrenganathan
Which Healthcare Stakeholders Puts Patients Interests before Profits?
Pharma Polls
0
, ,

Which Healthcare Stakeholders put patients before profits?

View Results

Loading ... Loading ...
Aug
5
Sandeep Singh Dhillon
Big Data to revolutionize healthcare in Malaysia – MIMS Malaysia
Pharma Notables
0
, ,

For a long time, returning visitors to government clinics in Malaysia would identify themselves at the reception counter, and wait for the officer on duty to retrieve the odd stack of cards and papers that made up their health record.

When did you last–? The doctor might ask, rifling through the stack and settling for an estimate as both parties are unable to provide the exact information. Go to a different medical institution and you would be started on a new stack altogether, with no thought or reference of the old stack.

This situation is about to change however, as the Malaysia Health Data Warehouse project (MyHDW) begins its implementation this August, bringing big data to the Malaysian healthcare scene.

Introduced only within the last few decades, big data is defined as extremely large sets of data or amounts of information that can only be analysed by computers to reveal patterns, trends and associations. In this case it refers to a consolidation of patient information from the entire public healthcare system.

The first dataset to go in the Malaysia Health Data Warehouse is the Sistem Maklumat Rawatan Perubatan (SMRP), which will collect information from patients’ every visit to healthcare centres.

MyHDW is meant to be a trusted, comprehensive source of healthcare data, which must come from every healthcare visit, including those from allied health professionals, traditional and complementary medicine practitioners, and maternal health, said Dr Md Khadzir, MOH Planning Division deputy director and Health Informatics Centre head.

“In the data warehouse, we should be able to link them all up,” he said, giving the example of being able to track how many patients diagnosed with stroke go on to visit physiotherapists, occupational therapists and traditional medicine practitioners.

“So, this is the intention: to have a snapshot of every visit to the healthcare system and to provide value-added data to the people in the Ministry of Health to make policy.”

The implementation of this system brings the significant benefit of unifying patient data. As Clinical Research Centre director Dr Goh Pik Pin from Taylor’s University notes, there is a lot of data from the nation’s public healthcare system, but it is inaccessible and cannot be used because it is stored in various places, in different formats.

With a single system for medical records including patient history, current and previous medications, clinical tests and imaging results, doctors will be able to quickly obtain more accurate information about their patients. This would the process of diagnosis and treatment more efficient, saving both time and costs for patients and healthcare providers alike.

Big data can also be utilised for its high analytical potential. Information from the general population can and should be used as a basis for making and assessing public health policy. The large amounts of available data would also be a boon for medical research efforts. MIMS

Jun
15
sandeepsd
Quadria Capital to invest USD 304 mn in Asian healthcare
Pharma News
0
, , , , ,

SINGAPORE, June 10:  A Singapore-based private equity firm would invest one-third of its recently raised USD 304 million in the South Asian healthcare sector. Read more …