“So I picked something I knew nothing about: healthcare,” Sculley said.
What Sculley knows about is digital transformation. During his 10 years as Apple CEO, he worked with Steve Jobs to launch the Macintosh computer. He was a founding investor of MetroPCS and also has served on the Board of Overseers of both the MIT Media Lab and Wharton Business School.
His first stop was Rally Health, a digital engagement platform that encourages healthy behaviors. The health data analytics company Optum acquired a stake in the company in 2014. Joining this type of startup was an obvious choice at the time – an easy entrance point for a new industry.
Sculley’s next move was more surprising – a pharmacy benefit manager (PBM). These companies manage drug spending for health insurance companies and large employers. They also design drug formularies – the lists that determine how much an individual will pay for a particular drug.
Sculley is the chairman of the board for RxAdvance. He and founder Ravi Ika are targeting not just the $370 billion dollar traditional pharmacy benefit management industry, but the entire $840 billion prescription drug ecosystem. This includes errors in prescribing, unintended drug interactions, and care for people with multiple health problems.
RxAdvance is a cloud-based PBM, a significant advance for an industry for an industry that until recently has been working with decades-old technology. Just like every other component of healthcare, there are silos for each type of data and not much collaboration among the owners of those silos.
PBMs have none of the cool factor of digital healthcare. What attracted Sculley to RxAdvance was the chance to transform another industry.
Ika and Sculley want private insurance companies and government healthcare providers to hire them to manage drug benefits and costs. Sculley sees the power of portable information as the key to the company’s competitive edge.
“Doctors have to collect a certain amount of information about any prescription and we are going to make sure this information is available at all points of care,” he said. “Once you have a cloud platform for the data, you can get to pharmacies and rehab and everywhere else.”
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This prescription data is already more portable than health records from hospitals or physician offices. Walgreens or CVS can provide a customer with a prescription at their home pharmacy or anywhere in the country. It’s much harder to get data from hospitals or physician practices.
“You can’t do that with data from EPIC or Cerner EHRs,” Sculley said.
RxAdvance also wants to sell software to other PBMs.
“We don’t have to replace a PBM, we just provide services like AWS,” he said.
RxAdvance has several products to manage the multiple services that PBMs provide:
- nirvanaRxCloud to manage standard and specialty drug benefits
- nirvanaAccountableCare to allow collaboration among multiple care for complex patients
- nirvanaSpecialty to manage the purchase and administration of specialty drugs
Breaking down information silos
RxAdvance just announced a partnership with Walgreens and Centene, a health insurance provider that offers policies on the Affordable Care Act marketplaces and manages Medicaid plans for the government. RxAdvance will be Centene’s PBM.
This collaboration builds on two trends in healthcare: providing healthcare services in retail spaces and vertical integration of various providers to get more patient data in one place. A lot of healthcare companies have merged or at least joined forces recently to accomplish this goal. Humana and Microsoft are creating a “longitudinal healthcare record” and CVS is in the process of acquiring Aetna to get more health information in one place. Cigna finished its merger with ExpressScripts at the end of 2018.
Sculley said RxAdvance’s Collaborative PBM Cloud transactional platform can create similar efficiencies by combining data from drug prescriptions, lab tests, and other clinical interactions, unifying it, and making it portable.
“Traditionally this information is used for reimbursement – that has been the primary role of a PBM, in terms of working with pharma, payers, and providers,” he said. “We will be able to take this information beyond the hospitals and clinics into the retail space.”
Managing multiple illnesses
RxAdvance wants to do more than make the prescription drug process more efficient. Another big goal is to address what the company calls “avoidable drug-impacted medical costs.”
Rand found that 60% of Americans had at least one chronic condition, and 42% had multiple chronic conditions. Healthcare spending on chronic conditions like heart disease, diabetes, and cancer was $1.1 trillion in 2016. When you add in lost productivity, the total economic impact was $3.7 trillion.
A Rand study found that 12% of Americans have five or more chronic illnesses and account for more than 40% of U.S. health spending.
Image: Rand, “Chronic Conditions in America: Price and Prevalence.”
A person with multiple chronic conditions often sees a specialist for each condition and ends up on a variety of medications. Unless a doctor or pharmacist takes the time to collect all the prescriptions and consider the combined impact, health problems from side effects could be worse than the original illness.
“We can also say, ‘Based on what’s known about these prescriptions, here are the known side effects when you combine them,” because often people take two or three different prescriptions which cause side effects because of that combination,” Sculley said.
Sculley is skeptical that politicians will be able to solve the problem of high costs in healthcare. Only dramatic changes – like addressing the $945 billion annual waste in healthcare – will generate enough savings to expand coverage to the 27 million uninsured people in America.
“So we can do this with tens of billions of people and this is why we think this one of the most disruptive companies, certainly for the healthcare industry,” Sculley said.
Pressure on PBMs to change
Healthcare costs keep going up and corporate leaders and elected officials are looking for ways to cut costs. PBMs manage reimbursements for prescription drugs and determine who gets paid what among pharmaceutical companies, health insurance plans, and pharmacies. Lawmakers have recently realized that the middlemen–PBMs–are part of the problem. PBMs can negotiate lower prices for drugs because they buy in bulk, but there is little transparency in these transactions. For example, Congress recently passed a law banning “gag clauses” in PBM contracts. These clauses prevented pharmacists from telling customers that paying cash for a drug could be cheaper than out-of-pocket costs under an insurance policy.
So far this year, 33 states have passed 51 laws to address drug prices. That’s on top of the 45 laws passed in 28 states in 2017. Some of these state laws establish review boards to review the costs of drugs and create penalties for prices that exceed price caps.
Sculley said that RxAdvance’s platform will support this kind of decision-making process and save money in the process.
“Healthcare, for a variety of reasons, has never been under pressure to go to disruptive technologies before, because they had so many special interests that were giving them ways to raise their prices,” he said.
Sculley speculated that if retailers who run clinics can offer healthcare services at affordable prices, consumers would have a viable alternative to health insurance. Walmart is testing such a clinic in one of its Georgia stores. The clinic offers primary care services, hearing tests, dental exams, counseling sessions and vision tests at “low, transparent prices.”
“Healthcare is the last big industry not organized around a person but around the institution,” Sculley said. “Every one of these large organizations is going from a hierarchy of institutions in control to everything focused on the customer.”