2377_IDNs_are_Gaining_Control_Over_blog_post-768377-editedPaul Darling co-authored this blog post with Joe Stevens.

Integrated delivery networks represent a growing percentage of pharmaceutical companies’ customer bases and, while they’re a heterogeneous target audience, their goals are relatively homogenous. My colleague Paul Darling and I covered this point in our previous post, but in a nutshell, our research has found that there are four common goals that can serve as conduits for manufacturers and suppliers to align effectively with their IDN partners: providing high-quality care and improving patient outcomes, reducing the cost of care delivery, boosting revenue, and improving the patient experience and satisfaction. IDNs also are interested in a common approach to achieving those goals: standardizing systems and processes across their various sites of care.

And if pharma organizations are looking for a “burning platform” to improve their IDN engagement efforts, here it is: One of the more popular ways that IDNs are promoting standardization is by gaining control of physicians’ prescription pads.

As care standardization advances, IDNs have the tools and processes to control physician prescribing, and there’s evidence that they’ve already been tracking physicians’ behavior for some time—and acting on the resulting insights. My colleagues and I recently spoke with 89 vice presidents and directors from 67 IDNs across the U.S. about their methods for driving high-quality patient care and outcomes. From our Provider Organization Partnership Tracker survey, we found that three out of four IDNs actively incorporate physician pharmaceutical utilization into reports and scorecards.

And these activities aren’t unique to the inpatient setting where diagnosis-related group reimbursements have an obvious impact on IDNs’ finances. We found that 80% of IDNs are tracking outpatient pharmaceutical use as well, in at least some departments or therapy areas. Physician metrics include items such as generic use, the average cost per script, the number of scripts per patient, the most used drug classes, the most prescribed drug by volume and cost, and how the physicians’ prescribing behaviors compare to their peers’ behaviors. The majority of IDNs are using these scorecards to influence physicians’ prescribing behavior in some way, with about one-third of scorecard users linking the results directly to physicians’ compensation.

We know that IDNs have the power to influence physician prescribing behavior, and we have reason to believe that they’ll use their influence more frequently. The IDN executives we spoke with cited several reasons why this was important for their organizations:

1. Control costs in their captive health plans. About 30 million lives are covered by IDNs’ captive insurance plans, which represents nearly 10% of the insured U.S. population. An IDN with a health plan has a clear incentive to control costs by encouraging the use of the most cost-effective drugs.

While most IDNs with a captive health plan serve patients from other insurers as well, the impact on prescribing behavior isn’t limited to IDN health plan enrollees. One pharmacy director at a vertically integrated Midwestern health system whom we spoke with summed up the influence of report cards on his physicians’ behavior as follows: “Even though the health plan represents only 25% of patient volume, I believe it impacts their practice and prescribing for the other 75%. If a health plan has a preferred agent, they’re more likely to use the preferred agent for all of their patients.”

IDNs that aggressively adopt value-based payment models have incentives that are similar to those with a captive payer. As payers continue to tell pharma companies that they will only pay for superior outcomes that are quantifiable, pharma companies will need to prioritize the collection of real-world evidence. Indeed, new technologies such as wearable devices offer opportunities to reduce both cost and burden on patients, which can drive more data collection in the future.

2. Control therapy areas of special interest. Even if an IDN doesn’t have a captive health plan, certain categories of drugs attract more attention. Our survey respondents identified that the top drug categories for IDN oversight are oncology, cardiology, infectious diseases and rheumatology. Because different dynamics drive each of these, they’re worth considering individually.

Oncology and rheumatology are two of the top three high-spend areas for both commercial payers and Medicare, and tend to be dominated by high-cost specialty drugs. (Diabetes is the third.) Our survey respondents listed “high cost” and “high overall drug spend” as the top two reasons why a therapy area would be targeted for management, with 73% and 67% of respondents, respectively, stating that controlling prescribing in these areas is extremely important. One pharmacy director at a flagship hospital in North Carolina described the situation in oncology as follows: “It’s significant enough that we have to alert our finance team [of new patients] because it’s going to be that big of a variance for that one month. ... In some cases, with the infusion side, you’ve got very positive reimbursement, and other times you have virtually no reimbursement. It’s entirely possible that the department spends six figures on a drug in a month.”

The cardiovascular and infectious diseases categories deserve a little more scrutiny, since neither of these fall into top spending categories overall. Survey respondents indicated that cardiology’s large patient volume and ability to affect population health measures were both key drivers of IDNs’ desire to manage physicians’ prescribing behavior. As one vice president of quality at a large Mid-Atlantic comprehensive network told us: “Cardiology is large volume. We have a lot of patients in that category and it bears watching because of the wide variation in how one treats common issues like congestive heart failure. I think, from the standpoint of management, in terms of cost and effectiveness and safety, that is a big deal there.”

Infectious diseases make the list due to the importance of antibiotic stewardship in a hospital setting. “Antibiotics are often overprescribed or prescribed inappropriately,” a pharmacy director at a regional hospital in the Pacific Northwest told us. “Our stewardship program has been quite successful in terms of reducing unnecessary antibiotic use, and in spite of antibiotics not being too expensive, we have been saving quite a bit of money.” (Similarly, although it didn’t appear as one of today’s top-managed therapy areas, several respondents mentioned pain medication as a potential future area where more control may be expected due to the ongoing opioid crisis.)

While the focus on some therapy areas may be idiosyncratic, there is an obvious risk for pharma companies of pushing a therapy area into the “high-cost/high-spend” category as a function of bringing innovative drugs to market. For example, while neurology currently isn’t a top therapy area to control prescribing, it’s easy to see how the large numbers of specialty drugs currently used in multiple sclerosis (where we already see some interesting contracting) or the effective commercialization of drugs in the Alzheimer’s disease pipeline could shift IDNs’ focus here. For this reason, successfully engaging with IDNs should be on the agenda for any team planning for the launch of a potential blockbuster pharmaceutical.

3. Minimize risk under value-based payments. Nearly 70% of our survey respondents indicated that their IDNs participate in the Medicare Shared Savings Program, and the majority indicated that the metrics around this program are expected to gain importance in the future. As providers share risk with payers, particularly if this includes downside risk, they can improve their cost recovery in several ways. 

Standardizing the delivery of care is one strategy that many provider organizations pursue as a means to generate a return on participating in an ACO. The North Carolina pharmacy director we spoke with also noted, “I mentioned that we have an ACO… and our evidence-based practice teams have created the protocols, so we treat newly diagnosed diabetic patients exactly the same way."

Another strategy that more advanced organizations pursue is incentivizing its decision makers to provide more efficient care. The CEO of a regional hospital on Florida’s Southeastern coast commented that: “You’ve got to be responsible for managing population health, where really your health system is closer to being an insurer rather than just a provider. You’ve got to have a delivery system where you can not so much control but incent providers to be efficient in the way they provide care.”

In the same vein, the vice president of population health management advisory services at Premier noted in a recent article in Becker’s Hospital Review that, “Compensation to providers must be aligned with the quality, utilization and financial metrics required in the two-sided risk arrangements to ensure the provider’s incentives are aligned.” Tracking pharmaceutical utilization with scorecards is clearly linked to both of these initiatives.

For pharma manufacturers, there may be an opportunity to draft an innovative contract that shares some of the risk with the provider. While payers have been less interested in these contracts for a variety of reasons, providers are in a better position to observe patient outcomes and have more incentive to mitigate their risks because a greater proportion of their reimbursements is shifting to value-based payments. The pharmacy director at the Pacific Northwest facility also described an attractive arrangement as follows: “If we standardize proton pump inhibitors, for example, we agree to use one brand and they will give us a lower price. We go to the P&T and get that approval, and we stand to save money because the drug company is taking the risk and they’re promising that we’re going to save X amount of money by standardizing, and they give us the savings up front.”

Fortunately for drug manufacturers, our research shows that implementing restrictive protocols to drive the appropriate use of expensive medications is still only a priority for a small minority of IDNs, with only 6% of respondents indicating this as their top tactic to reduce the cost of care. The top two cost reduction activities for IDNs that we surveyed are shifting care from an inpatient to an outpatient setting and tracking repeat ER patients to prevent avoidable readmissions, which indicates that cost reduction remains focused on hospital operations. This is logical when we consider that prescription drugs account for only 10% of healthcare expenditure.

However, while IDNs (and other organized customers) are only moderately engaged in controlling pharmaceutical usage today, they’ve developed the tools to be a more scrutinizing force in the future. As value-based payments change IDNs’ incentives, it’s only a matter of time before provider organizations deploy these tools more broadly. In response, pharma companies should ensure that they have an IDN engagement strategy in place as a potential blockbuster product nears launch, developing a plan to generate real-world evidence in key locations, and considering ways to share risk with their customers when data alone fails to convince. 


BLOG POST: What Do IDNs Care About? We Have the Data.

VIDEO: The Value Divide Between IDNs and Pharma

BLOG POST: What Pharma Needs to Know About Local Healthcare Markets


Topics: Paul Darling, value-based payments, prescribing behaviors, pharma marketing, Joe Stevens, IDN partners, provider organization partnership tracker survey