Health Business Blog

I spoke today with Jack Rovner, co-chair of the Health Law Practice Group at Neal, Gerber & Eisenberg LLP in Chicago, and an adviser to health plans and hospitals. In this interview Jack compares and contrasts the Obama and McCain health plans, discusses the impact of the financial/economic crisis on the prospects for health care reform, and talks about the role the states will play.

Jack leans toward Obama on health care and so do I.

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Check out the latest version of Change of Shift, the nursing blog carnival. It’s hosted this week at This Crazy Miracle Called Life.

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Trusted.MD Network CEO Dmitriy Kruglyak shines a harsh light on Health 2.0 in a letter to Modern Healthcare (Buzz surrounding Health 2.0 ‘way overblown’):

Just because a thousand people attended a conference to socialize, kick tires and promote their wares does not mean Health 2.0 is here to stay or that the industry is undergoing a revolution (what happened to the eponymous company?). We have seen similar manias with dot-coms and regional health information organzations and everyone knows how long they lasted and how they ended. Irrational exuberance attracts a lot of onlookers.

…If you type in a few high-profile Health 2.0 company URLs and do back-of-the-envelope estimation of how much money they have to make per user to pay their expenses and turn a profit it is not hard to see why Health 2.0 is unlikely to provide higher-than-marginal return on investment. The story of Revolution Health, which went from the promise of turning the industry upside down to being a footnote in just three years shows how hard it is to monetize even when you have hundreds of millions in capital and manage to acquire millions of users.

Dmitriy’s about right on this, except “irrational exuberance” never translated into big payouts for anyone I know of. Ever heard of a “Web 2.0 millionaire” (or billionaire)? Didn’t think so.

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Check out the latest edition of the Health Wonk Review at HealthBlawg.

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The first time I heard Clayton Christensen describe his disruptive innovation concept more than 10 years ago I was impressed. By the fiftieth or so time I heard it a year ago –complete with the same old anecdote about the Kaypro computer not being able to keep up with his typing– I was mainly impressed that he was able to be so successful using the same material for so long. He’s been talking about disruptive innovation in health care for a while, too. I first heard him apply disruptive innovation to in-store diagnostics at a conference in 2001. But now he’s really turning his focus to health care with an upcoming book and a section in the current edition of Health Affairs.

Christensen’s introductory article is more of the same: using the example of how the lousy but cheap PC disrupted the mini and mainframe and explaining that innovative business models are needed in health care in order to allow disruptive innovation to occur. Despite my comments above this article is interesting and worth a read.

Christensen’s article is followed by a nearly unreadable paper authored by his Harvard Business School colleague Richard Bohmer and ex-Kaiser CEO David Lawrence: Care Platforms: A Basic Building Block for Care Delivery. It seems like a lot of gobbledygook to me, but maybe you can figure out what they’re talking about and what it has to do with real life.

My favorite article in the whole section is by Mark Pauly from the Wharton School. In ‘We Aren’t Quite as Good, But We Sure Are Cheap’: Prospects for Disruptive Innovation in Medical Care and Insurance Markets, Pauly provides a solid critique of the Christensen and Bohmer approach.

[H]ow well does medical care fit the template of introduction of a disruptive innovation? The answer is that such occurrences are very rare –much more so than in other industries– but that there are reasons for this beyond failures of the imaginations of medical managers who are accustomed to moving in the same rut…

…[W]hatever might be true in the photocopying and computer industries, it is very hard to offer an innovation that explicitly or detectably lowers medical care quality, no matter how much it cuts costs. The trial bar seems ever vigilant for the idea that whatever is done elsewhere in life, no rational person could agree to accept somewhat lower expected health status in exchange for lower costs.

I think it’s consumers, purchasers and physicians who drive this behavior, not just the trial bar, but other than that I think Pauly is right on the money. Pauly describes HMOs as an example of a disruptive innovation, which inaccurately tried to proclaim themselves as equal or higher quality. He faults Christensen and Bohmer for a “wishful thinking” mentality because their health care examples promise lower cost and higher quality, which “confuses the application and devalues the construct” of disruptive innovation. In general Pauly is a lot more complimentary to Christensen than I am in this post, but read his article carefully and you’ll find a few zingers mixed in with the praise.

Pauly’s right that disruptive innovation is unlikely in the US. However, I think it is quite likely that disruptive innovations can occur outside the US and then be imported. An example is medical devices in emerging markets. For example, US medical device companies face a real dilemma in their approach to markets like India. That’s where the growth is, but they also face up-and-coming challengers offering affordable –if not leading edge– products. J&J has introduced an India knee, supposedly for the unique needs of the Indian lifestyle, but really as a source of price discrimination and to fight against low-end competitors. I don’t know the technical specs on these devices, but they are probably just variations on discontinued first-world products –similar to Pauly’s “heritage” Jeep Cherokee example.

The existence of medical tourism provides a pathway for disruptive innovation to reach the US. US patients who go abroad already receive a mixture of first-world and emerging market devices. One reason medical tourism savings can be so high is the lower cost of the device (sometimes lower cost for the same device, sometimes just a simpler “disruptive” device). Over time as these patients return to the US market and the adequacy of the lower cost devices is established –especially as those devices improve over time– there will be acceptance of these disruptive products for the US market.

By the time cost pressures reach the breaking point –in another 3-5 years or so– some disruptive products will be ready for prime time in the US.

Another intriguing article in the same issue, Lessons from India In Organizational Innovation: A Tale of Two Heart Hospitals provides another path to dramatic cost savings that seems to me to have little to do with the disruptive framework. Put the two concepts together and maybe we’ll really get somewhere.

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This is a transcript of my recent podcast interview with Telerays CEO, Dr. Daniel Roubein.

David E. Williams:  This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog. I’m speaking today with Dr. Daniel Roubein. He is the CEO of Telerays. Dr. Roubein, thanks for your time today.

Dr. Daniel Roubein:  David, thank you for the opportunity to speak with you. I appreciate the chance to discuss Telerays with you on Health Business Blog.

David:  First of all, what’s the concept behind this company Telerays?

Dr. Roubein:  Telerays is basically about connecting people. The Telerays platform is designed to enable hospitals and imaging centers to work directly with radiologists, and to give hospitals and imaging centers instant access to quality radiologists from all specialties anywhere in the country, provided those radiologists have met credentialing requirements. Telerays really seeks to level the playing field. We want to make larger facilities able to tap into qualified radiologists from anywhere in the country, and radiologists to have the opportunity to bid on cases they may not know about otherwise, and basically keep both sides of the imaging equation moving, both the hospitals and imaging centers, and the radiologists.

David:  I understand that from a high level, but tell me a little about what the actual work flow is like. What happens if I’m a hospital or imaging center, and I want to initiate the bidding process? How does it work for me?

Dr. Roubein:  Well, as a hospital or imaging center, you would begin the process by registering on the Telerays website as an interested hospital or imaging center with a certain radiology project that you would you like to have fulfilled. As an example, if you’re a freestanding imaging center, say for instance in Chicago, and you know that in a given month you produce about 100 MRI studies. To begin, you may wish to say the project is only half of those, so that you know you can meet your commitment. Through the Telerays website, you post a project for the interpretation of 50 MRI studies in the month of January of 2009. And you would specify that those are going to be generated between Monday and Friday, between the hours of 8:00 AM and 5:00 PM, and you would like a 24hour turnaround time. So, that’s the project. You have the opportunity as the hospital or imaging center to define the parameters of the radiology interpretation project.

Before the bidding process begins, you would have already had the opportunity to review credentials of radiologists who were interested in bidding on that project. Of course they would have to have appropriate state licensure, medical malpractice coverage, certification by the American Board of Radiology, as well as other credentialing items. And you would admit them to a project bidding process that might occur a month before, or even two months before, depending on what parameters you set. So, in December of 2008, the radiologist who had been admitted would be notified that the auction would occur on December 15th between 7:00 AM and 10:00 PM, or whatever the hospital or imaging center decides is an appropriate timeframe. Those preapproved radiologists then bid on the project, for which the hospital or imaging center set a ceiling, and the low bid wins.

Once the agreement is completed, the hospital or imaging center acquires their images as they would normally. In January of 2009 they’re uploading cases in real time to the Telerays platform. The radiologists are downloading the images, generating a report, uploading a final report to Telerays that’s then downloaded by the imaging center. Once the contract is complete, Telerays is paid by the hospital or imaging center, and then Telerays pays the radiologist.

David:  That’s a great explanation. I appreciate that. Let me probe a little bit. Obviously, you are doing a lot to credential the radiologists. And it sounds as though the customer can select a subset of those radiologists that are not just qualified within their state, but perhaps meet other criteria that they have in mind. Once that’s done, though, it sounds like there’s competition that’s just on a price basis. Is that right, and does that feel scary for the radiologist? Is there anything negative about that?

Dr. Roubein:  You are correct that price is a basic tenet upon which radiologists will compete for the right to provide the interpretation services, but it’s definitely not the only one. Certainly, a radiologist, and any group of radiologists would have the opportunity to distinguish themselves by virtue of the quality of the interpretations they provide, by demonstration of experience that they have in a particular subspecialty, and/or fellowship training in particular radiology subspecialties. A radiologist or a radiology group that has very efficient, streamlined processes in their own offices might be able to offer a superior turnaround time, so that if it’s known to them that an imaging center is only requesting 24 hours, but they know that they can turn it around in eight or 12, this is important in terms of quality of care and in terms of high level of service, that the imaging center can then return to its referring clinicians.

Another way that a radiologist can compete besides price is in responsiveness to those clinicians. A radiologist who knows that as part of his or her regular service, they’ll pick up the phone and call the referring clinician, not just for a life-threatening emergency, which of course would be expected and is part of normal radiology practice, but also for an important finding, or something that they feel the clinician may want to discuss. This is a very important way to make teleradiology mirror the way that radiology is being practiced right now all over the country and indeed all over the world. And certainly, as I mentioned, in terms of special training that radiologists might have, this is another way that they can compete, beyond just trying to offer the lowest price.

David:  You partly answered this question before in answer to the first question. Thinking about customers from a demand standpoint, are they able to predict their needs well enough in advance so that they’re able to use this service? It sounds like what they might do is perhaps bid out a baseline of needs that they know they have and then worry about the swing capacity separately.

Dr. Roubein:  Yes, I think, that’s correct, David. The imaging center or the hospital would know with a reasonable degree of certainty by looking at the past twelve months what they expect to generate in a given month. Telerays offers the option of staying well within those parameters. In the example I gave previously, if they know that statistically they’re going to produce 100 MRI studies in a given month, they can feel very safe in posting initially a bidding project for 50 of those cases, after they’ve preselected the radiologists that they want to work with. And once that’s worked well for them and they see more about how the process evolves, they may increase the number of cases or the percentage of their cases that they offer on Telerays until it’s 100%. And then, we would allow some leeway within a fixed percentage, plus or minus 10% of what’s put forward, in order not to place them in a situation where they’re paying for interpretations that they don’t receive.

David:  What do you expect to see or what are you seeing in terms of variability in pricing? I know when some of these services get established and these options are done, there can be some dramatically interesting results. I’m just wondering what you’re seeing, or what you expect?

Dr. Roubein:  This is a new concept, and we want people to try it, and basically we’ve set our fee at a percentage of the radiologists’ interpretation fee. But, as far as the prices that would actually be charged, Telerays won’t be setting those. Those are going to be driven by what the market will bear, and what the radiologists feel their services are worth. And what the hospitals and/or imaging centers feel the interpretation is worth. So, I believe that the market will work in terms of finally setting what is a fair price for both sides.

David:  That sounds good. That is what I’m asking. I’m wondering if you have a sense of how large those price differences might be between what a hospital might be able to get now and what they might get on the system. Or is it just too early to tell?

Dr. Roubein: It may be too early to tell and to speculate about specific numbers, but I believe that we’ll see it level to a point that’s a fair playing field for both sides.

David:  Now, another thing. You’ve mentioned the percentage that you take. One interesting thing, that’s a form of kind of price compression as well, in terms of making the market more efficient. I think that you’re taking something like 15% of billings, and that you actually include a billing service as part of that. Some people pay roughly half of that rate just for their billing service, and you’re also offering marketing and technology infrastructure, and so on.

So, how are you able to offer a relatively low commission? What efficiencies are you putting in? How does it compare with what a typical teleradiology service would be?

Dr. Roubein:  Well, we’ve basically set our fee at a level that we feel is a fair percentage for the services that you’ve outlined that we’re bringing to the table, in terms of infrastructure, and marketing, and credentialing.

We were able to do it basically by having carefully constructed our business plan, and carefully constructing the website so that it works efficiently, and keeping our overhead low. We’re actually trying to relieve salary compression.

I believe very strongly that the radiologists should be the ones who make the decisions about how much they’re paid per case, as opposed to allowing others to make those decisions and then taking a much smaller percentage of what that global fee is. Our overhead is low, that’s one of the main ways that we’re able to offer a smaller percentage.

David:  One of the services that you’re providing is the credentialing, and having different characteristics upon which customers can select the radiologists that go into the bidding pool.

Over time, if you look out ahead three or five or seven years, do you expect there to be a role for radiologists outside of the U.S. and that maybe are not U.S. Board Certified, and that offer good services, but perhaps at a lower fee than what is typical today?

Dr. Roubein:  I do not see a role for radiologists who are not certified by the American Board of Radiology. I believe that’s an institution which has served the radiology community, and the medical community and patients very well, in terms of providing one basis upon which a person can make a decision about the qualifications of a given radiologist.

So, I feel very strongly that certification by the American Board of Radiology is a necessity, and we are committed to that. I don’t have speculations about foreign or overseas interpretations. Our focus is on U.S. radiologists who are licensed in the states in which they practice, and are boarded by the American Board of Radiology.

David:  One of the things that you emphasize here, but which I’m not sure is unique to this bidding model, is the concept that “You’ll provide final reads, as opposed to preliminary reads.” For those of us who are not radiologists and don’t understand the finer points, can you explain that distinction a little bit and what the value is for the customer?

Dr. Roubein:  Yes, David. You are correct that it is not entirely unique for Telerays to provide final interpretations. However, we only provide final interpretations, which is a slight difference from some of the teleradiology companies.

To answer your question about the difference, it’s a very important distinction. The preliminary interpretations are sometimes offered by fellow radiology companies, for instance at night for emergency cases. That requires another radiologist to look at those images the following day or whatever time frame they’ve agreed to, in order to reaccess the case and then issue a final interpretation.

Our opinion, and my personal opinion, is that the qualified radiologist who’s committing to look at an image or a series of images as a Board Certified Radiologist should, can and should be able to issue a final interpretation, which will then obviate the need to have a second radiologist look at it; that’s a point of efficiency.

It doesn’t compromise care, because it’s no different than a radiologist looking at a case at 2:00 PM in the afternoon. So, I believe that it brings the level of quality up, that there’s an expectation that every time you look at a case, you’re going to take full responsibility for that case, and interpret it as final interpretation and stand behind it.

David:  What kind of infrastructure do you have in place in order to be able to connect a hospital, presumably to your system, and then to connect on to these various radiologists that are within your panel?

Dr. Roubein:  Well, we’ve worked hard to make sure that the backbone of that technology infrastructure is strong, that it’s HIPAA compliant. I’ve made plans to be able to accommodate projected volumes at three months, and six months, and nine months, and one year, and out further than that, in order to be able to tell people with great assurance in a very comfortable fashion that, “We really can support this, and we really have thought it out.” We’ve had the software specifically designed to accomplish this task.

David:  Now, I know that you’re very focused on radiology, and so this is an unfair question. I’m interested, whether you think the Telerays concept is applicable to other specialties, either the bidding aspect of it or the remote aspect that would be comparable to Telerays or teleradiology in general?

Dr. Roubein:  Well, David I believe that this model is very well fit to the practice of radiology. I do not feel that I can speak authoritatively to whether another medical specialty might feel that it applies to their practice. I think it’s something that has to be evaluated from many different aspects, as I have done over the past several years before deciding that this was viable.

So, I believe that it’s really up to the practitioners of the individual specialties to decide for themselves if they feel that this is a way that they can provide high quality medical care to the patients, because that’s really what this is all about. At the end of the day, it must be that the patient, who comes to the imaging center or to the hospital, gets the best radiology interpretation they can in the shortest period of time.

David:  You mentioned hospitals and imaging centers as the customers. Would a radiology group also potentially be a customer? Do they see Telerays as a competitor or an additional source of income for them, or how would they fit into the equation?

Dr. Roubein:  Yes, David. Actually, we’ve had inquiries from a number of radiology groups already, because we see this as a method for them to supplement income. If it’s a large group or even a small group of radiologists, who find that they have a certain block of time available to perform teleradiology readings, they are welcome. Some have already pursued credentialing all of the members of their group, to provide teleradiology interpretations through the Telerays platform.

The way that would work is basically, that each of their radiologists is considered an individual radiologist and has to be credentialed separately. The hospital or imaging center would have to approve each one of those radiologists. As long as that is in agreement between both sides, then that group would be allowed to use any of those previously credentialed radiologists to read, say it’s a four hour shift, three times a week, for a specific imaging center, during a specific month.

So, they’re very welcome, and we encourage radiologists groups to participate as a method of gaining new business and offering their services to a wider array of patients and centers. The basic idea behind the Telerays auction is to connect people, and to provide opportunities for radiologists and hospitals and imaging centers to play on a level field, and get the highest quality service for both sides at the most competitive price.

I appreciate the opportunity to put that idea forward, and let that be known about the Telerays company.

David:  I’ve been speaking today with Dr. Daniel Roubein, CEO of Telerays. Dr. Roubein thanks for your time today.

Dr. Roubein:  David it’s been a pleasure to speak with you. I appreciate you taking your time to discuss Telerays with me.

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Check out the latest edition of Grand Rounds at Emergiblog.

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This is a transcript of my podcast interview with Dr. Ralph Kalies, CEO of BidRx.

David Williams:  This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog. I am speaking today with Dr. Ralph Kalies, he is CEO of BidRx.

Dr. Kalies, how are you today?

Dr. Ralph Kalies:  I’m pretty good.

David:  Great! Well, tell me about BidRx. How did you come up with the idea for it?

Ralph:  Well, I came up with the idea, because I’ve been involved in the healthcare area for about 30 years, mainly with the pharmaceutical use process. Looking at the pharmaceutical use process, I’ve owned PBMs, I’ve owned physician practices. I’ve consulted pharmaceutical manufacturers, and done pharmaceutical phase three and phase four research. I’ve been involved in that whole aspect.

So, when I got to the point of deciding that I was retiring from many of those things, I decided that there were still a lot of problems out there. So I got together and put together my knowledge base, and thought I found the solution to solve all the problems with the prescription drug industry.

So, we essentially tried to put together a situation in healthcare that doesn’t exist, and that is a real true marketplace, that is making sure the consumer and the sellers have an ability to have full information, full disclosure and have an ability to make choices, being an informed consumer.

Right now, when a physician prescribes a prescription, the patient could say to the physician, “Doc, that prescription you’re writing, do you know how much that costs?” The Doc will not be able to tell the consumer how much that costs, and the consumer has no idea how much it costs either.

The next question the consumer may have is, “Doc, is that covered by my plan?” The Doc may or may not know if it’s covered by his plan, and the consumer may or may not know if it’s covered by his plan. “Doc, what is my copay or what costs will I have to bear of my insurance cost for this particular product?” The Doc usually does not know, and the consumer doesn’t know.

Then the final question, of course, is the consumer says, “Well, Doc, of all the products that are out there, is there another product that will do exactly the same thing, or get me just as well but not cost me as much?” The Doc says, “Well, since I don’t have the answer for the first questions, I sure can’t answer that question.”

So, that’s what we end up with in the current situation. BidRx was set in place to solve that issue and by solving that issue, allow consumers and payers to experience a dramatic decrease in the cost of prescription drugs.

David:  In terms of the system that you actually put together, tell me about what it is and how it works for the typical user?

Ralph:  It’s a competitive electronic marketplace where the consumer, or the prescriber, or the consumer’s advocate or the pharmacist as a consumer advocate, everybody has access to the information. It is truly interoperable, which the current system is not. What that means is that everybody has access to all of the information, and everybody has the information to make proper decisions, and they can access it very easily.

So, what happens is the consumer or any of the other people we’ve just talked about, put in the prescription that they have or they’re thinking of prescribing. What BidRx does is takes them through two levels of competition. The first level of competition is what we call “Product Competition” where the consumer sees all of the products that are similar to the product they put in, and not only product but similar prescriptions, which take advantage of looking at side effect profiles, and also adverse reaction profiles, as well as potency. So, it aligns prescriptions that would be an apples-to-apples comparison to the prescription they put in.

Then what happens is that the thing that is shown is the price of those prescriptions, so that it gives the consumer and the prescriber, and whoever else is looking at it, what I like to call the “catch-it-by-a-look.” You can see all the products down the line, you can see the Hunts, Heinz, Del Monte, and whatever and see the prices of those products and see the value propositions of those products so one can make an informed decision what would work. Typically, you will see that there are products that are hundreds of dollars to products that are tens of dollars.

The next level of competition, once we decide on the product that we are going to purchase with the physician and the physician prescribes it. Then the consumer goes out and then defines the service area they like, and if they would like see mail order prices, and they would like to also have different service levels like home delivery or other types of things. They then click on BidRx, and then instantaneously, they get electronic bids from all of the pharmacies that meet the criteria that they’ve set up in their profile.

So they then will see all the pharmacies, and the pharmacies simultaneously bid instantly on that product. The consumer then can select the pharmacy that has the best fit for them, and has the best price. The pharmacy prices can vary widely, and if you’ve been watching the studies that have been done, the prices can vary as much as 500 percent to 1,000 percent.

When WalMart came out with four dollar prescriptions, the next day all of a sudden Kmart was matching that, and Target was matching that. The same type of thing happens on BidRx, but not only for a couple of hundred products, but for all products that exist. So it essentially shows what happens when you shed light on the competition and people do know what the prices are, it would be like otherwise consumers are shopping in the dark.

So they then pick the pharmacy, they then get a reservation, and the pharmacy at that time gets a reservation. That’s the first time the pharmacy knows who the person is that is getting that medication. So now, they would be able to contact that person, set up whatever delivery situation would be there. Or on the other hand, the consumer could contact the pharmacy or go into the pharmacy, whatever they wish.

But now they have a set reservation just like if you were on Expedia or Travelocity, or a hotel room, or for an airline ticket, which we know everybody pays different prices for depending on how good a consumer they are.

David:  Now, what you’re describing there sounds very valuable in particularly for a self-pay patient, someone without insurance. And, I think on both levels –  in either case the doctor won’t know what the formulary status is. The fact of having a formulary may do some of what you’re describing in terms of finding alternative products. You still have the issue about how you interact with the physician, but the health plan may provide some of that value.

And then, the health plan may also have negotiated the reimbursement to the pharmacy so the end price to the consumer won’t tend to vary that much depending on kind of what plan they have.

Is this, then, primarily for patients that don’t have insurance? Or, is there value for patients that do have insurance, as well?

Ralph:  It’s valuable for all people who have prescriptions whether they have insurance or not. The consumer and the physician would have to know what the formulary is, what tier a product’s on, what’s covered, what’s not covered. All of those things have to be done even if they have a benefit plan. And right now, they don’t find that out until they get to the pharmacy. Because when they get to the pharmacy, that’s when you find out there’s prior authorization, the drug’s not on formulary, the drug’s not covered. And then, the process has to start all over again back to the physician to re-prescribe the product or get things taken care of, or the consumer has to pay a higher price if they continue on that same product.

So, that process is very, very inefficient for the pharmacy, for the physician, and for the consumer. With BidRx what happens is everything’s condensed at the front end. In other words, it shows you all of the products and all of the tiers. But, it doesn’t show it to you in a normal way. What it does is it just shows you the “You Pay” column. So, it shows you based on the price of that prescription about what you’re going to pay as a patient copay.

David:  So, I know what you’re talking about. When the consumer gets to the pharmacy and it’s only when the claim is adjudicated they find out about what happened, and then you set the process off. So, I understand how there’s efficiency at the front end. On the one hand, some of that could be solved by eprescribing, but I think we’re not there yet.

And then, on the other hand, there’s another piece which is that there’s a part of this which, I guess, may be something that the consumer is doing as opposed to the pharmacist. Because in the instance where the consumer gets to the pharmacy, finds out that, wow, this thing costs $100 and I was expecting to pay $10, it’s fairly frequent that a retail pharmacist might call the physician to see if a switch makes sense.

Are you suggesting that the consumer would do that as opposed to the pharmacist? Does the pharmacist have a role? Do consumers do that now anyway?

Ralph:  Well, what happens is that would happen as you got to the pharmacy at this point in time, and the pharmacist would, your right, many times if they took the time, contact the physician, get it re-prescribed, and get the right product in place. But, many times that requires a delay in the whole process because many times the pharmacist can’t get the physician.

David:  Now, you’ve described how there’s value for the consumer, for the pharmacy, and for the physician. Is there value to a health plan, as well, with BidRx?

Ralph:  There’s a value to a health plan, or let’s call it the real payer, to the employer.

What happens here is that the real payer ends up in a situation where if the consumer is not acting as the consumer, and the physician does not have the information to make good decisions for the consumer on a cost basis, then we end up with products being prescribed, like the Lipitor that you tried, and finding out that it costs, you know, $358 versus it would cost you $3 to get the Simvastatin.

So, those are the differences in prices that the employer, or the real payer, ends up paying versus would be able to experience that decrease in cost.

David:  Now, what happens if people have a whole big portfolio of prescriptions, which would be fairly typical especially for older people, and they get a good deal on one prescription at one place, and somewhere else they get a better deal on another one, and they end up having a somewhat fragmented collection of suppliers?

Are there issues for that in terms of either convenience or patient safety?

Ralph:  Well, let’s analyze what really is going on today to begin with. There’s this sort of untrue situation that assumes that a person goes to the same pharmacy all the time. They typically don’t. And, there’s nothing in their current benefit plan that requires them to, In fact, as we just discussed, many people want to push as many of the generic maintenance drugs to the mail order pharmacy and have the more emergency drugs billed at retail, and want to eliminate certain pharmacies from even filling some of the prescriptions.

So, there is not this idealized situation where you go to one pharmacy and all your prescriptions are filled there.

As far as the information on the prescriptions, many times the PBMs have indicated they do the drug analysis for drug interactions and other things so that even though somebody goes to a different pharmacy each time, they actually have that information to do the drug interactions and do the drug utilization review that needs to be done, and then can report that to the pharmacy that is filling it, even though the pharmacy does not see the whole profile because it is not an interoperable system. They only see the results related to the one prescription they’re sending in.

So, those are huge disadvantages of the current system at this point in time in trying to, for safety and also for convenience as you talked about. With BidRx what happens is we solved those issues.

One other thing I didn’t cover with the old situation: remember, the PBM only keeps a record of the prescriptions that are covered by your plan. So, when you do the drug utilization review and you do the drug interaction review, it’s only on the products that are covered.

For example, if you were on Nitroglycerin for your heart and then that was covered, but your Viagra was not covered and you went to get that at another pharmacy, they would not know that those two life-threatening products were being given together.

Let’s look at BidRx. BidRx now tries to solve that whole situation because, remember, on BidRx, it doesn’t matter if the product is covered, not covered or whatever. They all appear there, and for the first time, the patient has a complete electronic record of all of their prescriptions, covered and not covered, with one plan or another plan, they are all together in their own personal health record that they electronically can share or print out for anybody they wish.

They can give their pharmacy access to that, they can give their physician access to that, by letting them act as an assistant for them. For the first time ever, the patient, the physician, the pharmacy, and any other health care professional or anybody else they give access to, will have a complete electronic record of the prescriptions they received; and they will know when they had them filled, so they can check compliance. They will know all of that, which is hidden from everybody at this point in time, except the PBM.

David:  Tell me a little bit about how successful have you been. Are consumers using this? Are pharmacists getting online and bidding? What do physicians think?

Ralph:  Once again, the pharmacies will follow their customers. So, as customers become familiar with BidRx in an area, the pharmacies come online. What we have seen when we talked to all the major chain pharmacies is they all have, in a nutshell, said consumers will love this, payers will love this and don’t lock us out. We will be there when you have customers, but don’t expect us to help you, because right now we like the consumer that does not know and shop the price we know. We like the consumer that comes in for one reason: that’s convenience.

That’s why you will see a pharmacy on every street corner and you see all of those things that you see today. But once BidRx comes into play, then the consumers will have a whole lot of different ideas about what they can use to make proper prescription fulfillment decisions rather than just convenience.

Consumers, once they find out about it and once they use BidRx, they would never fill another prescription without using BidRx. Because what happens is just like anything else, as time goes on, there is more aggressiveness in the marketplace by the providers that are out there or the sellers, not only in price but in coupons and services. They compete on price, they compete on services, and they compete on making sure there is a good customer experience.

All of those things continue to happen. Because BidRx is also tied with the pharmaceutical manufacturers from a standpoint of they have an interoperable portal to the site, they want their brand of ketchup to be used above all other brands of ketchup. So they are going to constantly try and figure out a way to find that product to be selected by the physician and the consumer.

David:  Tell me, what is your business model? How does the site support itself financially?

Ralph:  The site supports itself financially by a number of different ways. The first way is that pharmacies, it doesn’t cost them anything to get onto the site and be part of BidRx at all. When the pharmacy comes on board, they can tell all the consumers their value propositions, the products they sell, the services they provide and the cost of all of those things and they can do that at no cost. The only time they actually do pay, they pay a marketing fee, a sales marketing fee, at the time they win a prescription, they win a bid.

David:  OK.

Ralph:  It is a fixed fee. It’s not determined on the basis of the cost of the prescription because it’s really like picking an ad in a newspaper or something but you only have to pay if somebody buys something.

David:  Right.

Ralph:  So, that’s one revenue stream. The other revenue streams that we have, again, are the advertising by the pharmacy, because if they want to put coupons on, just like if they put coupons any place else, if the pharmaceutical company wants to put coupons on, and then all of the other Google-like revenues that would come from a Google-like site, this becomes a Google of pharmacies.

So, to promote any of the products that may be potential picks by the consumers, all of that activity ends up being part of the revenue stream of BidRx, which is just huge. So, what we would anticipate, instead of the consumer paying more and instead of the payer paying more, what happens is BidRx really exists from those dollars that typically went to Madison Avenue and on buses and in magazines and things of that nature.

David:  I’ve been speaking today with Dr. Ralph Kalies. He is CEO of BidRx. Dr. Kalies, thanks for your time today.

Ralph:  You are welcome! I thank you for the opportunity.

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The financial meltdown, recession, and growth in health care costs are a triple whammy, even for those with good insurance. As recently reported, mainstream patients are seeking out pharmaceutical company Patient Assistance Programs intended for the poor. Even generic drugs can be pricey if you have a lot of them.

But I think I have a solution: the Ultrageneric formulary. This plan would feature efficacious products with very favorable side effect profiles and ultra-low costs. There should be strong acceptance from physicians because they are already happily prescribing these products.

What’s the secret? My formulary would consist entirely of placebos. As the New York Times reports (Half of Doctors Routinely Prescribe Placebos):

Half of all American doctors responding to a nationwide survey say they regularly prescribe placebos to patients…

In response to three questions included as part of the larger survey, about half reported recommending placebos regularly. Surveys in Denmark, Israel, Britain, Sweden and New Zealand have found similar results.

The most common placebos the American doctors reported using were headache pills and vitamins, but a significant number also reported prescribing antibiotics and sedatives. Although these drugs, contrary to the usual definition of placebos, are not inert, doctors reported using them for their effect on patients’ psyches, not their bodies.

In most cases, doctors who recommended placebos described them to patients as “a medicine not typically used for your condition but might benefit you,” the survey found. Only 5 percent described the treatment to patients as “a placebo.”

I expect this new plan to be a smashing success.

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Pharmaceutical companies are being scrutinized, and rightly so, for influencing physician behavior with sometimes immodest sums of cash and treats. Companies are starting to disclose and in some cases cap such payments. The latest example is GlaxoSmithKline, whose new CEO has announced plans to limit payouts to $150,000 per year per physician. (Of course most docs receive a lot less than that.) From the Financial Times (GSK to publish level of doctors’ advisory fees)

Andrew Witty, chief executive of the UK-based pharmaceutical company, said he was introducing tougher new rules to impose a cap “without exception” on such payments and promised to publish the amounts.

His commitment comes at a time of growing concern that the widespread practice of payments by pharmaceutical companies may help unfairly influence “key opinion leaders” in the medical community, in a way that biases their judgments and recommendations for particular treatments…

The pharmaceutical industry has taken steps in recent years to limit accusations of influencing doctors, curbing lavish entertainment and luxury travel under the pretext of supporting their attendance at academic conferences.

But critics continue to question payments to individual doctors as speakers and advisers to companies, as well as the drug industry’s heavy sponsorship of continuing professional medical education.

This article and others imply that pharmaceutical companies are solely to blame for the state of affairs and are being forced to open up under pressure. I don’t think that’s telling the whole story. In fact I doubt that Mr. Witty is upset about this turn of events.

Physicians are highly trusted professionals with great influence over patients’ lives. The decision to prescribe a drug is in their hands. Despite the rise of direct to consumer advertising it’s still the physician with the ultimate power to make the prescribing choice. That power brings a lot of responsibility, and it’s critical that physicians maintain the trust of their patients and the public. When they seek or accept high payments from pharmaceutical companies for access, consulting, or as an inducement for prescribing that’s not a great thing. Some who collect these fees are a bit ashamed by their own behavior, which is why voluntary disclosure doesn’t work well.

I know plenty of physicians who’ve decided not to accept payments from pharmaceutical companies. Every payment by a pharma company has a recipient on the other end. Let’s keep that in mind before bashing with such zeal.

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