Pfizer Follows Lilly

When the Going Gets Weird

“Lilly broke the mould with LillyDirect and everyone is following with their own unique pitch.”

The comment is from Markus Saba, a marketing professor at the University of North Carolina Center for the Business of Health (and retired communications executive with Eli Lilly) in an interview with the Financial Times on Monday. Pfizer, according to the Times, aims to recapture some of the goodwill it gained from rolling out its best-selling Covid-19 vaccine three years ago by putting the “Pfizer for All” brand on a direct-to-consumer medicines platform.

”The early-stage plans are the latest effort by a pharmaceutical company to circumvent industry middlemen and sell drugs directly to US patients. Earlier this year, weight loss drugmaker Eli Lilly launched its LillyDirect platform in an industry first.”

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I’m not sure an N-of-2 qualifies as "everyone" but the levee is breaking. The broad-framing looks roughly like this:

The infrastructural advantage that Big PBM + Big EBC have used to define the economics of the drug market in the United States -- a system of administrative complexity and self-generation built over decades -- is not just dissolving.

It's collapsing exponentially.

Customers -- defined here as the self-funded employers and their employees, the real "payers" in the American Way of Healthcare -- are pissed.

"Workers fed up with rising health care costs are filing lawsuits aiming to hold employers accountable for cutting what they say are bad deals with firms that manage their health benefits." wrote Tina Reed in Axios this week about the mushrooming legal battle over health costs and employee health benefits. "The heightened legal threat is contributing to employers' efforts to take a harder line with health insurers, pharmaceutical middlemen and other benefits administrators."

Yesterday, industrial supplier Grainger ($13 billion in total revenue; 24,000 employees; Fortune 500) filed a lawsuit saying Aetna mismanaged its self-funded health plans by approving false and excessive claims and pocketing money that should have gone to medical providers, according to Bloomberg Law.

Aetna took money from Grainger “under the guise of claims administration” but put only a fraction of that money toward workers’ medical claims, keeping the rest for itself, the company said in its complaint. Aetna approved false and fraudulent claims and engaged in “active deception” to conceal its misdeeds, including limiting Grainger’s audit rights, providing false or inaccurate claims reports, and preventing Grainger from accessing its own data.

It’s a safe bet that we’re going to see a lot more of these: nearly every self-funded plan in the country could conceivably sue their administrative services only (ASO) benefit manager, and win, given the lack of transparency large carriers provide.

Government is also pissed.

Hawaii, California, Illinois, Ohio and Kentucky have all filed lawsuits against Big PBM alleging their practices unfairly drive up prescription drug costs for products. PBMs have also been feeling the heat at the federal level, with legislation moving through Congress.

An entire economic subsystem is vulnerable to displacement.

And the technologies and capabilities to stand up unique care and service infrastructures -- to innovate the market in pharmacy, claims and benefit management -- are widely, easily and cheaply available to anyone with strategic vision and agility.

Just ask Change Healthcare.

Competitors Waystar, Availity and HealthEdge have all mobilized themselves as alternative infrastructures to fix the nightmare in provider financing and claims administration caused by a cyberattack that affected one-third of the American population.

And customers -- defined here as the healthcare providers and their patients -- are pissed.

You can't iterate on a burning platform.

And while you should expect any business to defend what has made it, and its shareholders, big money in the past -- UnitedHealth Group will fight to keep a $400 billion business intact; ExpressScripts will do what it takes to sustain $200 billion in annual revenue; ditto for WTW and its $10 billion book of benefits consulting business -- there is a deeper thing going on for these businesses to grasp, which is this: If you don’t like change, you’re going to like irrelevance even less.

Jumping to the next ‘hundred-billion dollar’ growth curve doesn’t start in the past. It starts in a new orbit for imagination, with a more creative form of leadership and engagement with the drug market, collaborating with industry as part of a ‘design management team’ to construct, brand, activate and sustain demand for new economic systems (‘ecosystem-centered market strategy’).

And the whole thing will perform better with a different “pharmacy” reimbursement/pharmacist-as-provider model as the base layer, the keystone to a new system of markets that rotate, and are rewarded, around the ‘production of affordable health' as a new economic concept, not “utilization management" from third-party payers, who themselves are kinetically trapped, trying to feed the “horseless carriage” rather than inventing the automobile.

It's fairly simple to remove the constraints of channel evolution in healthcare.

All it takes is weird vision and professional ambition.

/ jgs

John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy at a system level. To engage: john@bluespoonconsulting.com

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