#30 - Drug Pricing, Cajun Style

Louisiana wants unlimited drugs, CVS has an app too, and Amazon wants to practice medicine 

It’s August, which means you’re either on vacation, or you’re having trouble getting things done because nobody is answering their emails because they’re on vacation. 

Speaking of vacation, I’m actually taking one. That means this week’s Healthcare Handout is a little lighter than normal. Don’t you worry - I’ll be back, rested, and better than ever in next week’s edition. 

Things That Happened

Power to the ZocDoc? The physician booking company ZocDoc has been piloting a pricing model change. Instead of charging a flat per-doctor annual fee, they want to charge a flat practice fee with a booking fee for each visit booked through the platform. They’re doing it to lower the entry cost to the service for new doctors (to spur growth, no doubt), but current doctors may end up paying more. Some of them are quite upset, according to CNBC, and are even claiming the new ZocDoc arrangement violates anti-kickback laws. In response, ZocDoc has delayed a full rollout of the new pricing scheme. 

It will be interesting to watch this play out, as it will show which party has more power. If a doctor ends up paying more in the new scheme, it means she was getting a fair amount of business via ZocDoc and cutting off that business could imperil the practice. If most doctors decide to begrudgingly accept these price changes and remain customers, it shows that ZocDoc has built a resilient business that delivers real value to these practices. Has ZocDoc built an Amazon-level marketplace where sellers can’t afford to not be a part of it? We’ll find out. 

CVS has an app too, you know. CVS has announced that customers can now use the CVS Pharmacy app to have a video visit with a doctor. The functionality is part of their MinuteClinic services, and is offered via a partnership with Teladoc (who provides the doctors and underlying technology). It’s CVS’ next step in becoming a one-stop shop for all your healthcare needs. With Walgreens announcing their Find Your Care tool, which I wrote about last week, it seems patients have their pick of one-stop shops for healthcare. 

The big question I’m interested in understanding is who is actually going to use this? Telehealth is becoming increasingly commoditized, and was fairly commoditized to begin with. 96% of employers offer telehealth services along with their insurance, and many private plans at least include a preferred telehealth vendor. It’s easy to see why CVS, and Walgreens, want to be in the first position when people think about engaging with the healthcare system, but it will be a coup if they actually manage to get there. Louisiana wants unlimited drugs. The southern state, bemoaning the high prices of Hepatitis C drugs, combined with the fact that the disease predominantly affects lower income populations, has requested comment on a plan to pay a fixed price to manufacturers for unlimited use of their medications. The state estimates they have at least 73,000 infected, and with Hepatitis C treatments priced at $75,000 or more per patient, the state must either find a way to bring the overall cost down, or simply fail to treat their population. 

It’s a creative solution that will get people the drugs they need. And while it solves a near-term problem, it doesn’t strike at the heart of the drug pricing conundrum: prices keep going up, and nobody will be able to afford them if it continues. 

If you’d like to read some smart words about what subscription pricing could look like, here’s a journal article from 2008 discussing the model.

Amazon is thinking about getting a doctor. Christina Farr, the busiest woman in healthcare news, reported this week that Amazon is looking at opening primary care clinics in their Seattle HQ. With Amazon’s multi-various healthcare moves unfolding all the time, the question is around how these primary care practices will factor into the overall healthcare strategy.

Not much. A group of well-compensated and relatively homogenous HQ employees isn’t going to serve as a reliable trial population for experimenting with new care protocols, or better understanding how to deliver effective healthcare. And I think Amazon is savvy enough in healthcare to know that. I’d argue this is a benefit to save HQ employees the time of going to outside clinics when they have a cough or a sore throat. 

This isn’t to say Amazon won’t be getting their hands dirty in primary care, but if that’s going to happen it’ll be through their partnership with JPMorgan and Berkshire Hathaway. Paging Dr. Gawande… 


Thanks for reading. Have you considered taking a vacation? 

Stay healthy, 

Isaac