Express to Center Stage

Pharm Exec’s William Looney profiles Express Scripts’ Chief Medical Officer, Dr. Steve Miller, whose rise to prominence as an articulate critic of drug industry prices symbolizes the growing clout of America’s largest pharmacy benefit manager (PBM).

Express Scripts Chief Medical Officer Dr. Steve Miller may rank high on today’s list of “pharma’s most feared”-until you pause to consider how closely his background resembles that of so many of his c-suite drug industry peers. Throughout his career, the 57-year-old physician has put skin in the game at virtually every stage of drug development and commercialization; now, as chief clinical spokesman for the nation’s largest administrator of drug benefits-filling 1.4 billion scrips annually for 4,000 plan sponsors responsible for 85 million covered lives- Miller arguably knows more about the R&D industry’s drugs than the industry itself.

It was a maternal instinct that first drew him to healthcare. Says Miller, “The childhood dream was to be a veterinarian, but my more practical mother seized on what was a better tuition bargain at the time-the six-year medical school curriculum. Neither of us thought I would get in, but I did and so I went straight from high school to the University of Missouri in Kansas City, where I obtained my medical degree in 1983.”

While a student, Miller developed an avid interest in clinical research, delaying his physician studies to take fellowships in pathology and cardiology at the University of Alabama Birmingham and the University of California San Francisco (UCSF), respectively. He performed his medicines internship at a key academic teaching facility, the University of Colorado Health Sciences Center, where he became a faculty member in internal medicine -and where he also met his wife (and biggest mentor) Dr. Vickie Fraser, a co-resident and specialist in infectious diseases. Both ended up at Washington University in St. Louis where they joined the clinical and research faculty and Miller picked up an additional degree, an Olin School MBA. That led, in turn, to a stint in healthcare administration, as VP and chief medical officer at Barnes-Jewish Hospital in St. Louis, where he ran the drug research studies operation as well as pharmacy services, among other functions.

Bench work background

Miller notes that the focus of his research work was drug discovery. “I was a basic science investigator at Washington University, where our work was funded by a harmonious combination of grants from the National Institutes of Health (NIH) and pharmaceutical companies. I negotiated patents with several biotechs in pursuit of a special interest I had in finding a renal care drug that might eliminate the need for kidney dialysis in some patients. I know what it means when one of those proverbial shots on goal doesn’t work out, because that’s what happened to me-and helps explain why I landed at Express Scripts.”

On a practical level, Miller contends that his career trajectory reflects the convergence of healthcare into a fully integrated sector reliant on multiple assets and a diversity of skills. His experience as a practicing physician, clinical researcher, faculty member, and hospital administrator may have been inadvertent, but the lessons, at least to him, are clear. “Understanding how those who deliver and pay for health services practice their craft helps make our system work better for patients,” says Miller. “I’ve come to learn that academic medicine and commercial enterprise carry their own special roles, which is good. But being able to bridge the two is what’s required for the future.”

To underscore this point, Miller avows that big Pharma has to change the way it thinks about drug development. “Silos within and between drug companies and their external partners, not to mention the broader barriers involving other segments of the health system, make the process of bringing a compound to market more costly than it has to be. Removing these silos means that medicines could be brought to market faster and less expensively than today.” An exemplar of this approach, which Miller has invested in personally with his time, financial acumen, and lengthy contact list, is the Bluefield Project, a UC San Francisco-based research consortium seeking a cure for frontotemporal dementia (FTD), the most common degenerative brain disorder in people under age 60 and which is also linked genetically to Alzheimer’s disease. “When we started, there was virtually no research about this condition, despite the many parallels to Alzheimer’s,” says Miller. “Today, it’s an international movement opening new pathways to develop useful drugs for almost all forms of neurodegenerative diseases.”

A stake in new R&D models

Miller notes the Project is equally distinctive for its research model, based on open, real-time sharing of data; a “bidirectional” work stream to ensure that research hypotheses from patient observations can be tested quickly in animal studies; and a flexible, pooled funding infrastructure that gives priority to the most promising research leads, regardless of ownership. Says Miller, “It’s pure translational medicine, to get us from bench to bedside as fast as possible. The money is modest, almost immaterial- the research design is the trump factor.”

Though Miller was devoted to research and the non-profit world of hospital administration, he gradually found himself consumed by process. “I became frustrated that the work I was doing provided little opportunity to move healthcare-the way it is practiced-in a new direction.“ When Express Scripts, which also had deep roots in the St. Louis area, came calling for an interview, Miller showed up as a courtesy, but quickly became impressed by the scale of what the company was trying to do in making the pharmacy benefit more efficient for insurers and more accessible to patients. “I concluded that Express Scripts was a better place to shape the future of US healthcare.”

The way Miller describes it, the PBM value proposition behind Express Scripts is self-evident: if PBMs did not exist, they would have to be invented. “At its most basic, PBMs mobilize large blocks of patients to help the providers of their drug benefits obtain price concessions from the supply chain. We go to the manufacturers of clinically equivalent drugs and ask which of them might like to be our preferred provider for that condition for our 85 million covered patients. The proposition is simple: you give our clients a discount, we give you market share. And we do the same with retail pharmacies. We are able to select among the 68,000 pharmacies in the US by negotiating dispensing networks that steer those 85 million patients to the outlets that give us retail discounts, which we pass on to benefit plan sponsors in both the private and public sectors.”

Newcomer with clout

That said, Express Scripts, founded only in 1986, carries a small footprint. Most Americans take a company like Express Scripts for granted, with few realizing that the company is today bigger than the biggest of big Pharma, ranking 20th on the Fortune 500 list, and pulling well over $100 billion annually in sales, all at very low margins compared to most other healthcare providers. One of every four patients in the US have their pharmacy benefit managed through Express Scripts, including approximately 10 million beneficiaries at the Department of Defense-active duty personnel, their families, and military retirees. It’s a major responsibility; by and large -some recent rare data breaches aside -the company handles it flawlessly, as exemplified by an average 92% book renewal rate among clients. That might explain why Express Scripts’ low audience visibility is disproportionate to its market size and clout.

Innovating the PBM model

Miller aims to change that dour image by positioning his company as a driver of innovation, not just in the sweet spot of medicines but, indirectly or not, for all parts of the healthcare system. Like most innovators, Express Scripts has a “test and learn” culture that strives ceaselessly to find ways to do the same things better. Knocking out waste is what the company does for its customers; the same approach is applied to internal operations.

Miller points to Express Scripts’ mail order pharmacy capabilities- many benefit plan clients now rely exclusively on home delivery for maintenance medications, with a target of 40% cover set by 2015-as the embodiment of this strategic approach to innovation.

“First, we get from mail order all the synergies of scale, the most important of which is how our ability to dispense so efficiently forces the rest of the pharmacy market to perform at lower prices. Second, because our mail order system is highly automated, the level of precision and accuracy is extraordinary, which creates yet another threshold for superior system performance. When a patient does retail, the likelihood of him or her getting the wrong pill in the bottle averages about 1.7% of the time. When a delivery occurs by mail, we get almost Six Sigma perfection: Express Scripts’ reliance on mail order pharmacy prevents 2 million patients a year from obtaining the wrong prescription. Third, evidence we’ve collected shows that getting prescriptions directly at home drives adherence to medication up by 8% to 10%. If non-adherence imposes a cost on the healthcare system-and it does -then we’ve just saved the system 10%. By any definition, that’s an innovation.”

Express Scripts is building out that leadership in mail order-a position sealed by the acquisition of Medco Health Solutions in 2012-to differentiate its service offering from the competition in three additional areas:

Management of specialty medicine. A unique aspect of the Express Scripts model is that it operates its own chain of specialty pharmacies, organized into 15 Therapeutic Resource Centers (TRCs) for conditions ranging from oncology to multiple sclerosis to pulmonary artery hypertension. This creates a direct, impactful, relationship-driven approach to pharmacy care that raises the bar on adherence because it is managed by specialists with deep knowledge of what drugs work best for the designated condition. “Our pharmacists often have more experience with cancer drugs than the oncologists prescribing them, which makes for better outcomes,” claims Miller. That’s a persuasive selling point to clients in managing the mounting cost of specialty drugs, which, while comprising only about 1% of prescription volume last year, nevertheless, accounted for more than a third of total US drug spend. “We think that number is going to rise to 50% within the next few years, so helping our plan sponsors and patients get the best care at the lowest cost is going to make the difference in the PBM business, between thriving and just surviving,” says Miller.

Novel analytics. This means the embrace of new-and often unconventional-cross-disciplinary tools geared to discovering what motivates patients in their interaction with medicines. Express Scripts is an expert in the emerging discipline of behavioral economics, which relies on everything from physics to psychology to “nudge” patients to respond in a socially optimal or economically rational way toward a given set of options. “Choice architecture” is another phrase that aptly describes what Express Scripts is doing to help its members get to the best solution for their own health. Says Miller, “We use all this insight to frame messages to patients and customers just like political campaigns do to motivate likely voters.”

Real-world data-in real time. With 85 million covered enrollees and a fill rate of more than a billion scrips annually, the company has access to the richest single database in healthcare today. Express Scripts is using this data proactively, to predict which patients will be non-adherent to a medicine even before they take their first pill. Notes Miller, “We can also determine why this will be the case. That’s important, because if the reason is cost, then sending that patient a pill box divider isn’t going to help. But if the non-adherence is because of you being forgetful, then sending out a dose timer might be the perfect solution. We can link data to the individual: it’s taking personalized medicine right into the pharmacy.” An example is creating a laser application that can craft individualized messages to patients on the top of a pill bottle (i.e., “time to renew your prescription.”) Miller says this high-tech solution has persuaded 8% more of those 85 million covered lives-or some 7 million patients-to go and get their refills on time, so they don’t suffer the gaps in care leading to side-effects or disease progression.

Ideas into practice

To serve as a clearinghouse for application of these tools, a new HQ unit, Express Scripts Lab, was established in June with a dedicated staff of about 40 “decision designers,” researchers, economists, and IT professionals, supported by hundreds of contributors from the TRCs and other divisions of the company. Clients will also be engaged in collaborations to set Lab priorities, which will focus entirely on innovation. More than 100 health plans have visited the Lab to provide input in the last few months. In opening the facility, Express Scripts CEO George Paz stated, “We are driving down costs, reducing waste, and improving health in ways no other company can. This makes us unique in the PBM marketplace.”

Miller describes one pilot project underway through the Lab. “With the Affordable Care Act’s mandate to include access to contraceptives, we became interested in why women are so highly adherent to birth control medicines: could such behavior carry over to other medicines the women might be taking at the same time? We researched that and found there is indeed a positive correlation between the two. In other words, a woman doesn’t take birth control pills while failing to adhere to the insulin she needs to take for her diabetes.

“So this pilot is studying how to establish the principle of a ‘sentinel medicine,’ place that medicine in a blister pack, and see if that will extend a patient’s adherence to all the other medicines he or she is taking at the same time. It’s a novel approach founded on choice architecture-I’m not giving the patient another brochure, or sending her to a website or a lecture. Instead, we are testing what patients will do if we coordinate their meds around a concept that simply involves a high profile medicine and different packaging.”

The bulk of Express Scripts’ work still rests on what used to be the mundane task of formulary management. But true to its larger mission of transforming healthcare, the company is rapidly turning that task into a science of frankly stunning precision. The reason, according to Miller, is simple: drug price inflation is hurting health plans’ bottom line. “Our clients are confronting average annual brand price increases at double digits, way above CPI. There is some price inflation in generics as well, while in a few categories linked to compounded ingredient medicines important to patients with skin or pain problems, there have been even more significant price spikes, on the order of 1,000%.

“Looking at the picture overall, the patent cliff means there are numerous medicines alternatives available in nearly every therapeutic category, so why wouldn’t we act to leverage our market reach?” Miller contends that the focus on price increases is simply being responsive to the customer base, which is nearly unanimous in demanding the most aggressive cost management tools among the suite of PBM offerings. For example, more than half of all contracted plans at Express Scripts are now relying on some form of narrow pharmacy networks to control where beneficiaries can have their prescriptions dispensed.

Formulary focus

The centerpiece of Express Scripts drug cost management efforts is its National Preferred Formulary, a closed loop vehicle now covering more than 25 million patients and designed to significantly lower costs while limiting plan exposure to controversy around decisions to list-or de-list. The formulary relies on decisions made by a Pharmacy and Therapeutics Committee, made up only of outside clinical experts and is responsible for ensuring there are “safe and effective” medicines available to members in all therapeutic classes. According to the company, only when this hurdle is breached does the group examine a therapy for cost-effectiveness. In other words, a drug will only be excluded from the formulary if a clinically equivalent alternative-as determined by the P&T Committee-remains.

That aside, it is evident that prospects for being excluded rise if a drug is in an over-crowded therapeutic segment, with many clinically equivalent alternatives, along with some generic penetration. Another indicator is heavy promotion spend by the manufacturer, with use of co-pay offset coupons serving as a red flag. According to Miller, “no manufacturer puts out a coupon unless there is a rival trying to take market share. Can you name an offset program built around a drug with years to go on the patent? I can’t. And the whole approach undermines our benefit design-it’s anti-competitive.”

Last year, 48 medicines on the list were moved to “not covered” status, a figure that amounted to less than 1% of all products on the formulary and used by fewer than 3% of covered members. The 2015 excluded list grows to 66 products, and the company is claiming that participant plan savings from “not covered” will top $1 billion, up from $700 million this year. In another application of its Lab brain trust, Express Scripts attacked compound medicine pricing through a formulation process review that led to the exclusion of some of the highest priced ingredients in favor of cheaper replacements-retaining the same pharmacologic profile, but cutting the cost of the final product by as much as 95%.

‘Clients are behind us’

Miller asserts that the National Preferred Formulary has been strongly endorsed by clients, with some 90% of commercial plans having opted in to date. More important, none to date have backed out. He expects participation will continue to expand, particularly as the focus of the Formulary tightens around specialty drug spend. More important, Miller refutes claims from some drug companies that patients are suffering from the exclusions. “If there is a unique drug that represents an improvement in the standard of care and works better in the marketplace, it’s going to be on our formulary -period. The ability to render a choice that involves price as one factor exists because of the market. Specifically, it’s due to the number of follow-on or “me too” drugs available to patients today through the decline in exclusivity. If a drug lacks real-world data to show clinical superiority, not in the lab but in the real world, where we have more data than anyone else, then we will do precisely what our PBM business model tells us to do: move market share to the clinically appropriate products that give our members the best discounts.”

Company data also shows that greater affordability and increased adherence are closely linked. “By giving patients access to an affordable drug that doesn’t require additional out-of- pocket costs, we see that adherence goes up and surrogate endpoints are improved. There has been no instance under my watch as CMO where we have taken a position on a drug that leads to bias against a patient’s health.”

Can we talk?

When asked about complaints that Express Scripts is pursuing a “take it or leave it” approach to negotiating price and access with R&D drug-makers, Miller responds that dialogue with companies is actually increasing. “We’ve actually had more drugmakers taking us up on the offer to meet and review their portfolio than ever before.” He says the company hosts four large summit meetings per year to network and discuss key commercial and policy issues involving all of its stakeholders, including big Pharma.

Nevertheless, there is little doubt that Express Scripts will move unilaterally if necessary in meeting client expectations to lower costs. In a third quarter conference call with analysts, Express Scripts President Tim Wentworth noted that the Preferred Formulary list could henceforth be amended “midstream”-instead of once annually-to incorporate and quickly recoup any savings from the pending entry of competitors to Gilead in the hepatitis C virus space. It is also clear from conversations with many drug makers that Express Scripts is ratcheting up the stakes around “price protection” clauses in formulary contracts, which mandate any market-wide price increases by drug manufacturers be added to the rebates Express Scripts receives from them through the formulary. What it amounts to is a loss of pricing freedom; fighting that requires a mixture of clout, foresight, and cunning that some drug companies (notoriously) are not capable of mustering against an interlocutor with the market power of Express Scripts. On this, Miller declines to comment.

Three themes for the future

What’s next for Express Scripts? Applying the standard three-year planning cycle, Miller points to three themes that will drive corporate strategy around the aligning message point of “better decisions for healthier outcomes.”

The first is to be the best service provider in the industry. “We are constantly evaluating all our platforms around the central question-are we providing the best possible experience for patients?” says Miller. One element of that commitment is to boost home drug delivery by making it just as slick as the retail web experience. “Mail order pharmacy has not been compared to Amazon or the other outlets where people buy online,” says Miller. “We think that has to change.”

The second theme is controlling company exposure to costs, through an unrelenting commitment to “test and learn” innovation. “We are going to be sure we have the right platforms, the best people, and the most relevant information to provide timely, resource-effective, and clinically appropriate care to our clients and patients,” says Miller. If this premise is the essence of Express Scripts’ DNA, then it is no surprise how important managing specialty drug costs is going to be to the company’s future.

The third initiative is mastering the commercial future: what is the direction of healthcare financing and delivery and how does Express Scripts operate effectively in that space? Miller says this includes addressing the many disruptive effects of government regulation of the healthcare industry, noting that Express Scripts spends over $100 million per year on new compliance costs. Data privacy protections-where the company has stumbled in the past-and foreign language requirements are just two.

As the volume of government business continues to grow, being able to understand and anticipate how the public sector makes decisions will also count. “We know what a commercial plan wants in terms of services and how much they are willing to pay. Government payers, on the other hand, often ask for different services and cost structures, extra things that few of our commercial plan might consider.”

Taken together, Express Scripts believes it has the size, scale and innovation to navigate the befogged landscape of healthcare better than others who might lay claim to its space. “And,” says Miller, “as chief medical officer, I’ve got one of the best jobs in the industry, with a big window on the even bigger world outside.”

William Looney is Pharmaceutical Executive’s Editor-in-Chief. He can be reached at wlooney@pharmexec.com.