PBM (Pharmacy Benefit Management) is a model that has gone through the sea from the United States to China around 2010. It has experienced three stages of development: “emergence – silence – recovery”.

When PBM comes, the industry is looking forward to "the stone of other mountains, can attack jade"; when PBM is quiet, the industry view is "orange is Huainan, it is orange, and it is born in Huaibei"; PBM is reviving, more emphasis on "local" "" and "Chinese innovation."

PBM circulates among many stakeholders – pharmaceutical companies, insurance, medical institutions, pharmacies, patients, optimizes the diagnosis and treatment services and medication routes, and strives to reduce medical expenses as much as possible on the basis of ensuring treatment results. In the rapid development of China's medical market, the interest relationship is more complicated, and non-innovation can't solve the trap of the city. PBM is once again placed high hopes.

This article will explore the exploration and practice of the PBM business model in China. The article is divided into three parts:

1. PBM Detailed: More than just control fees

2. PBM Practice: Localization Innovation

3. PBM Future: Role Redistribution

PBM Detailed: More than just control fees

The drug welfare management model is not complicated to say. According to the definition of the American Pharmaceutical Association, it is a professional medical third-party service. It is comprehensively based on prescription management, optimization of drug acquisition methods, differential payment ratio, and health management. Medical services, especially medications, are used to control and optimize the structure of medications to achieve reasonable control fees.

Arterial network mapping

PBM was born in the United States in the late 1960s, accompanied by the invention of plastic security cards. In the 1970s, the prototype of prescription review appeared; in the 1980s, the model of prescription review was further developed, and PBM became the backbone of prescription drugs for managing outpatients. .

After the 1980s, the PBM business was rapidly developed under the influence of two major factors: First, with the rapid increase in the cost of medical services and prescription drugs, the demand for control fees continued to increase; the second was the arrival of the “golden age” of drug discovery, with a large number of When a new drug goes on the market, an organization is needed to help the payer track the launch and use of the new drug, and to balance the choice between the old drug and the new drug based on indicators such as efficacy and cost.

Today, the PBM players in the US market are roughly divided into several categories: one is the PBM embedded in the insurance company, such as the PBM company Optum of the health insurance company United Health; the second is the PBM company opened by the chain pharmacy. Such as CVS's Caremark; another is a stand-alone PBM, such as Medimpact (Medical).

It is also worth noting that the concentration of PBM companies in the US market is getting higher and higher. In the 1990s, there was a lot of glory. In 2000, it entered the peak of integration within the industry. CVS's acquisition of Caremark in 2007 was seen as the starting point for cross-industry integration, after which CVS further acquired Aetna, a commercial health insurance company, for nearly $70 billion. At the moment, Cigna Insurance is seeking to acquire ESI, and there is not much left in the independent PBM company.

A typical PBM business process is as follows: the patient goes to the hospital for medical treatment, the hospital prescribes the prescription; the prescription is delivered to the pharmacy, the pharmacy submits the prescription to PBM, PBM reviews the prescription according to the insurance product requirements and clinical rules and returns the result to the pharmacy, and the pharmacy provides the medicine to the patient .

Arterial network mapping

Of course, the above is just a relatively simple process. In the actual business, PBM has become a part of the pharmaceutical supply chain, will participate in the centralized procurement of drugs, get discounts on “price-for-price”; and set up central warehouses through self-owned or cooperative pharmacies. The network provides drug mail order service to patients with chronically long-term prescriptions. Patients only need to call in by phone or online, and they can directly renew.

Although the PBM concept has entered China for many years, the current understanding of the PBM business model is relatively simple, and the concept only stays at the level of control fees. Shi Mengmeng, general manager of Medimpact China, and Liu Zeyuan, senior investment manager of Yikai Capital Medical Health Group, all emphasized to the arterial network that the function of PBM is not limited to the control fee.

“The initial function of PBM is to achieve the interoperability of prescription information, and then develop into a prescription review to achieve drug-side control in a safe, effective, and economical manner; then a mature third-party drug, such as an insurance company. Build a network of pharmacies, get discounts on medicines, provide mail order business, distribute new special medicines, etc., and design new types of insurance based on data analysis, market analysis, etc." Shi Mengmeng said that PBM will provide multiple services according to the different needs of insurance companies and patients. Service.

Liu Zeyuan said: "The industry has misunderstood PBM and thinks it is just a medical control information system, whether it is SaaS mode or other forms, and this is actually very different from the mature PBM business model. The control fee is only the PBM function. One of the core functions of PBM should be based on long-term continuous, personalized, regular data on chronic drug patients, and the drug is administered in a centralized manner, which is the most economically efficient. In other words, PBM should be one. Efficient drug supply solutions, starting with patient needs and insurance company needs.

PBM Practice: Localization Innovation

Under the condition that the medical insurance fund is the main, the commercial insurance ratio is not high, and the interests are intertwined, how to explore an effective business path is a problem that all companies must face. In the case of medical insurance funds, it is difficult to achieve monetization through the “balance of share”, which is not the main source of revenue for PBM in China in the past and in the future.

PBM must be localized, and it must be adapted to China's national conditions. This is already a common consensus in the industry. Below we introduce two cases of PBM localization innovation - the United States and Germany and the key circle. Interestingly, the two companies have taken two different paths and explored more possibilities for the development of PBM business.

Shi Mengmeng, general manager of Medimpact China, told the Arterial Network that Virtue was founded in 1989 by professionals such as pharmacists and is the largest unlisted drug benefit management company in the United States that does not sell any drugs. Eight of the top ten insurance companies in the United States choose Virtue as their drug welfare manager. Mead Medical Services serves more than 50 million insurance members, manages $18 billion in drug costs, and handles more than 4 claims reviewed annually. Billion single.

In 2011, Virtue and Medicine began preparations for entering the Chinese market. “When we started exploring the domestic market, the industry generally lacked awareness of PBM. The entry point we found was to start with the needs of public hospitals. He needed to conduct regular prescription monitoring and generate reports to the regulators. "Shi Mengmeng said.

After that, it took more than three years for Virtue doctors to set up a database involving diagnosis, prescriptions, and more than 170,000 drug data, and explored with insurance companies, medical institutions, and dental organizations to conduct pilot projects for PBM business.

At present, there are four main parts of Virtue's domestic business: hospital reasonable compliance medical solutions, dental welfare solutions, localized PBM, and Chinese one-stop service for overseas drug benefits. The localized PBM services mainly include modules such as cost control, quality and safety supervision, and report analysis.

Services provided by Virtue China

Source: Virtue

Starting with dental welfare management is a relatively "compromise" program. Dental is a segment of medical service with a high degree of commercialization in China. The degree of standardization is high and commercial insurance coverage is relatively good. From the perspective of the dental organization, the PBM concept is also welcome to provide patients with professional, effective and economical dental treatment solutions. Together with the clinical incidence data, Meide Medical and Insurance Company designed the dental products together with the clinical incidence data, and combined the patient's dental symptoms during the medical treatment process to provide the 'second diagnosis' opinion suitable for the patient case and accumulate the experience of localized DBM.

“Finding pain points” is the core logic of the advancement of the US and Germany medical business. For example, the hospital's appeal is the convenience of claims. After joining PBM, real-time claims can be realized. The insurance company's appeal is based on the long-term goal of controlling fees, improving health management service capabilities, and collaboratively opening up new channels.

Shi Mengmeng told the arterial network. After 7 years of exploration, Meide Medical has become a pioneer in the localized PBM business. It has established a localized PBM engine and reviewed more than 35 million prescriptions for many hospitals. The company reached a consensus on exploring the localization of PBM.

From the lack of concept to the gradual understanding, PBM has indeed developed in the country. As a global company, Meide has been doing business in the Middle East at the same time. It is now the number one PBM in the region. It has entered the South African market later than China and has also achieved the top three in the region. "Fortunately, there are already some 'national prefix' commercial insurance companies in talks with us about the specific aspects of localized PBM in a phased manner, which is one of the good signals for the industry." Shi Mengmeng said.

“Not only between China and the United States, in fact, the global healthcare industry is facing a common driving factor – the aging of the population and the rapid increase in medical expenditures. These are all favorable factors for conducting PBM business. Of course, China and the United States are very different. At that time, it is not possible to directly copy the mature PBM business model of the US market, and it needs to be adjusted according to actual needs." Shi Mengmeng said.

Shi Mengmeng also stressed that virtue doctors have always been open to the Chinese market. Meide Medical provides PBM engines and solutions for many insurance companies and similar companies. It is to explore localized PBM systems suitable for China's national conditions, to continuously enrich PBM products and services, and to improve the ecology of medical welfare management.

Keyuan Circle Cloud Health was established in July 2015. It is jointly funded by Weining Health and Sinopharm Health. It is a homonym “pharmacy circle”, which aims to integrate the drug supply system and the physical pharmacy retail network to provide users with “medical online direct payment claims”. Five major professional services, such as cloud prescription transfer service, direct drug supply, pharmacist service, and out-of-hospital drug supply.

In August 2017, Keyworld completed nearly 200 million yuan of investment in Weining Health, Sinopharm Health, Millennium Capital, Zhizhong Investment (Supor Industrial Investment) and many other industries, in just over two years. , has completed the integration and acquisition of nearly 10 companies.

Key World Circle is the landing platform for Weining's health “cloud medicine” strategy. As a leading medical information technology manufacturer in China, Weining Health has been actively deploying and transforming the health service industry based on the expansion and strengthening of HIT in recent years. It intends to realize the transformation from software services to health services. Yunzhi, Yunyao, Yun Kang, cloud insurance + innovative service platform is the key to the transformation of Weining Health.

Zhou Wei, general manager of Key World Circle, believes that PBM's real landing in China needs to have a good foundation and policy support, such as: the electronic prescription circulation system, such as the online claims information from insurance to pharmacy, and the policy environment. Matching. Therefore, the key circle strategy is to adapt to local conditions, combined with China's software and hardware environment to gradually realize the full solution of pharmacy welfare management.

Zhou Wei told the arterial network that the “cloud medicine” strategy of the key world circle is mainly divided into two steps: the first step is to build the infrastructure and take the business insurance as the core, and pass the “pharmaceutical joint” network of nearly 70,000 social pharmacies nationwide. In combination with the insurance fee program required for insurance, the online direct payment claims system will be established, and the data will be accumulated. Then, through the scale of the managed insurance fund and the scale of the pharmacy claim amount, the price discount negotiation will be conducted with the pharmacy and the pharmaceutical company. The second step is to aim at the opportunity of “separate medicine” and “prescription outflow”, establish a third-party prescription sharing platform, and realize the connection between hospital prescriptions and pharmacies, so as to achieve online direct payment claims, reasonable control fees and optimal cost of prescription drugs.

From the perspective of the payment environment, in recent years, the total amount of commercial insurance has increased very rapidly, but as of today, many commercial insurance reimbursement can only be carried out through invoices, which is neither economical nor efficient. Keyuan's solution is to establish a “direct payment platform, connect pharmacies and insurance companies”, and provide the insured with a “key card” as the core payment environment for real-time claims settlement. At present, Keyworld has managed an insurance amount of about 3 billion.

Zhou Wei stressed that without electronic prescriptions, PBM's landing in China can only be in the form. Therefore, the construction of prescription platforms in China is particularly important. Public medical institutions are the core places for prescriptions. With the policy of “separation of medicines” and “prescriptions”, the demand for outpatients in hospitals is gradually transferred to social pharmacies. From hospitals to pharmacies, an independent information communication platform is bound to be needed. The Keystone Recipe Sharing Platform is capable of performing this function. Keyworld also introduced blockchain technology to analyze drug use through real and massive prescription information, and explore the business of drug welfare management and centralized procurement.

Zhou Wei told the arterial network. At present, Keyuan Circle mainly adopts two major systems: online direct payment settlement platform and prescription circulation platform, combined with three major operation centers, including “direct payment claims center, drug direct supply center and pharmacy B2B procurement center”. Combine to drive business development.

Key circle business model

Source: Key World Circle

“The connotation of the pharmaceutical welfare management business is service. Through system operation, it helps patients to easily access services and medicines, and fully meets his needs, thereby gradually managing diseases and improving drug compliance. On the other hand, PBM passes insurance companies and medicines. Multi-faceted services such as enterprises and pharmacies can effectively improve the operational efficiency of the drug supply system, thereby further optimizing the overall cost of drugs from pharmaceutical companies to patients." At present, we have seen some local medical insurance bureaus doing volume purchases. It also represents the gradual evolution of the PBM model in China. Zhou Wei believes that PBM will continue to play a synergistic role in resources, allowing medical, medical, and medical insurance to link and better manage and utilize medical resources and insurance funds.

PBM Future: Role Redistribution

Yikai Capital is a leading new investment bank and investment institution in China. Its core businesses include private equity financing, mergers and acquisitions and asset management. It is a major feature of Yikai Capital to provide solid industry research and guidance. In the past few years, Yikai Capital has released a number of industry research reports on consumer entertainment, new economy, medical health and so on. PBM research is one of them.

Liu Zeyuan, senior investment manager of Yikai Capital Medical Health Group, told ArtNet. They are interested in the PBM industry for two main reasons: First, PBM is in line with policy directions, including reform of medical insurance payment methods, grading diagnosis and treatment, prescription outflow, etc. The second is that the US PBM industry is experiencing large-scale mergers and acquisitions, and the amount of mergers and acquisitions has reached 100 billion. The industry's pattern is being re-established, combining domestic conditions and the evolution of the US market, or the opportunity for investment layout can be found.

Yikai Capital found that the current domestic PBM business development is still at a very early stage. Although there are commercial insurance institutions, medical information manufacturers and pharmaceutical circulation retail enterprises, their business models are facing challenges.

For example, commercial insurance institutions do not cover middle-aged and elderly patients with chronic diseases. Drug bargaining power and prescription acceptance ability are weak. The purpose of commercial insurance control fees is contrary to the interests of pharmaceutical companies, and it is impossible to obtain support from pharmaceutical companies. Medical information manufacturers have no drug bargaining power and prescriptions. The right to review, not to actually contact consumers, not to access commercial insurance; pharmaceutical circulation and retail enterprises are far away from patients, and it is difficult to obtain prescriptions.

Through the analysis of the above players, Yikai Capital pointed out that China's localized PBM business needs to have six key elements:

i. Strong drug bargaining power: Ensure that PBM can purchase drugs from upstream pharmaceutical companies at lower prices;

Ii. Ability to issue and review prescriptions: Ensure that PBM can assist patients with reasonable medication based on prescriptions;

Iii. Adequate patient flow: Ensure that PBM has sufficient patient base and drug sales;

Iv. Mature supply chain system: ensure that drugs are circulated at a higher efficiency;

v. Perfect payment-side guarantee: guarantee the final payment of the drug;

Vi. Continuous chronic disease medication data: to ensure that PBM understand the law of medication in patients with chronic disease.

Based on the above inference, Yikai Capital concluded that the urban grassroots community health service institution is the most suitable place for PBM to land because it meets the above factors.

First, community health service agencies have sufficient patient traffic. In 2017, community health service centers served nearly 800 million people. With the continuous advancement of medical reform policies such as primary care at the grassroots level, graded diagnosis and treatment, and family doctors' signing, patient traffic continues to sink to the grassroots level, which will bring higher traffic growth to community health service organizations.

Secondly, the community health service agency carries the main work of prevention and treatment of chronic diseases. It is a commonly used drug for the stable period of four types of chronic diseases such as hypertension, diabetes, coronary heart disease and cerebrovascular disease, and the procurement and reimbursement catalogue of unified large hospitals and primary health care institutions. Eligible patients can enjoy a long-term prescription convenience of 2 months in primary health care institutions, which will attract more chronic patients to the community to take medicine.

Another is that community health services are the preferred place for prescription outflows. Unlike non-medical institutions such as pharmacies, community health services have the ability to issue and review prescriptions. In addition, community health services have relatively adequate physician resources to better meet the needs of patients who are triage.

Most importantly, community health service agencies have a well-established payment security system, community health service agencies have opened health insurance, and medical insurance personal accounts and pooling accounts can be used. For chronically ill patients, long-term medication demand leads to sustained drug expenditures, and reimbursement has become an important factor in choosing a drug collection agency. And a comprehensive payment guarantee system will bring higher patient traffic to community health service organizations.

The report concludes that the PBM model born in the United States has subverted the traditional medical supply system, and the core concept has changed from the “supply-driven” of doctor-based drugs to the “demand-driven” of patients taking drugs. Through the lean supply chain management, highly automated warehousing and logistics system to compress the circulation of drugs, improve the efficiency of drug turnover; at the same time, based on the data model for the effective prediction of patient medication, in order to meet the long-term drug needs of patients with chronic diseases, reduce the waste of ineffective drugs, truly achieve " It is in line with the development direction of the current domestic medical reform policy.

Liu Zeyuan said: "Centralized drug supply is the core of PBM business. Almost all large US PBM companies will conduct centralized procurement and bargaining, and provide mail order for patients through central pharmacies. Only when they participate in drug supply can they With a monetization approach, the business model will be established." Of course, it is not that the service charge model is not established, but it is difficult to grow.

For investment opportunities in this field, Liu Zeyuan said that there are currently two types of health service organizations in the grassroots communities in nearly 40,000 cities (station/center). Most of the “stations” are private, and the “center” is public. If you are optimistic about the investment opportunities of community health service organizations, you can properly arrange community health service chain organizations, through chain operations, to improve management levels, and pre-design "prescription outflows", PBM and other services.

Looking for opportunities in change

The reason why PBM in the United States can develop is related to its medical expenses mainly related to the burden of enterprises and commercial insurance. They have direct demand for control fees, and the degree of medical informatization in the United States is high. PBM has more data sources as support. Evidence-based medicine is recognized by all parties including patients.

In fact, PBM was introduced into the Medicare prescription drug benefit after it matured in commercial insurance to help manage medical expenses. Therefore, it is obvious that medical insurance or commercial insurance will not fully affect the foundation of PBM development.

Part of the reason for PBM's difficulties in China is that the benefits associated with prescriptions are difficult to touch. Although medical separation is now required, hospitals have gained a lot of interest in the process of prescription circulation. The core of PBM is the review and revision of prescriptions. It is difficult to let the hospital hand over the power in the short term.

In addition to pharmaceutical welfare management, PBM can also cooperate with insurance companies to provide professional services such as insurance design, claims process optimization, and medical data support. This is the future direction of PBM.

Under the background of “health reform”, China’s medical and health industry is rapidly changing, and any beneficial model abroad can find the soil for testing water – for example, with American PBM, and Japanese retail pharmacy grading management, and promoting the use of pharmaceutical production and circulation. Scale, intensive development, etc.

Finding opportunities in change, rather than sticking to the rules of the business model, is the foundation of innovation.

HOUSEHOLD SERIES

Puyang Linshi Medical Supplies Co., Ltd. , https://www.linshihealths.com