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Walgreen Co. Message Board

  • robbsbeach robbsbeach May 6, 2010 11:35 AM Flag

    Cheryl Pegus: CMO of Walgreens

    Walgreens announced the Hiring of a Chief Medical officer.
    Looking retrospectively at the core solution to enhance their business model
    Walgreens is entering into the disease management arena.

    The new CMO has prior experience in statistical/epidemiology modeling of healthcare costs as well as team designed programs addressing cost/outcome management.
    The Disease management programs will data mine the existing files of Walgreens to improve future cost/outcomes of insured patients on medications.
    A clinical assessment of the study groups under the programs direction, will provide the base line used for intervention and behavior modifications that will impact future costs there-by reducing recidivism and finding favor with payer's.
    This may add weight in retaining business, against competition.

    Implementation in this direction will have its challenges within the retailers indirect spend , the learning curve of the indirect costs model lacks the understanding in the objective outcome of the traditional retailers operations,
    and will take some time.
    The biggest picture of integration has yet to be achieved by CVS, RAD, and the other business in this sector.

    With this said, I believe this approach will have a high value with the healthcare reform that will take place.

    My valuation model of future profits and dividends will need to be adjusted
    as financial info. is reported.
    If any anyone has access to such a model I would love to view its structure.

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    • <<” With this said, I believe this approach will have a high value with the healthcare reform that will take place.”>>

      Yes it will indeed….Big time….Consider the following: Currently only about 25% of all private sector health plans are “managed care.” By contrast, 100% of gov’t plans are “managed care.” As the gov’t continues to exert pressure on the private sector to model their coverage in the gov’t image, more and more plans will convert to managed care beyond the simple and passive use of tiering to drive drug selection. For most of the population, a completely “Open” healthcare plan is going to be a thing of the past. As emphasis is placed on preventative care, I believe DSM will play an active and expanding role.


      That being said…..it is still a gamble from the gov’t financing point of view. A few years back the gov’t, using flawed metrics, conducted a clinical trial on DSM. Their study concluded that DSM does NOT result in any healthcare savings. This despite numerous other studies concluding just the opposite and the sheer number of clients who can testify to the savings. The gov’t study did not require the patients in the study to be stable which is a mandatory metric for a successful DSM program and the duration of the trial was too short for any savings to be seen. Unfortunately, it was this gov’t study and only this study which was circulated to Congress during hearings on the DSM programs so the whole DSM ideology has been thrown up in the air. In the end though I think we will see DSM prevail as companies search for ways to lower their healthcare expenditures.

      • 1 Reply to cmxsux2
      • We can agree more than disagree.

        It depends on how you define managed care, most if not all heath plans have a
        specialty component that looks at the outliers.

        As for generic vs name brand this is a section that will soon be exposed to a critical eye going forward. Not that the impact will move the needle much but it will be a factor in drug selection/negotiation.

        As for the governments managed care programs they are not that advanced in understanding what cost/outcome objectives could be achieved with a seamless system with competition of course.
        And I agree with you on selection criteria it is not like when a new drug or product goes into clinical trials. I think you understand what I mean.

        This is a open field in generating the cost/outcome that has yet to be integrated by CVS and walgreens.
        From a business perspective leverage is going to be a Key point in profitability from the data mining that will take place. I also don't disagree with you of where Walgreen's has lost a lot time.
        I am not even sure if they get it.. or the profit value of this.


        Good luck cmxgen in your investing.

    • <<"Implementation in this direction will have its challenges within the retailers indirect spend , the learning curve of the indirect costs model lacks the understanding in the objective outcome of the traditional retailers operations,and will take some time.The biggest picture of integration has yet to be achieved by CVS, RAD, and the other business in this sector.">>


      I believe your analysis is correct overall but incorrect with respect to the above. Disease state management takes place upstream from the retail spend so in general there is no integration of the 2. Carepatterns, the CMX disease state management group was/is an incredibly profitable business segment within the PBM. While the overall shortcomings of CMX are well documented, the operation of Carepatterns is not one of them. MHS, ESRX, as well as every insurance company with a PBM operate a disease state management group. Realistically, the only thing that would be seen from the retail spend area would be increased rx sales brought on by the increased rx compliance seen from the disease state management program. Issues such as precert and step edits if they apply are also resolved upstream from the retail spend with no need for integration of the 2. Integration already exist between the rx contracting and the formulary development folks (who realistically write criteria to direct people to an equally efficacious but less costly alternative) so the retail spend portion of the business actually exists outside of these business operations.

      From a business only perspective the disease state management model is quite simple: That the increase in rx expenditures (mainly from enhanced compliance) plus the cost of the program is LESS that the cost of repeated inpatient stays caused by chronic noncompliance with evidenced based disease protocols and an ever decreasing health status brought about by the following:

      Acute episode to hospitalization to stability to noncompliance to health status decline to acute episode to hospitalization……repeat ad nauseum.

      Disease state management if applied correctly intervenes just after stability and before noncompliance. It is essential that the patient be stable in order for the program to work. The reason for the tuff sell to clients is 2 fold. First healthcare cost to the client initially INCREASE due to increased medication compliance. Second, the client has to make a fairly long term commitment to the program in order to realize savings. Compounding all of this is that the savings are seen on the medical side and not on the pharmacy side (which has increased costs) and in many cases, especially if the client has carved out their pharmacy benefits as is the case with the clients of the large PBM’s (CVS, MHS, & ESRX) those segments are overseen by different departments (medical v pharmacy) within the client’s business. Since the pharmacy benefits are carved out, different companies oversee the medical and pharmacy benefits of the client. For the insurance companies with PBM’s, since medical and pharmacy benefits are fully integrated, the cost of operating a DSM program is less than that of the standalone PBM’s.

    • you dont get it. dont bother analyzing.

 
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