Category Archives: Amazon Pharmacy

The Misadventures of Primary Care

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https://www.kaufmanhall.com/insights/thoughts-ken-kaufman/misadventures-primary-care

Innovation in the American economy over the past 30 years has been nothing short of stunning—one remarkable technological advance after another. Industry by industry and product by product, corporate innovation has profoundly changed the way we navigate our economic and consumer lives. From this context of technological and innovative change came the corporate belief that healthcare could be “significantly improved” through the same application of aggressive corporate strategy and innovation.

So along came Walmart, Walgreens, CVS, and Amazon with all the resources in the world and with the best intentions to contemporize primary care.

The goals of all this were front and center: change the definition of the healthcare gatekeeper, lower costs, improve quality, and create a much more consumer-friendly care experience. Yet here we see that American business has proven—once again—that the best intentions, the smartest ideas, and a lot of money are still no guarantee of commercial success. How quickly the corporate retail re-invention of primary care all came apart.

Between 2017 and 2022, retail clinic claims grew 200%, spiking particularly during the pandemic, according to Healthcare Finance. And yet now, Walmart has abandoned its primary care strategy, Walgreens is pulling back significantly—even after announcing significant expansion plans as little as a year ago—and CVS is facing uncertainty after a leadership shakeup.

Under corporate leadership and strategy, primary care has become a catalog of woes. Let’s unpack that catalog.

Walmart opened its first health center in 2019, offering a range of basic services with prices posted. At first, it focused on patients who could pay cash, but eventually evolved to accept a range of insurance plans. Walmart brought a level of strategic aggression to its primary care initiative by announcing in 2023 it would nearly double the number of clinics it operated. But in an abrupt about face, the megaretailer shuttered all 51 primary care locations in April, citing an unsustainable business model with an inability to maximize revenue and adequately control expenses.

Walgreens, on the other hand, opted to invest in existing providers. In 2020 and 2021, Walgreens spent $6.2 billion on the primary care clinic chain VillageMD, establishing it as the majority owner. In 2022, Walgreens sunk another $3.5 billion, through a mix of debt and equity, into VillageMD’s $8.9 billion acquisition of Summit Health. Walgreens, like Walmart, suffered for its primary care investments. The company was forced to take a $5.8 billion write-down on Village MD in the second quarter of this year.

During an October 15 earnings call, Walgreens CEO Tim Wentworth said the company “is reorienting to its legacy strength as a retail pharmacy-led company,” according to the Wall Street Journal. “We are in the early stages of a turnaround that will take time.” And that comment came with the potential closure of 1,200 Walgreens retail locations, following on the heels of 160 primary care clinic closures earlier this year.

CVS, too, has not been immune to primary care turbulence, as CVS Health CEO Karen Lynch was forced to step down last month after presiding over an expansion of healthcare clinics but then closing dozens of them in California and New England. CVS’s strategic approach revolved around its $10.6 billion acquisition of Oak Street Health in 2023 and its intention to expand primary care in 1,100 MinuteClinics. That strategy now seems to be up in the air with the departure of Ms. Lynch. The CVS board is now suggesting an approach that may involve a spinoff of its insurance and pharmacy benefits manager units, Aetna and Caremark.

Amazon, however, at the moment shows no signs of abandoning its foray into primary care. Rather than focusing its efforts on solely brick-and-mortar locations, Amazon organized its primary care strategy around the 2023 $3.9 billion acquisition of One Medical, a concierge-style service designed to facilitate both in-person and virtual visits. While Amazon’s primary care strategy remains somewhat opaque, it seems to revolve around partnering with employers and health systems to cultivate primary care patient loyalty through a membership program that builds on the Amazon Prime brand.

Each company took a slightly different approach to primary care, but all four planned to leverage their exceptional size to achieve profitability.

Interestingly, scale has not been sufficient to solve the challenges of primary care. American Medical Association President Bruce A. Scott wrote recently: “If retail giants can’t make today’s care delivery model work financially, how on earth can physicians in private practice?” It’s no wonder the ongoing shortage of about 20,000 primary care physicians is expected to persist. A recent AAMC report found that by 2036, that number could double.

Primary care has been unsuccessful as a transactional business; retailers sell goods at a set price and send customers on their way. In healthcare, payment models are nowhere near as straightforward. Patients, particularly in areas where access to care is limited, may have continuous, rather than episodic, needs. All of this complexity has seemed to add up to higher costs and lower margins. Primary care seems to require a much more complex business model, one robust enough to remain patient as that business model experiments with various approaches or is vast enough to offset losses with other lines of revenue.

So where does all of the above lead us? Are there any useful conclusions or lessons to be learned? Maybe so.

  1. Primary care is an essential component of any hospital system of care. Done right, it acts as both an important gatekeeper and as a trusting component of the continuity of healthcare service.
  2. At the moment, there is not enough primary care to meet the demand. Stories abound of patients whose longtime primary care physicians retire and said physicians cannot be replaced without a great effort—or often not at all.
  3. Right now, the economics of primary care don’t work as a standalone service. Many have tried and—regardless of whether they were big or small, for profit or not-for-profit—this essential patient-centered service can only operate when subsidized by a larger enterprise. Walmart, Walgreens, and CVS have all tired of those subsidies.
  4. The overall healthcare system and its quality of care and delivery is significantly damaged by the current state of primary care. Too many patients receive delayed diagnosis and treatment and slow or little necessary follow-up. Patients that should be seen in the office are instead funneled to the emergency room. Care, of course, remains well-intentioned but often is instead inconsistent and chaotic. Conditions that might have been deftly managed instead become chronic.
  5. All this leads to the importance of not giving up on primary care. Patients prefer to be seen in the primary care ecosystem. They tend to trust that level of care and attention. Patients also prefer to be seen in-person when they are feeling particularly poorly, and they appreciate prompt answers about concerning health issues. What this all suggests is that we are at a moment when hospitals need to double down on the primary care dilemma. Primary care needs to be examined as an essential component of the overall enterprise-wide strategic plan both clinically and—especially—financially.

Corporate America, with all of its economic power and resources and scale, has found primary care to be a confounding and, so far, unsuccessful business model. So, after all of the recent noise and promises and slide decks, the problem and promise of primary care is back in the mission-driven hands of America’s not-for-profit hospitals—exactly where it should have been all along.

Retail clinic failures show collaboration may work better than competition

Posted on by • Posted in Amazon Care, Amazon Clinic, Amazon Pharmacy, Amazonification of Healthcare, CVS Health, Disruption, Primary Care, Primary Care Delivery Model, Retail Clinic, Retail Healthcare, Retail Pharmacy, Walgreens, Walmart • Leave a comment
https://www.healthcarefinancenews.com/news/retail-clinic-failures-show-collaboration-may-work-better-competition?leadId=1234536&utm_source=newsletter&utm_medium=email&utm_campaign=&utm_content=&utm_term=%E2%80%8B&mkt_tok=NDIwLVlOQS0yOTIAAAGTNKIUR2ngSNiWCxLJmzop_26XQDUgYgWHrHpYw-SoT40EaBYoDHAtahVsSxQZ6tI_fGWx0OdIkw0IBWs7fPBSabd0j0tSogRh50jxjcxmahY

CVS has fared better because of its ability to scale and coordinate its other business model resources, Aetna and Signify, analyst says.

The disruption promised by the retailization of healthcare hasn’t materialized as planned.

Walmart and Walgreens recently announced the closing of retail clinics.

“The news is a significant setback for retail health players, some of whom are now realizing that delivering retail-driven primary care may not be economically viable and certainly isn’t causing the disruption in local healthcare markets that many predicted,” said Emarketer senior analyst for digital health Rajiv Leventhal.

Reimbursement for primary care is a major challenge, as are labor shortages and higher costs. Retailers that are not able to scale their clinics through synergies with other parts of their business models, as CVS has done, will find costs rising above their ability to make money.  

Walmart is closing all 51 of its health centers across five states, saying the business model was unsustainable.

“Healthcare is very difficult and very challenging,” said Innocent Clement, cofounder and CEO of Ciba Health and a physician by training. “Walmart (was) very disappointing news. I expected a lot. It’s embedded in all of our communities.”

Retail clinics help make healthcare affordable and the convenience of pharmacies creates access for vulnerable populations, Clement said.  

Retail based clinics and urgent care clinics play a role in controlling healthcare costs by diverting approximately 30% of cases from much higher-cost emergency rooms. 

“Walmart Health’s decision to shut down its health centers and telehealth services is a sudden pivot from its recent plans to expand but not surprising given retailers’ overall struggles in the care delivery space,” Leventhal said.

“It’s not Walmart’s first failed attempt at operating medical clinics, but it will likely be its last crack at it considering how badly it went – going from signing off on a plan in 2018 to build 4,000 primary care clinics to shutting down in 2024 after opening just 51. The latest effort was littered with red flags throughout, from struggling with basic billing and payment functions to leadership changes and other operational obstacles.”

Walgreens suffered a $6 billion loss in its second quarter due to its struggles to make VillageMD profitable. It announced it was closing 60 VillageMD clinics and that number is expected to rise.

Walgreens invested $1 billion in VillageMD and then dumped in $5.2 billion more, Leventhal said. The plan was to keep expanding and co-locating VillageMD clinics with a Walgreens pharmacy. As of last year, Walgreens had 680 clinics with an estimated 200 co-located with a drugstore. Now 140 are already closed with 20 more to close, many of those are co-located with a Walgreens drugstore.

“They’re still leaning into VillageMD investments where they’re succeeding,” Leventhal said. However, “the investment just has not paid off at all. That led to a significant jaw dropping loss.”

Walgreens’ $1 billion cost-cutting strategy should put it in a better position going forward, Leventhal said.

“What many people don’t realize is that urgent care clinics are experiencing a level of extreme financial pressure that endangers their availability, range of services, and continued existence,” said longtime healthcare executive Web Golinkin, a former CEO of RediClinic and FastMed Urgent Care. He recently published a book about his experiences in “Here Be Dragons: One Man’s Quest to Make Healthcare More Accessible and Affordable.”

Reimbursements from third-party payers on services at clinics have been relatively flat over the past recent memory, Golinkin said. This includes both commercial and government payers, Medicare and Medicaid. At the same time, operating costs have increased dramatically.

“It’s difficult for providers to have leverage in a retail health setting. It’s harder than it looks,” Golinkin said. “The reason we were disruptive, we were open seven days a week for extended hours and co-located with a pharmacy.”

But supply and labor costs increased during the pandemic and have not reset, he said. There’s already a shortage of primary care physicians.

RediClinic began inside retail clinics such as Walmart and Walgreens before being sold to Rite Aid in 2014, Golinkin said. FastMed was sold off piecemeal to HCA Healthcare, HonorHealth in Arizona and others.

The bigger picture is the lack of access in this country to primary care, Golinkin said. CMS needs to shift dollars to primary care, he said, a statement backed by the American Medical Association, which has been banging the drum for greater physician reimbursement.

Healthcare has narrow margins to begin with, Golinkin said, but may be able to offset losses in one area with profits from another.

Retail clinics may be able to offset losses through pharmacy sales, with the clinics acting somewhat as a loss leader to getting customers in the store, Leventhal said.

But what’s really needed is the ability to scale and a business model that brings consumers from retail pharmacy sales and the clinic to drug purchases and other care needs, as CVS has done.

The struggles for Walmart and Walgreens are a cautionary tale for other retailers, Leventhal said. 

“It’s difficult to operate a primary care startup,” he said.

There are nearly 14,000 urgent care clinics in the United States, Golinkin said, adding that most are under sole ownership and all are under the same financial pressure that caused Walmart to shut down.

“This is not just about Walmart. It’s an access issue,” Golinkin said. “What happened to Walmart is symptomatic.”

The answer may lie in partnerships between providers and retailers.

There are many examples of partnerships between retail medical providers and health systems. Prominent health systems such as Advocate Health Care, Providence, Kaiser Permanente and Cleveland Clinic either provide care in retail pharmacies or are clinically affiliated with one, according to Golinkin. 

Walgreens has a partnership with Advocate Health Care.

It makes a lot of sense from a continuity of care perspective, Golinkin said. If someone goes into a clinic in a retail space and sees a clinician associated with a hospital or physician practice, and that doctor or PA or nurse says the consumer needs further care, that person goes to the provider.

Most clinics and urgent care centers are tied now to an EHR for a clinically integrated network.

“This approach will boost referrals for health systems while saving them the costs of maintaining their own outpatient practices,” he said. “That’s the model we’re really going to see going forward, more collaboration.”

WHY THIS MATTERS

CVS Health has created the scale to make its clinics successful, according to Leventhal.

Amazon is also lurking as a potential competitor through its expansion with primary care startup One Medical. Amazon bought One Medical for $3.9 billion last year.

CVS took a hit to its bottom line as well, but that was mostly due to high MA utilization through its insurer, Aetna.

CVS is in a much better position strategically, because it has an insurer, a pharmacy benefit manager and also Signify Health, said Leventhal. 

CVS’s Aetna business makes it the most imposing retail health disruptor, he said. This combination of a payer and provider has substantial power in local markets and can influence patient decisions on where to get care.

The company’s acquisition of Oak Street Health and Signify Health gives it a full circle strategy. CVS is leaning into opening more Oak Street clinics within CVS drugstores, Leventhal said. 

CVS has the ability to synergize Aetna with Oak Street Health and Signify operations, as outlined in its 2023 Investor Day Presentation, according to Leventhal. 

For example, over 650,000 Medicare beneficiaries (not all of them Aetna members) visit CVS stores in Oak Street geographies each week, CVS data said. 

There are over 300,000 Signify Home visits annually in Oak Street geographies. Approximately one in six CVS customers end up scheduling a visit at an Oak Street clinic. CVS promotes this by setting up tables within their drugstores that have material on Oak Street.

Ten percent of Aetna seniors educated by Signify about Oak Street as a primary care option scheduled a Welcome Visit, the presentation said.

CVS was in a competitive battle to acquire Signify Health last year for $8 billion. Signify does risk assessments that are billed to the insurer, which connects them with services, specifically with Oak Street Health.

Even CVS would acknowledge delivering primary care through a retail entity is challenging due to low margins, Leventhal said. 

In theory, clinics appeared to be the perfect one-stop shop model. In reality, they faced a bunch of challenges, especially during and after COVID-19, Golinkin said.

THE LARGER TREND

Pharmacies, particularly independents, are also dealing with the cost pressures of reimbursement. 

Pharmacies are paid by pharmacy benefit managers a reimbursement fee for dispensing drugs, and over the course of the last 10 years those fees have materially declined, squeezing pharmacy margins, according to Seeking Alpha.

This squeeze is in part why Walgreens Boots Alliance’s cash flows have declined so precipitously and why rivals such as Rite Aid have been forced into bankruptcy, the report said.

The newest model for pharmacies is the cost-plus drug model. CVS, Walmart and Walgreens all have offerings and Walgreens is soon expected to roll out its own cost-plus drug model to create a more sustainable model for pharmacies to be reimbursed.

Walgreens CEO Tim Wentworth, who came aboard in October 2023, recently said that the company is ready to adopt a cost plus drug model, which is similar to the one used by Mark Cuban’s online pharmacy, Cost Plus Drugs. 

Cost Plus Drugs, which launched in 2022, works directly with drug manufacturers to avoid PBM middlemen. It lowers prices on medications by basing costs on the manufacturing fee, plus a 15% markup, a $3 pharmacy handling fee and a $5 shipping fee. Cost Plus also transparently displays what it pays for its medicines. 

Amazon announces One Medical membership discount for Prime members

Posted on by • Posted in Affordability, Amazon, Amazon Care, Amazon Clinic, Amazon Pharmacy, Consumer Focus, Consumer Marketing, Consumer Value Proposition, Consumerism, Convenient Access, Innovative Care Models, Primary Care, Primary Care Strategy, Urgent Care, Urgent Response, Virtual Care Strategy, Virtual Healthcare, Virtual Office, Virtual Visit • Leave a comment

https://mailchi.mp/f12ce6f07b28/the-weekly-gist-november-10-2023?e=d1e747d2d8

On Wednesday, e-commerce giant Amazon announced that its 167M US-based Prime members can now access One Medical primary care services for $9 per month, or $99 per year, which amounts to a 50 percent annual discount on One Medical membership. (Additional Prime family members can join for $6/month or $66/year.) 

One Medical, which Amazon purchased for $3.9B last year, provides its 800K members with 24/7 virtual care as well as app-based provider communication and access to expedited in-person care, though clinic visits are either billed through insurance or incur additional charges. Amazon also recently started offering virtual care services through its Amazon Clinic platform, at cash prices ranging from $30 to $95 per visit. 

The Gist: After teasing this type of bundle with a Prime Day sale earlier this year, Amazon has made the long-expected move to integrate One Medical into its suite of Prime add-ons, using a similar pricing model as its $5-per-month RxPass for generic prescription medications.

At such a low price, Amazon risks flooding One Medical’s patient population with demand it may struggle to meet. But if Amazon can scale One Medical, while maintaining its quality and convenience, it may be able to make the provider organization profitable. 

Known for its willingness to take risks and absorb financial losses, Amazon is continuing to build a healthcare ecosystem focused on hybrid primary care and pharmacy services that delivers a strong consumer value proposition based on convenience and low cost. 

Blue Shield of California ends exclusive PBM contract with CVS

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https://mailchi.mp/d29febe6ab3c/the-weekly-gist-august-25-2023?e=d1e747d2d8

Blue Shield of California announced a plan to diversify its pharmacy benefit management (PBM) contracts in a bid to improve transparency and reduce costs. 

Instead of relying on Woonsocket, RI-based CVS Health’s Caremark as its sole PBM, the health plan and its 4.8M members will be served by five companies, including Amazon Pharmacy for at-home deliveries, Mark Cuban Cost Plus Drugs Company (MCCPDC) for a transparent pricing model, and Prime Therapeutics for negotiations with pharmaceutical companies.

Caremark will remain responsible for Blue Shield’s specialty pharmacy needs, which CVS noted in an investor filing represents over 50 percent of nationwide pharmacy benefit spending.

Blue Shield intends to implement this new system by 2025, and is targeting savings of $500M annually, which translates to 10 to 15 percent of its current spending. 

The Gist: Whether Blue Shield saves money with this initiative depends on the whether the benefit of competition in its PBM contracts outweighs the costs of more complex coordination between vendors. 

Keeping half of its business tied up with CVS through specialty pharmacy will further limit the potential impact. Nonetheless, it’s noteworthy that pharmacy disruptors like Amazon and MCCPDC have found a major health plan willing to work with them. 

Consumers, employers, payers without PBMs, and members of Congress are increasingly dissatisfied with the current pharmacy benefit market structure, and Blue Shield’s move could serve as a catalyst for future shakeups.

Amazon launches subscription service for generic prescription medications

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https://mailchi.mp/8f3f698b8612/the-weekly-gist-january-27-2023?e=d1e747d2d8

On Tuesday, Amazon unveiled its latest healthcare offering, RxPass, which will deliver generic prescription drugs to Prime members who pay an additional flat $5 monthly surcharge. The service, which currently covers 53 medications for common conditions, requires consumers to pay out-of-pocket rather than through insurance, but does not limit the number of drugs a subscriber can receive for the flat monthly fee.

RxPass is not yet able to ship medications to eight states, including (notably) California, Texas, and Pennsylvania.

The Gist: Paying $60 a year to avoid the hassle of going to a pharmacy or dealing with another mail-order delivery program will be a very attractive offer for many of the 168M US-based Amazon Prime subscribers, as much for the convenience as for the potential cost savings. 

But the concept isn’t novel. Case in point: Walmart continues to offer its $4 generic drug program, launched in 2006. Given that the average Prime member is 37 years old, Amazon’s flat-fee service offering will target a younger demographic with fewer medication needs—and complement the service offered by PillPack, acquired in 2018, which is built for older customers on multiple medications. An evolutionary, not revolutionary, step in Amazon’s ongoing moves into healthcare.