Everyone is looking at the health system and saying we need major changes. How does it look for the prescription-drug business?
Five years ago, the business model was very much focused on utilization: How many pills are being used? Now, we’re applying intelligence that will result in the nondispensing of a drug. This is a very different model. And what you’re going to see over the next several years is that Medco’s profitability will become much more service-oriented, with various offerings to reduce inappropriate or unsafe drug use [including analyses of patients' prescriptions for possible drug interactions, and genetic testing]. Pills are only about 10% to 15% of the total cost of health care. So as a finance guy, I look at pills as an investment to drive total health-care costs down.
Medco is a middleman, but you seem well positioned to influence how the health-care system as a whole approaches prescriptions.
I believe that what we’re doing at Medco today will change how pharmaceutical manufacturers develop drugs tomorrow. Because it’s not like it was five years ago, where you targeted a broad disease state and you came out with a medicine for, say, lowering cholesterol and you just hoped that everybody in that disease state started taking your drug. Those days are gone. The new era with personalized medicine is what we call smarter medicine. And manufacturers are going to have to figure out who their target market is, where their drug is of the highest level of efficacy, and be less focused on having a cure-all for the masses.
You made an acquisition with that in mind?
We just bought a company called DNA Direct. It’s very small, but it helps clients, patients, and payers make sure that patients who need genetic tests are getting the right tests at the right time. The return on investment to our clients is huge, because we’re keeping the patients out of the hospital, the most expensive part of health care.
You have some personal experience with the potential for such testing.
Yes, my dad, back in 1992, had a quintuple bypass. After the surgery, which was successful, the doctor gave him Coumadin. Two weeks later he had a massive brain hemorrhage because he didn’t metabolize the Coumadin properly. He needed neurosurgery and was in rehab for six months and never fully recovered. Today, he would have been tested for Coumadin metabolization, gotten the right dose, and had no neurosurgery and no rehab, eliminating a million-dollar health-care bill.
How do you think health-care reform will affect Medco?
[For one thing,] Medco would have access to about 30 million Americans who don’t have insurance today. For employers that were receiving the retiree drug subsidy, this can be an opportunity for them to change to an Employer Group Waiver Plan and sign up with a prescription-drug program. We have a PDP, and while it’s relatively small as a percentage of our business, it has grown more than 75% in the last year. There will also be a lot of opportunity to work with the government on various comparative-effectiveness and cost-reduction studies.
Could “personalized medicine” help protect doctors from medical-malpractice lawsuits?
I would say that the more knowledge the physician applies in treating a patient the better off he’ll be with regard to a tort case. Doctors who take advantage of the latest science in these personalized tests, and those who are wired, are going to provide better care and should theoretically have less exposure to catastrophic lawsuits.