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Episode 41: Mind-Blowing Insights into the Pharmaceutical Industry

Hey everyone. This is Rudy Fernandez from Creative Outhouse. This conversation with Kyra Hagan is eye opening. For starters, she talks about how 25 – 30 cents of every dollar a company or organization spends on healthcare goes to pharmaceuticals. And many times, there’s what Kyra calls “monkey math”. So there’s a lot of waste. So how you do you get the message to people that there’s a problem and you can solve it? How has he new world of healthcare changed messaging and tactics? Well, that’s why you’re here, isn’t it? Welcome to Marketing Upheaval.

Helping Employers With Healthcare Decisions

Rudy:

Welcome to Marketing Upheaval. My guest is Kyra Hagan, Vice President of Marketing at RxBenefits. RxBenefits is a technology-based company that helps midsize employers get better pricing on prescriptions for their employees. Kyra has more than 20 years of healthcare IT experience and has a unique perspective on what’s going on in the world of prescription drugs, and how mid-sized employers are managing that part of their coverage they offer their employees. We’re talking about that and how she engages her audiences, what’s changed with the COVID crisis, and what she sees on the horizon. Thanks for joining me, Kyra.

Kyra:

Well, thanks for having me. I’ve been looking forward to it.

Rudy:

So let’s start with RxBenefits. Who exactly is your customer?

Kyra:

Well, RxBenefits actually has three customers. We partner with Employee Benefits Consultants, often called brokers, to bring an optimized pharmacy benefit to self-insured employers of all sizes. At the end of the day, we end up servicing the broker, the HR manager or the benefit leaders inside of that organization and all of the organizations’ employees and their family members, who we call members.

Pharmacy as a Critical Healthcare Benefit

Rudy:

So what is the problem that RxBenefits solves for them?

Kyra:

Well, you know, pharmacy is a critical benefit. It’s highly utilized by employees, but it’s also very costly. And I think today, about 25 – 30 cents of every healthcare dollar that an organization is spending on healthcare benefit is going to prescription drugs, with no sign of a slowdown. Unfortunately, not all of that spending is beneficial. A lot of dollars inside the system are wasted due to poorly negotiated pharmacy buying contracts, lack of clinical oversight and really poor customer value or poor customer service and explanation of the benefits. So we exist to help employers bridge those gaps so they can balance the economic and the clinical value of the benefit. At the end of the day, that tends to lower the overall cost of the pharmacy benefit by an average of about 26%.

Rudy:

Well, from an outsider, that sounds like an easy sell. What kind of barriers could you possibly have that if you say, we’re trying to lower your cost for pharmaceuticals, your cost per employee or however you measure that, right?

Lowering the Cost of Pharmacy Benefit

Kyra:

Well, unfortunately, there’s a false perception in the marketplace from HR leaders that lowering cost in the Pharmacy Benefits means lowering coverage. So reducing the benefit and creating something that’s called member disruption. That is you no longer cover drugs or medications that the person used to be on or you raise the out of pocket cost for the member so that they’re paying a larger portion of the cost share. And that’s really a false perception.

There are a lot of ways to lower the cost of the pharmacy benefit and improve the value of the benefit for the employee, and actually even in some cases, expand the coverage. Because there is a lot of waste inside of the pharmacy system. But it’s very opaque and mysterious to people and they don’t understand what leverages exist that they could pull with the right partner in order in order to bring equilibrium to that value equation.

 

The Consultant’s Consultant

Rudy:

So I’m guessing you talk to HR managers and people who manage that sort of aspect of the plans and brokers. I guess, the HR managers are the brokers’ customers.

Kyra:

That’s correct. So, you know, I have an interesting world that I live in and it’s the first time I’ve had this extra hop, where RxBenefits is the consultant’s consultant. So we’re arming the consultant with the pharmacy expertise they need and we may or may not ultimately present to their client, the employee. So I have the challenge of managing both the direct sale when were put in front of them and the messaging there, but also arming a channel distributor with that information.

Rudy:

Well, we’ve been in that position several times, obviously. For healthcare clients for example, we do a lot of things where we give physicians materials to give to patients. But unlike in your situation, physicians aren’t always good salespeople, but they’re health people. So we have to couch that. What do you provide the brokers to provide to the HR managers? How do you enable that system? How do you reach them?

Modernizing the Sales and Marketing Process

Kyra:

Well, when I joined RxBenefits at the beginning of last year, the organization had a 25 year history of managing and distributing its product strictly through kind of feet on the street. So we had a very large field-facing organization that was still knocking on doors of brokerage firms and conveying our Value Proposition in face to face meetings. And they were about a year and a half into having a cold calling team that augmented those efforts. The organization really had almost no digital presence. And so ideas like inbound marketing and content marketing were for foreign concepts.

I’ve been building that infrastructure from the ground up since I came to the organization. There’s a tremendous amount of pharmacy expertise and thought leadership inside of our building. And because we sit in the category of one, our solution is truly unique. Education is critical, and that thought leadership is critical in order to open the doors for people to understand that there is a solution that they never knew about or thought of. We’ve been working hard as you can imagine, at running on content, and building our digital acumen and really trying to perpetuate the messaging at scale beyond what could be carried in a bag by field facing sales team.

Cost Savings to Save Jobs

Rudy:

So a lot of people have lost their jobs. Your indirect customers are HR managers. So what changes have you seen in terms of RxBenefits, being able to say, Hey, here’s a way to save money, but at the same time, they’re worried about, I have to figure out how to keep people employed or I have to lay people off. What do you see happening in that field?

Kyra:

Well, you know, as a result of the pandemic, obviously, everyone’s budget, including their healthcare spend, and their benefits budget is under a tremendous amount of pressure. And so that really has meant for RxBenefits that our clients are leaning in and depending on us more heavily than they ever have in the past. One of the things that is unique about our offering is we have the ability to tailor a pharmacy saving strategy based on an organization’s tolerance for what we talked about earlier, member disruption. So is this organization in a highly competitive market where recruiting and retaining top talent is very tough? And the benefit needs to be incredibly competitive, and sort of cover everything carte blanche? We never want to stand in the way and say no? Or an organization where the cost of the benefit has exceeded sort of the value equation. And we need to really put some cost saving controls in saying no to employees who are on maybe a high price, but low clinical value medication is something that we’re now willing to do.

But we see employers obviously, moving the needle on that spectrum a little bit in order to find more dollars to save jobs. So we may have delivered 25% savings by improving their pharmacy contract and the way they buy it. But now they want to put some clinical oversight programs in to start really scrutinizing certain prescriptions that are suspect for abuse or, being a low value type of prescription. It’s kind of ratcheting up the savings there because in the typical plan, the type of savings we’re going to bring to the organization is going to be 10s to hundreds of thousands of dollars is mainstream, and sometimes millions of dollars a year. That can save a lot of jobs.

Reaching HR Managers With Your Message

Rudy:

Yeah, I’m guessing that was always part of your messaging. But has that become a bigger part of the messaging? Maybe the messaging was save money before, but now it’s like, you don’t have to fire as many people if you do this? I’m oversimplifying.

Kyra:

That’s correct. And where before that it may have been, you know, it would be nice to save this money, but it’s not critical that we do it. And we dealt with inertia. And now it’s, it’s becoming a necessary strategy.

Rudy:

Yeah, we’re seeing that. Whereas change is hard, always. But when you’re in this atmosphere, it’s a necessity. You have to adapt. People are more willing to adapt. Like you said, HR managers, they have way too many things on their plate, usually on a day to day basis. So you’re saying it’s easier to kind of get their attention now to say that that lead, hey, you don’t have to let go of as many people. We might be able to help you, type of thing.

The Truth About What is Driving Healthcare Plan Costs

Kyra:

I don’t know that it’s easier to get their attention because there is so much competing for their attention. But when we do, I think we have a more invested listener and a more motivated buyer. It goes back to the fact that HR managers are really balancing two competing paradigms. They need to lower the cost of the benefit. That’s the edict from the CFO or the CEO to whom they report. But they want to do the right thing by their people. Right? They chose this employee inside the organization. And if they believe, and they’re operating under that false premise, that a reduction in cost is a reduction in benefit, that’s an immediate barrier to moving forward. When they understand things like for most employers, just 1% of their members are driving 40-50% of the plan’s cost.

Rudy:

Wow. So is that because they’re getting drugs that are real expensive?

Kyra:

Correct. Yeah. So 10 years ago a doctor could write a prescription for a new medication and that medication may cost that plan $5,000 a year. And $5,000 is a considerable amount when you multiply it by the number of employees you have. But we’re literally in a position now where with the stroke of a pen, a doctor can write a script that could impact a plan by a million dollars a year.

Rudy:

So is part of your target audience physicians as well?

“Monkey Math” and Big Pharma

Kyra:

We obviously work with providers inside an organization. A provider’s job is to take care of their patient. The patient’s job is to get well and the pharmacist’s job is to dispense the medication. It is not any one of those actors inside the pharmacy ecosystems job to look at the cost of the medication.

Now physicians get invested in cost. And their view into it is in terms of the out of pocket costs to the member: Can my patient afford what this medication will cost them at the point of sale? And is that going to be a barrier to them taking the medication, to their adherence and to getting the outcome we want? They have no idea what the drug costs the payer on the back end. And there is a lot of what I’ve coined “monkey math”. Other people might call it fuzzy math, that goes on inside of this drug manufacturer, Big Pharma machine that really hides what the actual price of the medication is from all of those people who are making those decisions. And so they’re not equipped to understand clinical value versus economic value or what their alternatives are.

You know, the drug manufacturers are in the faces of providers from the day they enter medical school. They give them a little bit of information and tout the benefit of the drug, but couponing, copay assistance, these other programs they put that reduce that natural barrier of member cost. That then negates any conversation around cost with the physician.

A great example there’s a drug called Vimovo. I’ll pick on it because it was prescribed for me at one point but Vimovo is a compound drug used to treat arthritis pain. It combines basically the equivalent of Aleve, or over the counter drug naproxen, and Nexium, which is a pill to prevent your stomach from being damaged by the anti-inflammatory into a single drug. For somebody to buy the equivalent therapy of those medications over the counter would run that member about $40 a month. I was given a coupon so I had no copay for the Vimovo. So my cost went from $40 for buying two over the counter medications to zero felt like a win. But that prescription cost my employer $3,600 a month.

Rudy:

Oh, wow. That’s sneaky. Because you don’t see it. And you know, as an employee, you probably don’t I mean, you’re in the business, so you do look at it. But other people would be like, Oh, I didn’t have to pay for it.

Kyra:

Correct. And so those are those are some of the things that we’re dealing with some of the market dynamics.

Low Value Clinical Drugs

Rudy:

So is that an example of what you called a low value prescription?

Kyra:

Correct. A low value clinical drug. There’s no therapeutic benefit, no improved outcome to the patient. There’s a convenience factor. I can take one pill instead of two. But is it worth $3600 a month?

Rudy:

Yeah, no. Take two pills. Wow.

Kyra:

Yeah.

Optimizing Marketing for Digital Consumption

Rudy:

Earlier you mentioned about creating content whereas, RxBenefits was more heavily sales instead of marketing. Right now you’re trying to bring in more the marketing aspect to it. What are some things you found that you’ve had to create? It sounds like you kind of not from scratch, but you were starting from a very low base level in terms of work. What are some things you got to create, to help the sales team kind of deliver the message?

Kyra:

Well, I’m starting with a contemporary web presence. So a site that was actually responsive and mobile first. And that had a content hub that was SEO optimized. We’re really in the process of digging deep and we’ve sat on a tremendous library of content that was previously all presented in face to face meetings. We’re getting that stuff out and dusting it off, refreshing it and optimizing it for digital presentation and consumption, which is a big part of what we’re doing. As I mentioned, we were literally going out in the field and meeting face to face with brokers. So with the Coronavirus pandemic taking our field team off of the road, we’re converting our entire sales process to a digital process as well. That includes refactoring and retooling presentation decks and other materials for that. We’re really building an infrastructure from the ground up.

We had a temporary slowdown. But I think because our value proposition is savings and tangible dollars, people pretty quickly got back to the business of wanting to meet with RxBenefits. They knew that this was something new they could bring to a client who was cash strapped this year. We pretty quickly built up our meeting volume and it’s actually up significantly over, not only prior years, but over our target goals for this year. So that’s been great. The paradigm we’re dealing with now is driving those decisions. So turning that meeting activity into a commitment to make a change because HR managers are still dealing with sick people. They have people who need special accommodations under ADA. They’re dealing with their own supply chain issues and operating the business as they think about reopening. And we’re competing with a lot of noise.

“Save Money” Messaging Needs an Emotional Connection

Rudy:

So let me ask you this about messaging. So saving money is obviously probably the most common message out there in every industry. But saving money is not the message, usually. There’s something tied to it. Like you’re smart if you save money or you’re saving money because you’re responsible or, save money because you deserve these other things. Whatever the message is always some emotional tie to what saving money means because we assign a meaning to money. It either means I’m in control or I’m smart or powerful, whatever it means. What is that message of saving money to HR managers?

 

Kyra:

Well, I hit on it briefly when we first started that, you know, the savings is an important component and clearly a motivating factor for many of our customers to transition to RxBenefits. But the other components that we address that we haven’t spent much time talking about are what happens clinically in terms of oversight and management of this program. RxBenefits employs a team of full time Pharm.Ds, so Doctorates of Pharmacy, who makes sure that people are getting the best medication for their condition at the right dose at the right time. Safety of employees is a part of that clinical value equation that I was alluding to.

 

Off-Label Prescriptions

There are many medications that are intended for one purpose and FDA approved for one purpose they are prescribed off label for another use. Diabetes drugs are a great example of that. There are many new injectable diabetes medications that are really fantastic at preventing type two diabetics from becoming insulin dependent. But those medications also happened to be effective for many people at helping them lose weight. They work as weight loss drugs. Most employers choose not to cover weight loss drugs as a part of the employee benefit. So by design, those drugs would not be covered for that purpose.

 

But the drug is clearly covered for the diabetic member because we have to take care of our diabetic population. Right? If we don’t, the comorbidities, the likelihood of them having a severe medical event is huge. And so the drug is approved on the formulary, we don’t know the reason it’s prescribed and so that claim just goes through. Well, some of these medications can be $1,000 a month. And so, you know, RxBenefits is putting a secondary set of eyes on that to say, What is the reason for this? Is this an appropriate medication for this person? Do they have the right condition?

Rudy:

Why would they prescribe that?

Kyra:

They’re detailed by the pharmacist, they have a zero dollar copay, coupon for the member. And, you know, there it goes. And so, you know, those types of things are not only helping to reduce the spin, but there is a 60% higher chance of having an adverse event. That is a reaction to a medication that’s prescribed for an off-label use. And, and so the safety component of it is another.

Improving Quality of Life and Savings for Employers

And I really can bring it home with this real life example. So there was an employee of a mid-sized food and beverage company that we work with that was prescribed an injectable drug, and 120 milligrams per week at the cost of $312,000 a year. That patient lost a considerable amount of weight in their first year of treatment.

Rudy:

Did you say $312,000 dollars a year?

Kyra:

I did. Okay. During that year of treatment, the patient had also as a part of their treatment plan been advised to lose weight to assist with their condition. They were effective at doing that. Nobody went back and recalibrated his dosing. So our clinical team conducted an independent drug review of the company’s claims data and we found that the actual recommended dose of the drug was 120 milligrams per month, not per week. So we reached out to the prescriber to let them know and the prescriber adjusted the dose so that lowered it from one syringe per month from four. And that change improved not only the patient’s quality of life because they’re injecting a lot less drug than they used to be injecting, but it reduced the cost from $312,000 to $101,000 per year.

Kyra:

There’s something called evergreening. And there are a lot of patenting techniques that drug manufacturers use where they reformulate medications when the patent expires and so it should flip to generic. They’ll change the color. They’ll change it from an aerosol to a spray. And they’ll get another 10-15 years on it to just keep the price inflated. It’s pretty tragic, really.

Healthcare Marketing and Consumer Privacy

Rudy:

Yeah. And not to make too much of a political statement and if it’s addictive even more bonus, like okay, yeah, I’m gonna go there. It’s about marketing, we’re staying with marketing. Okay. So you come from a healthcare technology background? Tell me your thoughts and maybe share some of the best practices for marketing people, especially in healthcare on how to give your audience useful information that appeals to them without breaching their privacy.

Kyra:

Yeah, I think a lot of healthcare marketers and healthcare organizations, have that question. I worked with hospitals and health systems for the better part of 20 years and they really remain very confused about how to infuse consumer marketing best practices into their strategy. They go immediately to the most sensitive data they have, right? It’s almost like they’re cataclysmic this when the word personalization comes up. And so they’re thinking about what exists in the medical record. And you know, they believe personalized marketing isn’t possible because we’re prohibited from using that by HIPAA. And that would be an obvious overreach and super creepy. And that’s just not a road we can go down. When in reality, people today are shopping for healthcare, just like they shop for all other consumer goods. We should leverage common martech that’s used across e-commerce and all other consumer-facing organizations.

Consumer Segmentation Strategies for Healthcare Marketers

We capture digital behavior data that often signals buying intent, or implicitly expressing interest in a particular health topic that would not be an overreach in any way of sensitive or protected data and allow us to do a lot more to deliver relevant messaging and communication that would meet people where they are. The other thing that I get on a soapbox and rant about is that healthcare marketers are really terrible at segmentation, because they don’t use consumer segmentation strategies, they use healthcare segmentation strategies is, which is we’re going to talk to everybody who has this condition the same way.

Rudy:

That’s a good point. I hadn’t thought about that. You know, a lot of people in healthcare marketing think in terms of healthcare and conditions. What is a good example of someone who has done it well, in traditional marketing and healthcare marketing?

Kyra:

Obviously, we do need to send healthcare related messaging to people who are at risk for, you know, or have a prevalence for a specific condition. So condition is a good place to start. But creating splits based on demographics, you know, psychosocial demographics, age, gender, and doing things with just variable creative, and content, which basic marketing automation systems allow us to do, would be a major step forward for many healthcare organizations.

Rudy:

And for those listening, we know people who do creative for health care. So if you need that…

 

 

Differentiation in Marketing Strategies

In your blog a couple years ago, where the quote was:

“Many organizations make the fatal mistake of comparing the experience they offer to the experience delivered by the organization across town — investing in “me too” strategies, they provide no real differentiation. Organizations would be much better served to do the research required to understand what consumers in their market really value, assess how the patterns of choosing everything from insurance to primary or specialist providers has changed, and then deliver against those expectations.”

 

So I get on this rant a little bit, but I wanted to hear your thoughts on the me too approach and what you see and how it could be done differently.

Consumerization in Healthcare Marketing

Kyra:

Well, a great example that that comes to mind because I raged against this machine for 10 years was online scheduling. People are busy. I don’t know if you have that in your life, but, you know, time is something I was thinking about how to manufacture. And literally this, you know, archaic process of I need to get on the phone, I need to call. I probably need to be put on hold. I’m more than likely dealing with a less than friendly receptionist, and she wants to reach out to me what’s available. It’s like, this is what I have, take it or leave it.

And that whole process takes so long. I can’t tell you how many times I’ve had to hang up in the middle of it, because somebody walked in my office or had to get to a meeting and then the appointment never happens. How about we allow people to schedule like they can schedule to have their car serviced, or book a table at a restaurant? And the Healthcare is still so dominated by physician satisfaction catering to physicians, that they cannot cross that chasm to really shift to this consumer mindset and understand that they’re competing on convenience and access. It remains a major barrier. A lot of marketers today get it, but they get shut down inside the organization.

 

Rudy:

We just released an episode today where I talked a little bit about marketing departments getting shut down in organizations and being viewed as order takers. Hopefully, that’ll change with this crisis and consumerization. We have an episode about that too, about the Consumerization of Healthcare. People expect to at least some level of convenience. I could see where that needs to change.

 

Kyra:

Exactly. So when I find when I work with organizations, which I did for a number of years consulting on how to build a better digital experience for healthcare consumers, they would use, the hospital across town as the benchmark. So they were always chasing what somebody else had done. Instead of actually meeting with consumers and doing interviews, and doing user experience design and building something that was a value, they just copied what somebody else had done. Which that person had already realized didn’t work and was on their way to throwing out at the time that they were building it. And there were just so many Mulligan projects and so much time wasted. This, this paradigm shift of who is our real customer, physician or consumer. It’s a sea change.

 

Rudy:

I’m anxious for it.

Adherence and Behavior Change

So one of the biggest challenges in terms of pharmaceuticals is adherence. Do you see messaging down the road that motivates people to take their medications, the prescribed way? You talked a little bit about educating employers about the right kind of medication and which ones have value or might not have as much value. Is there anything along the line that you can see that will help with adherence which would help wellbeing and health?

 

Kyra:

I think there’s great possibility and potentially, there’s actually a lot of effort and energy being spent into trying to message to consumers and patients today around medication adherence, there are a lot of digital technologies. You know, phone apps and other things that have been deployed. But I think a lot of them have that inherent design flaw we just talked about, which is they take the broad stroke approach. To talk to everybody on a certain medication or with a certain condition in the same way and operate under the false premise that people just don’t take their medication because they don’t remember. And that if we can just annoy them enough and nag them enough and prop them up, that’ll solve the problem. I see very little innovation around structuring adherence tools in a two-way communication to ask people if they took their medicine and if they did not, why not? And without the answer to the why question, I don’t think any subsequent messaging that you can do is going to be on point.

 

And so we’re still very far from really meeting people where they are, and helping them overcome the specific challenges and barriers. And that’s where we’re going to have to go to get good at it. They don’t believe it works,

 

What’s Next in Pharmaceutical Marketing?

Rudy:

So I want to ask you, looking down the road, we’ve been through a lot of changes lately, and we’ll probably go through a lot more. What are some things that you’re really excited about in terms of RxBenefits and healthcare in general, employer healthcare? And what are some things you’re concerned about?

 

Kyra:

Well, information doesn’t always change behavior. I do believe that information is powerful. I believe people need to be informed about options. There’s a lot of waste, as I talked about inside of the pharmacy ecosystem where those dollars could be better applied to wellness programs, to personalized coaching, to other things. I would really like to see those dollars shifted to something that’s going to move the needle instead of moving the needle for Wall Street, for these pharma companies. So that potential, on a personal level, gets me really excited to come into work every day. I don’t have to come in anymore, but walk up the stairs to my office.

 

Tilting at Windmills: Big Pharma

Rudy:

What are some of the bigger concerns?

 

Kyra:

I remain concerned about the paradigm shift of really empowering people partnering with patients and members and consumers as partners in health and the health care systems’ willingness to really do that. I get concerned about the mismatch of funding. Big Pharma is a big machine to fight. We’re trying to do it for the little guy. We’re trying to help Joe’s Pallet shop and Hannah’s Garden shop, buy pharmacy like an Amazon or Home Depot. That begins to level the playing field. But pharmacy is very much an industry run by giants. That’s a formidable foe. Resources, time energy –  that’s the limiting factor in terms of moving the needle to make a more efficient healthcare system for every American.

 

Rudy:

Well, I’m with you, I’m ready to tilt windmills with you. We’ll go we don’t have any pharma clients. Kyra, thanks so much for taking the time. I really have enjoyed talking to you.

 

Kyra:

Thank you.

 

Wrap-Up

Rudy:

Thanks for listening. To find out more about RxBenefits, visit RxBenefits.com. To learn more about Kyra, find her on LinkedIn here. For shownotes, go to www.creativeouthouse.com/podcast. You can find out more about our work and case studies at Creativeouthouse.com/our-work. Thanks to Susan Cooper for Producing the show. A special thanks goes to Blair Riley and Melissa Baratta for helping us bring Kyra on for this episode. That’s it for this episode of Marketing Upheaval. And remember, if the state of marketing has you confused, don’t worry, it will all change. See ya.

Podcast credits:

Host: Rudy Fernandez

Producer and Cover Art: Susan Cooper

Earcon sound design: Gopal Swamy

Audio Consultant: Jason Shablik

Post production provided by: Music Radio Creative

Hosting provided by: Buzzsprout Affiliate Link

Transcripts by: https://otter.ai

Email us at info@creativeouthouse.com and we’ll send you a free vinyl sticker featuring our Marketing Upheaval cover art.