The Center for Cost-Effective Consumerism

In response to emerging challenges in the pharmacy benefits industry, Express Scripts is pleased to have launched the Center for Cost-Effective Consumerism (the Center). We created the Center as the result of a powerful lesson we learned from our experience in the statin (cholesterol-lowering) class of drugs. We believe the Center will help plan sponsors achieve five critical goals: lower-cost drug mix (e.g., generics), maximum therapy adherence, greatest use of the most cost-effective delivery channels, uncompromising safety, and increasing member engagement and satisfaction.

I. Beyond Financial Incentives: Express Scripts Experience in the Statin Class
In 2006, Express Scripts sought to significantly lower costs in the statin class by taking full advantage of the availability of simvastatin, the first high-potency generic alternative. We knew that financial incentives (e.g., copayment savings) were an important element, but were concerned that more was needed to effect significant change.

To this end, we applied findings from social psychology and cognitive linguistics to develop deliberately framed messages coupled with information tailored to the individual patient. (Framing uses words, phrases, and concepts that already have equity in the mind of the person receiving the message and have been used effectively outside of healthcare.) We educated members through a variety of channels, including mail, phone, IVR, and online. Working patient by patient, we moved thousands of statin prescriptions, saving our plan sponsors and members more than $600 million to date.

Our statin initiative was much more successful than we anticipated. Throughout 2007, we analyzed the relevant data to determine why. We knew the formulary change played a role, providing a rational financial incentive for members to shift toward lower-cost drugs. But we wanted to understand how our member communications helped drive behavior change.

Most of our plan sponsors took part in our comprehensive member communications campaign, but a subset chose not to participate. This created a natural experiment where we could isolate the effects of communications on market-share movement. Express Scripts’ independent research group controlled for differences in plan design, copayments, and the use of clinical programs such as Step Therapy, creating an “apples to apples” comparison in which the only difference between the groups was whether patients were exposed to our communications campaign.

The results show that our communications program had a powerful effect on member behavior: It doubled the switch rate at retail and tripled it at Home Delivery, compared to the formulary change alone. This means that for every unit of change prompted by financial incentives, there were an additional one to two units of change prompted by communications.

In short, it takes more than financial incentives to motivate change at the member level.

II. Significant Opportunities Call for an Innovative Approach
Express Scripts’ analysis shows that the pharmacy benefit remains laden with significant opportunities to drive down cost and improve health outcomes. Perhaps the greatest potential relates to drug mix, specifically the underutilization of generic alternatives. The landslide of brand-name drugs losing patent protection has produced unprecedented opportunities to better manage spend in the pharmacy benefit over the past several years, and increasing the generic fill rate (GFR) remains the single greatest opportunity for savings today. The greater use of generics has significant benefits for plan sponsors and patients:

• It provides substantial savings. Plan sponsors realize lower plan costs – every 1% increase in GFR corresponds to a 1% or greater decrease in spend – while members save via lower copayments. There is no cost-shifting to members.
• It maintains health outcomes. Generics have the same clinical effects as brand drugs.
• It encourages members to stay on their medications. Research shows that members are generally more compliant with low-cost generic therapies.
• It makes the use of prescription drugs safer. The safety profiles of generics are better understood than those of branded products.

Until recently plan sponsors and their pharmacy benefits managers sought to maximize the use of generic drugs using financial incentives alone (e.g., offering lower copayments for therapeutically equivalent generics). Despite these efforts, overall generic fill rates fall far below the potential maximum of 75% to 80%. This difference between the typical GFR (often in the low 60% range or even lower) and the clinically sound maximum represents a tremendous amount of waste: additional dollars spent with no additional health benefit obtained. In fact, Express Scripts estimates that this under use of generics is costing corporate America $20 billion annually, and the nation as a whole about twice that amount.

In short, reliance on financial incentives alone – the rational economic model – to effect behavior change in the pharmacy benefit is costing us tens of billions of dollars each year. Based on our unique experience in the statin class, we understand that the latest science of human behavior has much to tell us about effecting change. To that end, we’ve launched the Center for Cost-Effective Consumerism.

III. The Center for Cost-Effective Consumerism
The objective of the Center for Cost-Effective Consumerism is to increase the sustainability of the pharmacy benefit through continuous development and application of proven tools based on a multidisciplinary, advanced understanding of human behavior. To achieve this end, The Center generates hypotheses on the best ways to engage members and effect change in the benefit, analyzes the results of these experiments, and implements successful theories into business practice. The Center has several initiatives and experiments underway, including:

• Segmentation – We are using the best available approaches to understand our members as individuals. Specifically, we are creating actionable subgroups of members based on proprietary analysis of existing and supplemental member-level data (i.e., segmentation). We are using this proprietary segmentation scheme to develop, test, and deploy tailored messaging, with all communications channels “segment aware” at the member level.
• Rapid message testing – Express Scripts is actively and continuously testing how message design and content affect member behavior. We employ technology that allows us to design tests using the gold standard approach of randomized controlled trials, to achieve statistically valid results quickly, and to rapidly deploy those learnings in our standard processes.

The Center relies heavily on Consumer Central, an operational platform that includes development and refinement of the technologies that enable us to tailor messaging, test hypotheses, analyze results, and distribute consistent messages to our members via mail, phone, IVR, and online. We have institutionalized the capabilities we developed during our statin initiative in this platform, enabling us to provide consistent, comprehensive messaging for all savings opportunities across all channels, and enhancements to the platform are ongoing.

Express Scripts understands that we achieve the best results when the best science underpins our hypotheses. We’ve created an award-winning Advisory Board to guide our efforts.

IV. The Advisory Board
The Center’s Advisory Board is comprised of some of the nation’s top researchers and thought leaders in their respective disciplines. This multidisciplinary Board provides insight that guides our experiments, and output from the Board will be implemented into practice when appropriate to help plan sponsors drive to a more cost-effective pharmacy benefit. Brief biographies of our board members follow.

Ian Ayers, JD, PhD
William K. Townsend Professor of Law
Yale School of Management, Yale University
Ian Ayers has been ranked as one of the most prolific and most-cited law professors of his generation. In 2006, he was elected to the American Academy of Arts and Sciences. He has published nine books, including the bestseller Super Crunchers, which illustrates a new way of thinking about numbers by analyzing millions of bytes of information that can lead to greater insights into human behavior and greater accuracy in predicting the future.

Arthur Caplan, PhD
Emanuel and Robert Hart Professor of Bioethics
Chair, Department of Medical Ethics, University of Pennsylvania
Arthur Caplan is chair of the Department of Medical Ethics at the University of Pennsylvania. He has written or edited 25 books and over 500 articles which have appeared in peer-reviewed journals of medicine, science, philosophy, bioethics and health policy.

Helen Darling, MA
President, National Business Group on Health
Helen Darling is president of the National Business Group on Health, a national nonprofit organization providing practical medical solutions to its employer-members’ most pressing healthcare problems. Darling heads the Business Group’s Institute on Health Care Costs and Solutions, which is devoted to finding practical solutions from a business perspective to the nation’s growing crisis of rising costs and affordability of care. She was recently named one of the 100 Most Powerful People in Healthcare.

Alan Garber, MD, PhD
CHP/PCOR Director and Core Faculty Member
Henry J. Kaiser Jr. Professor
Professor of Medicine, Stanford University
Alan Garber is the founding director of the Center for Health Policy and the Center for Primary Care and Outcomes Research at Stanford University, where he is a professor of medicine. Garber’s research focuses on methods for improving healthcare delivery and financing – particularly for the elderly – in settings of limited resources.

Punam Anand Keller, MBA, PhD
Charles Henry Jones Third Century Professor of Management
Tuck School of Business, Dartmouth College
Punam Keller is an expert in marketing and teaches a range of marketing courses at the Tuck School of Business at Dartmouth. Keller’s award-winning research has appeared in publications including the Journal of Marketing Research, Journal of Consumer Research, Journal of Consumer Psychology, Marketing Letters and Memory & Cognition.

Brian Knutson, PhD
Assistant Professor of Psychology and Neuroscience
CHP/PCOR Associate, Stanford University
Brian Knutson is an assistant professor of psychology and neuroscience at Stanford University. His research focuses on the neural basis of emotional experience and expression. Knutson’s long-term goal is to understand the neurochemical and neuroanatomical mechanisms responsible for emotional experience and to explore the implication of these findings for the assessment and treatment of clinical disorders of affect and addiction, as well as economic behavior.

David Laibson, PhD
Professor of Economics, Harvard University
David Laibson is a professor of economics at Harvard and a research associate at the National Bureau of Economic Research. His research studies include macroeconomics, psychology and economics, neuroeconomics, and finance. Laibson’s work has been published in journals including the Quarterly Journal of Economics, American Economic Review, Journal of Economic Perspectives and Science. Laibson has received the PBK Prize for Excellence in Teaching.

Emily Oster, PhD
Assistant Professor of Economics, University of Chicago
Emily Oster is an assistant professor of economics at the University of Chicago, where she studies health and development, with a particular emphasis on the interactions between disease and human behavior. Her work includes understanding the HIV epidemic in Africa and gender imbalance in populations in Asia. Oster’s work has been featured in the New York Times, Esquire and Forbes.

Mark Turner, PhD
Institute Professor
Professor and Chair of Cognitive Science, Case Western Reserve University
Mark Turner is a cognitive scientist, linguist and author. He is Institute Professor and Professor and Chair of Cognitive Science at Case Western Reserve University, where he was dean of the College of Arts and Sciences for two years. Turner previously served as associate director of the Center for Advanced Study in the Behavioral Sciences, located at Stanford University.

Paul Zak, PhD
Professor of Economics, Claremont Graduate University
Paul Zak is a professor of economics and the founding director of the Center of Neuroeconomic Studies at Claremont Graduate University. Zak also serves as professor of neurology at Loma Linda University Medical Center and is a senior researcher at UCLA. His newest book is Moral Markets: The Critical Role of Values in the Economy. He is credited with the first published use of the term “neuroeconomics” and has been a vanguard in this new discipline integrating neuroscience and economics.

V. Conclusion
Express Scripts firmly believes that an advanced, multidisciplinary understanding of human behavior embodied by The Center for Cost-Effective Consumerism results in an exceptional pharmacy benefit, helping plan sponsors achieve:

• Lowest-cost drug mix (e.g., generics)
• Maximum therapy adherence (in key classes)
• Greatest use of most cost-effective delivery channel
• Uncompromising safety standards
• Increasing member engagement and satisfaction