Tuesday, February 15, 2011

Surprising Data on the Mail vs. Retail Choice

Both foes and fans of mail pharmacy will find something to crow about in newly public data about CVS Caremark’s (NYSE:CVS) Maintenance Choice program. The data appear in the latest Journal of the American Pharmacists Association.

CVS Caremark’s Maintenance Choice program makes mail and retail dispensing channels economically equal (“channel neutral”) for consumers by eliminating the out-of-pocket cost difference for a consumer between mail and retail for 90-day maintenance prescriptions.

As far as I know, this peer-reviewed academic article contains the most complete public disclosure about the actual operations of the MC program. These data go far beyond satisfaction surveys by showing the actual choices in a channel neutral situation.

Read on to find out what happened in a sample of 325,000 people with this benefit design. Then ask, how can you incorporate these real-world behavioral insights into your marketing plans?

As always, I suggest you read the full article for all of the details: Revealed Preference for Community and Mail Service Pharmacy. Free to JAPhA subscribers; everyone else will have to buy it.

Revealed preference is a fancy way of saying: “Watch what people do, not what they say.” With this idea in mind, the authors observed the behavior of 324,968 commercially insured patients who were newly enrolled in “a plan that allowed them to purchase 90-day supplies of chronic medications at either mail service or community pharmacies, with no differences in out-of-pocket costs for either channel.”

We all know the program as “Maintenance Choice,” although the paper never mentions the commercial name.

The patients were grouped into three cohorts:
  • New to therapy
  • Previous mail service pharmacy users
  • Previous community pharmacy users
Here's what happened:
  • More than two-thirds of consumers chose a mail pharmacy over a retail pharmacy. Put another way, consumers seem happy with mail based on their actual (voluntary) behavior.

  • The decision to use mail was heavily influenced by a consumer’s prior use of a retail or mail pharmacy for maintenance prescriptions. Previous mail users tended to stick with mail and previous community pharmacy users tended to stick with community pharmacy.

  • For new maintenance prescriptions, more consumers chose mail than chose a retail community pharmacy.
The chart below shows my summary of this natural experiment. (Click the chart to enlarge it.)

My quantitative summary:
  • 76% of previous mail pharmacy users stayed with a mail pharmacy
  • 66% of previous community pharmacy users stayed with a community pharmacy
  • 56% of new therapy users chose mail pharmacy.
The authors statistically identified other factors correlated with the mail vs. community pharmacy choice: age, gender, household income, region, driving distance (time in minutes), and concomitant medication use. For simplicity of presentation, I only present the simple descriptive behavioral finding above.

These data are neat because they go beyond satisfaction data, which have been controversial and often used in a misleading way. If you’re curious about pharmacy satisfaction, see these articles from the Drug Channels archives:
Given the high voluntary adoption rates of mail, these data make me wonder about Walgreens (NYSE:WAG) campaign to convince consumers to fill 90-day prescriptions at a Walgreens retail pharmacy instead of a mail-order pharmacy. See Walgreens Joins the Attack on PBM Mail Profits.

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FYI, Mr. Gary Lee Weinrib studied this issue many years ago. As he noted in his research: "If you choose not to decide, you still have made a choice." See for yourself...




13 comments:

  1. Enjoyed the Rush reference. Geddy is just Neil Peart’s puppet though – Neil writes all the lyrics.

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  2. It really has to do with the prior exoeriences of people and what was a good experience. If, for instance, mail order was a good experience a person will prefer that method over soemthing else. Cost does play a role, but probably a minor one, as people's perceptions and experiences play a greater roles in their decision making.

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  3. Adam - Nice post. I wonder what the NCPA would think about the fact that more people return to mail than return to the retail setting? Does that call into question their typical arguement?

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  4. One could argue that the data challenge the conventional view that retail pharmacy is superior. But the only "choice" available was a CVS pharmacy. Would more people have chosen a retail pharmacy if they could use their preferred independent instead of being forced to use a CVS chain pharmacy?

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  5. People are victims of habits and will not change unless it is in their best interest. Over time and with some marketing, people will migrate back to their local pharmacy (where there is a person they can ask questions). Also, it is limited to CVS (as another said) so the choice is limited. Open it to all pharmacies and the results will be different (in my opinion).

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  6. As mentioned, there is very ltd choice in MC. I don't understand why if a consumer wants to support a certain pharmacy, AND that pharmacy is willing to accept the competitive terms of the agreement, then what gives?

    Many folks forgot the FEP bidding process in about 1990. Pharmacies within a certain MSA had the opportunity to bid for the retail Rx volume of FEP lives. Six mos after the implementation of the program, the FEP dropped allowed all providers into the network IF those pharmacy providers were willing to meet the competitive pricing. Lots of pushback from all parties, but the consumer won out.

    What's the diff w MC?

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  7. Good comments. In this post, I didn't highlight the fact that the consumer can only choose between CVS retail pharmacy or Caremark mail.

    I strongly suggest you read the discussion section of the original paper (pp. 55-57). The authors do a nice job of laying out the strengths and weaknesses of their methods and data.

    They also do some additional analysis on the behavior of consumers who started with mandatory vs. incentivized mail plan designs. They write:

    "Because financial incentives alone fail to motivate the majority of patients to transfer maintenance medications from community pharmacy to mail service pharmacy, many patients elect to pay higher out-of-pocket costs for prescriptions in order to receive them at their community pharmacy. This may explain, in part, why participants previously enrolled in mandatory mail service pharmacy had higher rates of selecting (or returning) to community pharmacy after the benefit design changed."

    Adam

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  8. NCPA does not represent CVS or any other publically held pharmacy chain, APhA but not NCPA. In fact NCPA often battles the publically held companies as seriously as they do mail order. So I am sure that NCPA thoughts and words would say that if a “Revealed Preference” study of Mail order or Central Fill vs. Community Retail Pharmacy was done the results would have been much different.

    Secondly I am not sure that this even qualifies as a revealed preference study. Not only because we have a limited choice, unlimited choice being a needed qualifying factor for a “Revealed Preference” but also because of the CVS retail pharmacist themselves. Would not they be incentivized to have the patients to go mail order by having less work to do.

    It was a very interesting study published by APhA and needs to be considered seriously but a revealed preference, I think not.

    We have converted many mail order accounts to community pharmacies without a single defection back to mail order. Granted this only represents ~ 5,000 lives compared to ~300,000 but it is more of a “revealed preference” in that all options and all settings are on the table, mail order, chain, or community retail.

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  9. I ask everyone to refer to Table 4 of the study and notice that in the majority of areas the Odds favor selection of community pharmacy for the distribution of 90-day supply maintenance medications compared to mail service.

    It is also important to note that more than half of all participants were previous mail order users (being comfortable with it since they had to do it previously)

    And again, the authors note that this is all based on administrative data, it is important for future studies to actually survey patients what their preferences are and what they feel are benefits from either channel. At the end of the day face-face patient care has shown to add great improvements in therapeutic outcomes for our patients and patients should have the right to choose.

    also, Our older population have difficulties getting out of the house etc. which is why a mail service is a good option for them (shown by the data)....

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  10. Wow. Shocker. I'd also rather get a prescription in the mail than visit one of the worst pharmacy chains in America as well. What's next? Are you going to tell me that a study showed that people prefer to have Pizza Hut deliver . . . and therefore this means that people don't like to go out to eat in upscale restaurants?

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  11. Study Actually Shows Slight Preference Advantage for Community Pharmacy Over Mail Pharmacy

    I finally had a chance to read the study on
    mail and community pharmacy preferences published in The Journal of the American Pharmaceutical Association, and reached the conclusion that community pharmacy actually held a slight preference advantage over mail.

    While 56% of patients who were new to therapy (i.e., had never filled that particular medication at either a mail or community pharmacy) the study details shows that 76% of those patients had previously used mail for OTHER medications. Accordingly, when results are examined by whether or not the member had previously used mail for any medication, only 32% of patients with NO prior mail use chose mail for the new prescription and 63% of those with prior mail use chose mail for their new prescription. In other words, community pharmacy was the preferred choice for the majority of patients who had not previously used mail for any prescriptions.

    The data for ongoing users can be broken down the same way, showing that 21% of patients with NO prior mail use chose mail for their refill and 75% of those with any prior mail use chose mail for their refill. Again, when you examine data points for both new and ongoing users, community pharmacy appears to have a slight advantage in terms of percent choosing. Furthermore, the authors note that the most important predictor of selecting mail service pharmacy was recent use of mail for another medication. Specifically, the odds ratio for selecting community pharmacy was 3.77 for community pharmacy users compared to prior mail users.

    All that said, the authors conclusion, which focused on the diversity of preferences rather than which channel had an inherent preference advantage, was on point—“Patient behavior indicates that certain patients prefer to access prescription medications via mail service and others through community pharmacy.”

    Brenda Motheral, BPharm, MBA, PhD
    RxOutcomesAdviser.wordpress.com

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  12. Brenda,

    Thank you for your thoughtful comment and clarification of the "New to Therapy" cohort.

    You have reinforced one of the key points that I note above: Previous mail users tended to stick with mail and previous community pharmacy users tended to stick with community pharmacy.

    So when given a choice, most people default to their most familiar option, which may or may not be the "optimal" decision. If you believe in behavioral economics, then this study supports a reference-based prospect theory explanation for the mail vs. retail choice.

    Regards,
    Adam

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  13. Study Actually Shows Slight Preference Advantage for Community Pharmacy Over Mail Pharmacy

    I finally had a chance to read the study on
    mail and community pharmacy preferences published in The Journal of the American Pharmaceutical Association, and reached the conclusion that community pharmacy actually held a slight preference advantage over mail.

    While 56% of patients who were new to therapy (i.e., had never filled that particular medication at either a mail or community pharmacy) the study details shows that 76% of those patients had previously used mail for OTHER medications. Accordingly, when results are examined by whether or not the member had previously used mail for any medication, only 32% of patients with NO prior mail use chose mail for the new prescription and 63% of those with prior mail use chose mail for their new prescription. In other words, community pharmacy was the preferred choice for the majority of patients who had not previously used mail for any prescriptions.

    The data for ongoing users can be broken down the same way, showing that 21% of patients with NO prior mail use chose mail for their refill and 75% of those with any prior mail use chose mail for their refill. Again, when you examine data points for both new and ongoing users, community pharmacy appears to have a slight advantage in terms of percent choosing. Furthermore, the authors note that the most important predictor of selecting mail service pharmacy was recent use of mail for another medication. Specifically, the odds ratio for selecting community pharmacy was 3.77 for community pharmacy users compared to prior mail users.

    All that said, the authors conclusion, which focused on the diversity of preferences rather than which channel had an inherent preference advantage, was on point—“Patient behavior indicates that certain patients prefer to access prescription medications via mail service and others through community pharmacy.”

    Brenda Motheral, BPharm, MBA, PhD
    RxOutcomesAdviser.wordpress.com

    ReplyDelete

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