Healthcare is one of the last remaining industries where consumers struggle to get hold of information about pricing and quality of the products they purchase. Oration, a Foster City, Calif.-based public benefit startup, hopes to change that by making drug quality and pricing information accessible and understandable for patients.
"There are about 4.3 billion prescriptions filled in the U.S. annually, and 86 percent of those are generic drugs," says Pramod John, CEO of Oration. "Generic drugs are the equivalent of any sort of generic commodity; they are manufactured en masse and are repackaged and sold to us. When most prescriptions are for generic drugs, why do we need the intermediary infrastructure we currently have?"
In December, Oration released OrationRx, an app-based solution to help employees find the least expensive medications and manage prescription costs. OrationRx stands to improve the pharmacy experience for employers as well, because the combined costs of prescription drug coverage can be costly. The company also has plans to expand into the healthcare accountable care organization market in the near future.
Mr. John spoke with Becker's Hospital Review about how disruptors make an impact, why drug pricing needs to be fixed and what healthcare companies can learn from Amazon.
Editor's note: Interview has been edited for length and clarity.
Question: Why did Oration choose to focus on drug pricing first?
Pramod John: As we looked at and began to unpack the different industries at work in healthcare, we found that there are a lot of peculiarities in how the supply chain works with something like drugs versus the supply chain for something like hip replacements. We realized there are all of these really specialized industries that have different plumbing and wiring. If you're going to look at them broadly, at the 30,000-foot level, you might be able to solve some problems, to make things slightly better, but you can't truly fix anything.
We decided that if we were able to hone in on something very specific and fix that, change the way it works, then ultimately we'd have a model that could very easily be applied in any other area. In a lot of industries that have experienced disruption in the past 15 or 20 years, the successful companies usually weren't successful because they solved all the problems, they were successful and scaled when they were really good at changing the way one thing worked.
The classic example of that is Amazon. They started out with books, one very simple thing. And when they were able to show the model worked effectively with one thing, they were then able to expand it very easily. I think in some ways it's questionable whether they would have been successful trying to solve all things on the first go, versus honing in on something you show the model is capable of doing very well.
Pharmaceuticals alone are an almost $400 billion industry. When we look at that number and focus on cost, we know that drug costs are what they are because consumers have no easy choices. Every decision in healthcare is a complex and difficult choice, and so, as a result, a lot of the cost is driven by the fact that people can't really take any action.
Every year Consumer Reports and other publications issue reports on drug prices — Costco versus Walgreens and CVS. It isn't that we as consumers don't know how to look at pricing, but in the context of how our plans work when you get under the hood, those things are really complicated. They're not push-button simple, which is what we're used to in life.
So our mission isn't just to save money, it's to make these things as simple as pushing a button and make it just like every other experience in life where the consumer doesn't have to think about it.
Q: What other benefits are there to fixing the drug pricing problem?
PJ: We're an early-stage company, but our hopes going in are to affect cost and convenience for employees. We have people willing to pay for the product even without any savings because using OrationRx streamlines the whole experience for the employee to where they don't have to deal with the healthcare system anymore. It removes a lot of steps that an employee usually has to deal with to manage even a seemingly simple thing like drug spend or managing their medications for their family.
We said "Why don't we let software figure out all of these things that are so complex for the average person?" Software can determine exactly what you need as an individual. Our algorithms figure out what the best options are, enabling you to just click a button. You don't have to deal with doctors or pharmacies or any of the things you traditionally had to. So it's not only a cost savings, it's a real benefit that makes employees' lives easier.
We just signed a partnership with [Draper, Utah-based] Health Equity, one of the largest health savings account vendors in the country. With a lot of employers moving to high-deductible plans, we're going to have an integrated offering that connects directly to your HSA. So for an employee on an HSA, we're going to help them ease that process on every side of the equation automatically for the most common purchase they make. Then there are other benefits like adherence. It's been shown over and over again if you make it convenient for people to remember prescriptions by reminding them and shipping the drugs to them, adherence increases.
Q: Does Oration plan to introduce other solutions after rolling out Rx?
PJ: Absolutely. In some ways, we're already expanding beyond that through what we're doing today. I'll go back to the Amazon analogy: When it launched and initially just sold books, they didn't say that you're not allowed to go to Borders or Barnes & Noble, or that you had to buy all of your books from them. But they made it clear that if you tried one transaction it would make your life easier, and that made people want to move all of their transactions over. And we've taken a very similar approach in that prescription drugs is one of the largest vertical industries in the world overall when you think of healthcare. We definitely realized we want to shift the way these things work, but we need to start with one transaction, and the end goal is to demonstrate, to prove, that we don't actually need a lot of the underlying infrastructure we currently have in place to do so.
Q: What's in the works this year for Oration?
PJ: One of the biggest areas of focus we hear that is important from every employee we speak to is specialty drugs. One new program we're going to be rolling out is in the specialty drug space, which is quite unique in how it helps the employees manage the cost of one of the biggest tickets. That's one of the big technology-related goals we have for the end of the year. We've also got some significant partnerships, a whole host of large customers we are going to be rolling out. One of the other goals for the year is a pilot we're currently rolling out with one of the large hospital system's accountable care organizations. We've found that our bread and butter has been self-insured employees, but we're seeing a lot of interest from the ACO market also. Most of them are also looking for ways to reduce their costs associated with drug expenditures.
More articles on health IT:
Memphis man allegedly steals patient data to scam banks
What hospitals can learn from Hollywood Presbyterian's ransomware run-in
Google, Edward Snowden stand with Apple on phone encryption debate