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I'm the cofounder of a health tech startup. This is my opinion. The cynical spin was healthcare pre-2008. Today, our healthcare industry is finally making mean
by pxlpshr 11y ago
I'm the cofounder of a health tech startup. This is my opinion.
The cynical spin was healthcare pre-2008. Today, our healthcare industry is finally making meaningful changes to its model, moving from fee-for-service toward value-based care and risk sharing. [1]
This means payers, providers, and everyone in between is now incentivized to get IN FRONT of problems (like smoking) before it creates an even bigger, high-cost/high-risk patient population (heart disease, cancer, etc). Those who don't will get phased out / merged.
The reality is ~75% of the $2.2 trillion we spend on healthcare per year goes toward fighting said chronic conditions. From a distribution perspective, 20% of the population is responsible for ~80% of costs... 5% of population, ~50% of costs. Moving the needle a small amount matters a lot.
[1] This is one example of a brand changing due to industry consolidation. Prices are being commoditized across the board for care, for drugs, etc. As others have said, CVS & Walgreens are no longer just pharmacies selling drugs. They are diversifying and growing into providers just like payers.
- SilasX 11y agoI can understand that much, but CVS doesn't (privately) reap the returns from healthier customers. That dynamic would apply to a health insurer or provider, not a glorified convenience store.
- acomjean 11y agoalive customers are the best kind. CVS is a pharmacy so keeping patients alive longer means more money on perscription medication.
- johnmaguire2013 11y agoIn fact, wouldn't they lose profits on tobacco cessation products and medications used by smokers with health problems?
- larrys 11y agoAgree. If people smoke and are unhealthy they in theory would need a larger amount of prescription drugs which CVS sells and profits from.
- dragonwriter 11y ago> If people smoke and are unhealthy they in theory would need a larger amount of prescription drugs which CVS sells and profits from. If people smoke and die sooner, they will in theory (and practice) need no more of the prescription drugs which CVS sells and profits from. Heck, statistics showing that smoking reduces total health care costs (and, less relevantly to the immediate discussion, pension costs) by killing people younger have been used by cigarette smoking companies as part of campaigns against government anti-smoking campaigns around the world. Aside from the moral aspects of that argument, the financial aspects work exactly the opposite for people selling health care services -- which CVS does, both as a pharmacy and a clinic operator -- as they would on people funding health care costs.
- ItsDeathball 11y agoCVS is actually a health insurer, or at least a component of one: https://en.wikipedia.org/wiki/CVS_Health#Strategic_Business_Units https://en.wikipedia.org/wiki/CVS_Health#Strategic_Business_...
- refurb 11y agoCVS is not really an insurer, they are a provider of retail pharmacy, specialty pharmacy, home infusion, etc. They are actually paid by the insurance companies to provide these services.
- Sanddancer 11y agoBy making it harder to maintain bad habits, CVS is looking at long-term goals. Getting a customer to stop smoking means a good probability that they're going to buy more things from CVS in the extra years they live.
- dragonwriter 11y ago> I can understand that much, but CVS doesn't (privately) reap the returns from healthier customers. Assuming that customer retention is cheaper than acquisition, it directly reaps the returns from not killing its customers. > That dynamic would apply to a health insurer or provider, not a glorified convenience store. CVS is, among other things, an insurer (or, rather, a pharmacy benefit management company serving insurers, but the incentives are pretty similar with regard to not killing the insurers customers), and also operates the nations largest walk-in clinic brand in its in-store clinics (so, its also a provider, and not just in the sense that every pharmacy is.)
- SilasX 11y ago>Assuming that customer retention is cheaper than acquisition, it directly reaps the returns from not killing its customers. Public goods problem -- you have to subtract off all the customers you lose to other companies that have extra money due to not cutting off the cigarette revenue stream.
- hganesan 11y agoAs a PBM, they might actually be making some money back by not supporting tobacco products as well. If the anti-tobacco stance gets an extra health plan or insurer to sign with Caremark, the increased revenue from scripts, and potential added trips from customers, can make up for losses in tobacco-related revenue. Might also help them position themselves to shift more and more towards being a credible health care service provider.