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The Next Platform Frontier: How Platform Models Are Poised To Bring Transparency to Drug Discount Programs

It’s no secret that healthcare lacks transparency. It’s also no secret that one of the biggest and most devastating consequences of that lack of transparency is financial. Why is it that I can’t take my medication without fear of unexpectedly receiving a bill in the mail? Why is it that a month after picking up my necessary prescription, I still don’t know what it will cost me? I spend my days at Bain Capital Ventures looking for companies to help solve these problems.

The reality is that lack of transparency goes far beyond our bills in the mail. The healthcare system has an incredible number of different types of financial transactions, all of which go by different names: premiums, co-insurance, reimbursements, chargebacks, rebates and more. Many are secondary financial transactions, or transactions not directly associated with the treatment of a patient, the dispense of a drug or the purchase of a product. For example, a middleman such as a group purchasing organization (GPO) may secure a bulk discount on a product for its hospital customers. Dollars flow between parties, but the transaction is even more complex and non-transparent than paying for an x-ray.

Financial transactions related to prescription drug discounts are some of the most complex secondary financial transactions in the healthcare market. In fact, prescription drug discounts are a complex and opaque web of secondary financial transactions. In the US, there are approximately a dozen drug discount programs that exist, and all of them operate differently. It’s lack of transparency — not bad intent by any participants — that leads to noncompliance so common that we even give them their own names, such as duplicate discounts.

The federal government is well aware of the challenges in this secondary financial market, as seen by reports from the Government Accountability Office (GAO) and Health and Human Services Office of Inspector General (OIG). The latest of these reports was issued just earlier this year by the GAO in January.

Despite these challenges, there is limited information and few data exchange platforms to create clarity in the market. We see examples of platforms emerging every day in other sectors: Slack, LinkedIn, Mirakl, Sendgrid, Passport and more. These models inherently bring more value while curbing inefficiencies — something which is desperately needed in the healthcare space, especially on the financial management side.

That’s where Kalderos comes in. Kalderos is bringing manufacturers and covered entities together on a single platform, enabling a transparent exchange of information. We had the opportunity to lead Kalderos’ Series B back in June of this year, and have been thrilled to see the developments the Drug Discount Management platform has made in the few months since. Developments like its newest solution, 340B Pay, which allows providers to request discounts directly from manufacturers as rebates, all-but eliminate the possibility of noncompliance, and benefit all stakeholders. 340B Pay streamlines collaboration while reducing costs, creating more efficiency in the ecosystem and helping to ensure patients get the drugs they need.

We’ve seen noncompliance in the drug discount space come to a head in recent years, with drug manufacturers absorbing billions annually in revenue leakage from noncompliant discounts. Overworked providers are attempting to prevent noncompliance without a clear information exchange to do so and frequently have overworked employees spending significant, valuable time on these issues.

Stakeholders have sought disruptive solutions to solve discount program challenges for years, yet nothing to date has solved the underlying transparency flaws. They are largely niche — “scrubbing” discounts for manufacturers or offering minor workflow enhancements for covered entities, for example. They are services that support single parties, not platforms that improve the whole ecosystem, and often they add rather than subtract complexity as more players enter the space.

We’ve all seen the benefits of platforms in other industries, and it’s time healthcare innovators, and more importantly, patients, reaped these benefits as well. We couldn’t be more excited to partner with Kalderos as they launch 340B Pay, bring transparency to drug discount programs, and work tirelessly to lower the cost of healthcare for patients.