Introduction: The drug discount problem

Overview
The way drug costs are regulated and negotiated in America is super complex. What’s at stake and what is Kalderos trying to do? This is the short and skinny version of a highly complex problem.

What are discounts and rebates?

How Drug Prices Work | WSJ (Youtube)

Drug discounts and rebates are a business practice in the pharmacy world used for negotiating the cost of drugs between manufacturers, pharmacies, and medical providers.

The government leverages them too as a tool for lowering the cost of drugs for people.

340B Drug Pricing Program
Medicaid Drug Rebate Program

These are two programs that aim to help low-income and rural Americans by requiring manufacturers to sell drugs at a lower price to pharmacies and hospitals

There’s a lot of stakeholders in healthcare and maintaining data integrity is a challenge

These programs, whether they are government programs or private sector tools, are often working ineffectively because they’re often misapplied. It could be a data issue, it could be an incentives issue for different stakeholders. Market abberations happen. It’s messy.

Basically lots of dollars are going somewhere, but those savings aren’t necessarily being passed down to patients.

Kalderos is creating a platform for data integrity and complaince.

The platform aims to improve trust, transparency, and compliance through properly applied discounts and rebates. Basically, if the data is accurate and right, we reduce the finger pointing around who is to blame. Downstream from this, the hope is that cost savings get passed down to people who need the drugs.

Terminology

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Covered Entity
A covered entity is the government term for healthcare providers (hospitals, physicians, etc), insurance companies, and healthcare record keepers (clearinghouse).

It’s defined by Health Insurance Portability and Accountability Act (HIPPA). Covered entities are subject to HIPPA regulations, like requirements around how patient data is handled.

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340b Drug Pricing Program
A government drug discount program aimed at reducing the cost of drugs for rural and low-income people. It works by requiring drug manufacturers

Medicaid Prescription Drug Rebate Program (MDRP)
Another government drug rebate program that aims to make drugs more affordable to those on Medicaid.

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Contract Pharmacies
Some hospitals have pharmacies built into their health system, others don’t. So they will have contracts with pharmacies (think Walgreens) to fulfill drugs for patients. These are contract pharmacies.

The problem for this scope

Duplicate Discounts
A duplicate discount is when two rebates/discounts are applied to the same drug. This is not allowed, it also causes drugs to be sold at a loss, causing market abberations. The money is going somewhere, but it’s not necessarily the patient.

Whenever duplicate discounts happen, there is a lot of potential issues for legal action. Manufacturers are upset, the state is requesting for a lot of information. Covered entities have a lot of paperwork and data to sift through in their own healthcare records and with the contract pharmacies they work with.

To make matters worse, record keeping in this industry is horrendeous. There are not many standards set in place, people are constantly making their own workflows, drugs are often using mismatching units for measurement.

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