Tell us a little about NexgenRx – how did the company get started?
I founded NexgenRx in 2004. I had previously been one of the founders of Assure Health,
with
Ron Loucks
Ron Loucks is the founder and CEO of Nex-
genRx, serving the drug, dental and extended
health benefits needs of Canadian employers,
through the leading third party administra-
tors (TPAs), employee benefits consulting and
brokerage firms in Canada.
Ron was a pioneer in the electronic claims ad-
judication industry as one of the founders of
Assure Health in 1989. He was Chief Oper-
ating Officer of the company until it was ac-
quired in November 1999, by BCE Emergis,
a leading e-Commerce organization. At that
time, he was named Executive Vice-President,
North America and was responsible for the
Canadian eHealth Division. He left Emergis
in February 2002 to start his own Managed
Care consulting company and subsequently
launched NexgenRx in September 2002.
Ron is a member of the Board of Governors of
McMaster University, a Director of the
Think First Foundation of Canada and a
member of the Advisory Board of the Mon-
treal YMCA. He is the former President of the
Alumni Association of Lower Canada College,
and a member of the Corporation of LCC.
10 INSIGHT S
which we sold to BCE Emergis in 1999. That event made me realize the market was ready
for a newer, more flexible, rules-based technology. I also felt it was time to move from an
insurer-centric model to a more pharmacy-centric model.
Insurance companies dominate the provision of benefits in Canada today, but it doesn’t
have to be that way. The U.S. moved away from insurance companies’ handling health
plans 20 years ago. Health benefits are a recurring, predictable expense, and we per-
ceived there was a need to enable clients access to pharmacy benefits planning and ad-
judication without going through an insurance company simply to access the technology.
Also, most of the technology out there is 20-30 years old, so I knew what we needed to
improve upon.
We started with a clean sheet of paper, hired systems designers and systems architects, and
set out to create an infinitely flexible, rules-based claims adjudication system. It took us
three years to perfect a platform that handles not only drugs, but also extended health care
and dental claims. Plan sponsors can quickly and easily access our service in what we call
a “carve-out” model – carving it out from the insurance company’s traditional group ben-
efits plans.
How many employees do you have?
We’re able to run a lean shop because we’re a technology-driven organization. We have fewer
than 30 employees administering almost 500,000 lives and processing more than 60,000
transactions a week. Most of our people are in customer service and IT development because
we constantly work with clients to tailor plans and ensure the technology meets their specific
needs. We invest heavily in technology and more than $20 million has gone into the devel-
opment of the company and the software. It’s a very robust system - it has to be - we oper-
ate a network of 7,800 pharmacies and 18,000 dentists and process 99.8 per cent of our
drug claims electronically in real time in under three seconds. As well, we operate a bilingual
help desk for providers from 8 am to 10 pm.
Were there certain niches in the market that you felt weren’t being filled, that
NexgenRx could address?
Yes absolutely – and the solution we developed to fill that niche is so completely different
from anything else out there that it took the market a while to understand it. It’s only now
that the NexgenRx adjudication platform’s sophistication and flexibility is being recog-
nized. Here’s an example of our technology’s flexibility: We're the only drug plan provider
in North America that has a card valid in 7,800 pharmacies in Canada and 52,000 phar-
macies in the U.S.
The National Hockey League Players' Association carries our card. As you can appre-
ciate, the players live and work in different countries and travel across the border con-
stantly. Our card can service the players' and their families' drug plan needs on both
sides of the border.
volume 6, issue 2
We filled another niche by designing a sophisticated plan that and understand what goes on. So we have a very clinical staff -
blends a traditional group-benefit plan with a Health Spending that adds a lot of depth of knowledge which pharmacists really
Account. So when an employee with, for example, a 20 per cent appreciate.
co-pay formula goes to the pharmacy, the pharmacist can auto-
matically submit the co-pay to the Health Spending Account, and Are there any other advantages to employers and plan spon-
the employee is not out of pocket. sors in working with a smaller firm like yours?
Absolutely. As a small company, we are very client centric, we’re
We’ve also made it much easier for employees to find information nimble and we can meet very specific needs. Our technology al-
and have taken paper out of the whole process, every step of the lows for great flexibility – giving employers much broader scope
way. All our marketing material and booklets are available on the on the type of plan designs they can offer, the type of controls, the
web so when an employee wants to find out what the formulary type of reports that they get to analyze their drug claims utiliza-
is for example, they just key a couple of words into the search en- tion, that type of thing.
gine and they’re taken immediately to the page they need in their
electronic booklet. Our technology also allows for instant updates We also provide a pricing advantage. We don’t have the overhead
when plans are changed or designs are modified - unlike paper. of some of our big competitors and we pass on those savings di-
rectly to our plan sponsors.
Another example of sophistication and flexibility is that starting Q1,
2011, employees will be able to submit paper claims to us online Also, our financial model is unique in the industry. We charge plan
and receive payment directly into their bank account, literally sponsors a flat transaction fee. The traditional model used by the
overnight. No more filling in and sending a insurance companies is to charge a percent-
claim form by mail, and then waiting for re- The solution we developed to age of the claim value. I like to use the anal-
imbursement by cheque. As mentioned, 99 fill that niche is so completely ogy of going to the ATM. The banks will
per cent of our drug claims are submitted to different from anything else charge $1.50 whether you take out $100 or
us online, but 40 per cent of dental claims, $500. That's the same philosophy we have.
out there that it took the mar-
and 100 per cent of extended health care It’s a transaction so it doesn't matter if it’s a
claims are paper at this point. We're always ket a while to understand it. $500 drug or a $50 drug - to us it’s a trans-
looking for ways to streamline the process, action and we put it through the same rig-
get rid of the paper, get rid of the hassle, and provide a better serv- orous protocol and charge the same amount.
ice for employer/client sponsors and their employees.
During the three seconds it takes to adjudicate the claim our tech-
Do you also advise employers about plan design and how to nology determines not only if the patient and the drug are eligi-
save money? ble and the price charged is correct, but also checks for drug-to
We do. We work closely with the consulting community, bro- drug-interactions, drug age-appropriateness, drug gender-appro-
kers and consultants who traditionally are the plan architects priateness, and if the refill is too soon or too late, et cetera.
and advisors. Often they call on us for expertise in drug plan
management issues, like formulary design. It’s important to understand that although big pharmacy chains
offer this type of review process their system works only if the pa-
We have two pharmacists and two pharmacy technicians on staff tient goes to the same pharmacy location each time. Pharmacies
who work with clients to streamline formularies, discuss new do not exchange patient information, even within the same chain.
drugs entering the market, and advise client sponsors on where Going through an adjudication engine like ours alerts the phar-
to get the best bang for their buck. macist to other drugs have been dispensed to that patient – and
alerts them to possible interactions, contra-indications or double
Our pharmacy-centric approach can also seen by the fact that doctoring – where patients are getting over prescribed or over
most of our help desk staff for the pharmacists are themselves medicated. We offer a real clinical safety advantage as well as fis-
pharmacy technicians – they've actually worked in dispensaries cal control element here.

Fall 2010 INSIGHT S 11

That’s where a smaller claims adjudicator like NexgenRX really life, accidental death & dismemberment, long-term disability,
offers plan sponsors a leg up because we provide customized per- health and dental – all through one insurance company. What we
sonalized service. When a client talks to a customer service rep do is carve out health and dental from the insurance company be-
here, they’re talking to the same person every time. We don’t have cause it's simply a transaction-based product.
a floor of 50 people answering phones.
Initially, a plan sponsor had to send data to two sources. For ex-
What types of companies make up your primary clientele? ample, if an employee had a salary increase or change in depend-
We have a wide variety of clients from a broad spectrum of sec- ent status they had to send the info to the insurance company and
tors such as manufacturing, financial, education and some major to NexgenRx. Naturally, the insurance companies weren’t willing to
unions who have adopted our product. Our clients are varied and forward the new info to us. So we took the initiative and inserted
we cover a wide gamut of need and scope for them – from 25 ourselves as the administrative platform that the employer goes to
lives to 35,000 lives. online. The change is made to the em-
We're now ready to break ployee’s eligibility once through our system
We offer specialized stop-loss insurance for through the clouds as far as and we populate the insurance company's
catastrophic claims, but for the most part, database, as well as populating our own.
our marketing approach is
drug plans are very predictable as far as
costs are concerned. Recognizing that, our concerned. This puts the employer in a strong position
model says ‘why would you sell that pre- because now they control both their eligi-
dictable risk to a group insurance company and have them add bility and data. They’re no longer tied into the insurer’s database
their mark ups?’ That’s why all our plans are provided on an Ad- which makes changing carriers such a hassle, that they typically
ministration Services Only (ASO) contract basis. stay with the carrier and absorb annual rate increase. NexgenRx
gives the plan sponsor total flexibility and control over their own
We provide stop-loss insurance through a large general insurance destiny.
company called Royal & Sun Alliance. Stop-loss insurance limits
vary from $3,000 to $10,000 per individual cardholder. So, for ex- The administrative system we've developed has been a huge step
ample, if you have a $5,000 stop loss attachment point, any claims forward for us. We piloted with certain clients at the end of 2009
up to $5,000 are the employer’s responsibility and anything over and we really ramped it up at the beginning of April this year with
$5,000 is covered through the insurance. That’s the stop-loss pro- some major clients that have come on board. It's a new era for Nex-
vision. Again, you haven’t sold your entire risk to an insurance com- genRx as we go after the traditional retail customer.
pany; you have provided a stop-loss at a certain level that makes
sense in your risk-management strategy. NexgenRx offers some very innovative solutions in drug
plan design – can you tell us a little about them?
We work a great deal with third party administrators, who basi- We are very active in therapeutic design, where we develop for-
cally insert themselves between the insurance company and the mularies with lower-cost alternatives, not just the generic, which
client. The client could be a multi-employer is the default for most plans. Therapeu-
union or it could be a traditional corporate We're always looking for ways to tic-equivalent drugs can have a dramatic
client. Working with third party adminis- streamline the process. effect on more cost-effective care. One
trators was our initial entry point to find of the problems I think that we see in
customers who had already separated themselves from the insur- the marketplace is that Canadians believe health care is free. We
ance company. are trying to make our plan sponsors and their plan members
discretionary shoppers.
The big breakthrough product for us came via corporate clients
without third party administrators who needed some kind of ad- The whole issue with sustainable drug plans and in particular
ministration platform. An employer with a 5,000 life group plan, the sustainability of group benefit plans, is we have to look at
for example, would typically provide group insurance benefits for alternatives that can contain the costs. Whether that's a different

12 INSIGHT S volume 6, issue 2

delivery system - a direct-to-consumer system - or therapeutic sponsors, is when a doctor says, “you have a drug plan don’t you?”
equivalents, or managing a disease state with more information the answer should be: “Yes I do, and can you please prescribe from
rather than throwing a drug at a symptom – we need to try to get this list of drugs because this is what my employer plan provides for.
at the source of the disease. If you go off this list, then the co-pay that I have to pay increases.”

There's a lot of things that we're able to do with our technology, It’s a question of educating the prescribing community to the fact
it's a question of finding the innovative employers who aren't that this isn’t a big money pit that people can dig into whenever
willing to accept the status quo of absorb- they want. The immediate reaction our plan
ing rate increases year after year. I see a much bigger place for sponsors have is let’s cut benefits, and that’s
the drug manufacturers than the wrong reaction. I think where drug man-
How do you market these solutions? ufacturers could add a tremendous amount of
the role they're playing today.
Our approach has always been to sell value is talking about best practices for disease
through intermediaries such as brokers and state management. So doctors can become less
consultants. That's been the source of much of our business, but likely to just throw drugs at the issue and more likely to consider
some of our larger sales have been through personal contacts and the alternatives, such as educating the patient. Prescribing a cho-
direct contact with targeted industries and employer groups we lesterol-reducing product for a patient with high cholesterol is deal-
thought would benefit from our service and who had an innova- ing only with the symptom, it's not getting to the core problem.
tive team that was willing to look to alternatives.
Are there any opportunities specific to pharmaceutical
We're a disruptive technology in a traditional market. It's the manufacturers that you can speak to?
Canadian phenomenon: the rush to be second. Because we have We manage several manufacturer co-pay assistance programs today,
a diverse client base, we can point to examples of similar-sized em- which allows the patient access to high-cost biologics when tradi-
ployers in our marketing to new clients. We're a small company, tional means of access have dried up. We provide a lot of data that
we have been very patient in building the model so we haven’t can be useful to drug manufacturers looking at drug trends in the
gone out and rushed to market and had to retrench. Jokingly, we're marketplace. I see a much bigger place for the drug manufacturers
the best-kept secret in Canada, except to than the role they’re playing today.
our clients, but in reality we're now ready
It is a question of finding innovative It’s a question of them sitting down
to break through the clouds as far as our
marketing approach is concerned.
employers who aren't willing to accept to think, “What are we going to do
the status quo. as manufacturers in 10 years to
What are your customers telling you make sure that plan sponsors don't
about the types of things they are looking for in drug arbitrarily eliminate our drug from the formulary because of cost or
plans these days? Are they interested in more cost con- because of lack of funding,” or “How can I build a relationship di-
tainment, employee cost sharing? rectly with the end user patient?”. I would certainly welcome dia-
Cost sharing is nothing more than cost shifting. You’re not ad- logue to look at what a new model might be in the future. I know
dressing the real problem, you’re shifting the cost onto the backs of there will be a new model. It’s a question of who will step up and
the employees or pharmacies or manufacturers. take the initiative.

The real issue is how to obtain the best therapeutic value for the
dollar spent. There is statistical proof that doctors prescribe 80 per
cent of the time from a list of less than 30 products. When a doc-
tor says, "You have a drug plan don't you?" what he means is he can
prescribe whatever he wants.

The answer that we're trying to promote to our employers and plan

Fall 2010 INSIGHT S 13