Health+Benefits Vital Signs the Jan/Feb 2021 issue

Compounding Cost Savings

Q&A with Dhaval Bhanusali, MD, Dermatologist and Founder of Skin Medicinals
By Tammy Worth Posted on January 19, 2021
What is the origin of Skin Medicinals?

As a doctor, I have relationships with my patients. They are like family. And at one point, I noticed with the medications they were taking, the prices started skyrocketing overnight. There was an immediate shock value for them, and their premiums were also going up each year. It was dramatic: $4 became $400 overnight for the same medications that had been around for 15 years.

The dermatology world is pretty small, and I started communicating with friends and we were all seeing it happen. We do a lot of compounding medications; that was the basis for dermatology before big pharma took hold. I thought maybe we could go back to our roots and start compounding again.

I have a background in both technology and compounding, so I started building a platform where dermatologists can compound the same kinds of medications patients were getting through insurance. It allows us to get affordable medications back to patients, and we can personalize them as well. I can look at a person and choose different ingredients based on their skin or complaint. The company grew a lot faster than expected, and it exploded. There are about 4,500 dermatologists that use it now—almost half of those practicing in the country.

Compounded medications can be more expensive because they are often small-batch products. How does your platform enable cost savings?

I was able to understand the pain points on the side of the doctor and the pharmacy. Once you can account for those different things, you can have some spectacular end results.

Writing a prescription for a compounded medication is different than a traditional pharmaceutical product. When a doctor writes one, they will have a paper script with a little of this and some of that. With some ingredients, you would have to Google them to make sure they were available, and you had to put the formula together in your head. Then you had to hope the compounding pharmacy could make it, then you would call to make sure of that and get the price. They took the prescriptions by fax, and they could only take so many prescriptions in one day.

This platform enables doctors to make one quick click and use products that are established in the literature. Everything in the platform has some basis in the scientific literature proving why the ingredients should be combined and used.

To be very frank, medications were archaic for a long time. The pandemic has made us look in the mirror and evolve. This platform has provided an option that can streamline the process. And it allows doctors to click on ingredients that are more common ones that patients tend to use and put together medications the way they feel are best for the patients. I am able to select ingredients, and the pharmacy prepares it and ships it directly to a patient’s home. Patients can get refills this way, too. Mail order pharmacies have been shipping medications to patients for years, but a year ago, it was almost unheard of to get these dermatology products shipped directly. I just wonder why it took us so long to get here.

Do you work with a particular compounding pharmacy for the medications? Are you able to keep costs down through volume?

It took some education to figure out how to work with the pharmacies. There is a lot of regulation out there, and we had some bad apples in the industry in the past. We had to do it the right way and ask the right questions and make sure everything was compliant. We had to build the platform with the pharmacies because we had to streamline their process as well.

Compounded medications can be more expensive, but we are able to negotiate the prices and offer good access points for them. The platform needed to offer access, good technology and ease of use. Doctors are busy, too, and we didn’t want to add any additional administrative burden for them.

We are always trying to push the price down as low as we can for pharmaceuticals. I think the idea that so many of us are using compounding now is flipping the switch to make it a viable option for patients.

Compounding had been a big part of dermatology for a while. But people would do it in the office or find a local place, and the prices were high because they were just making one-offs. We work with a pharmacy in Arizona, and they have sister ones in other states. That’s been the hardest thing—to make sure there was a pharmacy in each state to create and ship medications to patients. We needed to have partners that understood the value of providing more affordable medications for patients. Prices may still be high for the pharmacies, but they have to understand the business reason to take part and the ethical good for doing this.

Can you give an example of cost savings that might be found from compounding as opposed to using a pharmaceutical product purchased through insurance?

For instance, there may be an active medication like tretinoin, which is commonly used for acne, antiaging or rosacea. For someone with sensitive skin, we might add hyaluronic acid, which helps calm the skin. Generic tretinoin might be a $45 co-pay, and then $800-plus is billed to insurance.

But a combination of these two may just cost $30. You add a few other ingredients, and that makes one cream.

It is eye-opening for doctors and patients to understand they can keep things at an affordable price. It’s a mass market: you can have 10 options out there, but every person is unique and there are a billion different kinds of snowflakes out there. With compounding, you can look at a patient and determine what is perfect for them instead of what bucket they fit in.

You think it isn’t enough just to lower a drug’s co-payment. You also want to reduce overall pharmaceutical costs. Why do you think that is important?

Healthcare costs are not sustainable. A patient may see no doctors in a year but have premiums that go up anyway. We have an overarching problem of how to create better transparency. No one knows how much costs actually are until we see a bill later. With this kind of platform, the patient and doctor can see the cost up front.

Premiums are rising, and we can discuss using medications as an option to keep the prices down. The hardest thing for a patient to understand is that a zero co-pay isn’t always cheaper; there’s always more to it than that. Even if a doctor says something is covered under insurance, that’s at what real cost? What is the insurance plan charged? With more innovation and technology, we can do better for our patients for the short term and long term.

Is this platform something that could work with other specialties, or is it most suited to dermatology?

We have had a lot of primary care doctors, because it is pretty common in that world to do dermatology products. I hope it inspires other fields to use it as well. By setting a precedent, I hope it will inspire others to look into it.

Read our related content, The Compounding Business

Tammy Worth Healthcare Editor Read More

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