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Prescription Data Used To Assess Consumers

Milliman's IntelliScript codes drugs red, yellow or green, according to the insurer's instructions, with red signaling the greatest risk, Franzen said. Red codes could include the so-called AIDS cocktail drugs and cancer medications, he said.

The companies receive data only on individuals who are in clients in PBMs' databases, generally excluding, say, people who pay for drugs in cash. The profiles cost insurers about $15 a search. IntelliScript gets about 1 million queries from insurers a year, largely individual health insurers.

The system can save money for insurers, said Richard Dick, an entrepreneur who built the database system that Ingenix acquired in 2002.

For instance, if MedPoint produces a report that an individual has been on the highest dose of the cholesterol-reducing drug Zocor for 18 monts, the insurer "would be able to know that you have a very high, near-intractable cholesterol problem," Dick said, and could avoid a costly blood test.

From a business standpoint, it makes no sense for an insurer to sell a plan with a $200 monthly premium if the company knows that the consumer is taking medications that cost $400 every six months, industry experts said. That is why having access to an "objective" source of third-party information is valuable, said Tia Goss Sawhney, a Chicago area health insurance actuary who has used both companies' tools. "Though most people tell the truth most of the time, there are people out there who don't, who leave out something that's incredibly relevant, who may even be able to defraud a company," she said. "That's important because ultimately the people who tell the truth have to pay for those who don't."

Franzen, whose firm expects revenue of $575 million this year, said his clients tell him that about 10 percent of applicants do not disclose pertinent medical conditions in their applications that are later revealed by prescription drug history.

Some health experts worry that insurance companies can make faulty assumptions by looking at prescription drug records, because many drugs have multiple uses. "I had a patient on Amitriptyline for migraines and they were denied life insurance because it's also an antidepressant," said physician Kate Atkinson of Amherst, Mass. "I had to explain it wasn't being used for depression." Another patient was on Prozac -- not for depression, but for menopausal hot flashes. "I wrote an appeal letter, and they still wouldn't give it to her," Atkinson said.

Services such as MedPoint are just "one of many tools" underwriters use to make coverage decisions, said Tyler Mason, a spokesman for UnitedHealthcare, which uses MedPoint. A high-risk score on a profile will often lead to requests for more information from the applicant, he said.

Ingenix and Milliman officials stress that they provide data only with the patient's consent, as required by the Health Insurance Portability and Accountability Act (HIPAA), a 1996 law that governs personal health records information. But HIPAA does not give the Department of Health and Human Services the ability to directly investigate or hold accountable entities, such as pharmacy benefit managers or companies such as Ingenix and Milliman, who are not covered by HIPAA.

A health privacy proposal pending in Congress would expand federal officials' ability to regulate such "downstream" organizations, audit their activities and impose civil fines. The bill also includes a prohibition on the sale of electronic medical records.

Tim Sparapani, senior legislative counsel at the American Civil Liberties Union, said that the products that Ingenix and Milliman are marketing represent the "commodification" of electronic medical records by third parties. "We've got to stop these practices before the marketplace is fully developed and patients lose all control over their medical information," he said.

The field is growing rapidly. Realtime Solutions Group, a company in Woodridge, Ill., is testing whether lab data can be aggregated with prescription and other data for underwriting purposes. The firm is working with two major commercial labs and three large insurers, using thousands of real applicants. Initial results are promising enough that the company plans to proceed to the data-analysis stage, company co-founder Tedd Determan said.

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