Tag: Research Centers



Pharmacy benefit management firm research, Panos Kouvelis. Blog illustration.

Prescription drug consumers confounded by the cost of their medications can get a peek behind the curtain thanks to new Olin research into the complex “co-opetition” — cooperation and competition — among drug makers in the middleman-controlled US drug supply chain.

But, as Olin’s Panos Kouvelis explains, the system is so complex and opaque, it may be headed for government regulation.

Kouvelis’s research describes the complicated dynamics between drug manufacturers and “pharmacy benefit management” firms — massive companies like St. Louis’s Express Scripts or CVS Caremark that manage drug benefits and dispense medications for millions of patients as part of their employer-supplied healthcare coverage.

Kouvelis says his research shows that on one hand, drug makers compete with each other to build their brands and increase sales for similar medications. On the other hand, in the complicated world of PBMs, drug makers unwittingly cooperate. That’s because their price competition and volume-leveraged negotiations with the PBMs lower costs to PBM clients — employers — which increases the market for PBMs and the patients they serve, thus benefitting all drug manufacturers.

Deciphering a Complicated System

In fact, Kouvelis says the industry is destined to end up regulated by the government because the system is more opaque than almost any other supply chain. Consumers can pretty easily discern how automobile manufacturers and their suppliers make money, for example. But fewer understand how their $20 copay for anti-cholesterol medication gets split between the drug maker, the insurance company, and the pharmacy benefit manager.

“In a complex environment, we have to figure out how the prices are set when drug manufacturers work with PBMs,” said Kouvelis, director of The Boeing Center for Supply Chain Innovation and Emerson Distinguished Professor of Operations and Manufacturing Management.

“This is exactly the time that the government has to decide,” Kouvelis said, in light of the planned acquisition of Express Scripts by Cigna and the considered acquisition of Aetna by CVS. “The PBM is controlling three things: The price its clients pay, the copay patients pay, and the negotiated wholesale price charged by the manufacturer. What we’re finding out is that for a profit maximizing PBM it does make sense for some drugs, the drug cost to be actually lower than the copay.”

The research paper, entitled “Drug Pricing for Competing Pharmaceutical Manufacturers Distributing Through a Common PBM,” Kouvelis and his coauthors created a mathematical model of strategic interactions of the drug makers with the PBM. They use that model to measure the effect of the many variables at play in the system, including drug prices, tiered formularies (the list of drugs the PBM provides) with different copay levels, rebates to PBMs, demand, price sensitivity among patients, and market size.

The researchers — who included Yixuan Xiao at the City University of Hong Kong and Nan Yang at the University of Miami — used data from publicly accessible sources to test the mathematical model as much as possible. The paper has been published in the Production and Operations Management journal.

“The only thing we can calculate here are the profits of everyone in the game,” Kouvelis said. “From a competitive perspective, what is going to happen when we have rational players in it? How will drug manufacturers set prices? How will PBMs leverage their formularies for rebates and controlling costs to clients? To what extent is everyone benefitting? And who finally pays most of the drug costs?”

Turmoil in the Industry

The research is particularly timely: Express Scripts — No. 22 on the Fortune 500 with 2016 revenues of more than $100 billion — is now a merger target by insurance company Cigna. It’s the latest sign of turmoil in the industry. Express Scripts’s stock has been buffeted since its largest client, Anthem Inc., announced it would drop Express Scripts in 2020 in favor of launching its own PBM called IngenioRx.

Express Scripts is one of the three major players in the PBM industry, including OptumRx, owned by UnitedHealthcare, and CVS Caremark, which is in the process of acquiring insurer Aetna Inc.

One thing is clear from the research, Kouvelis says: PBMs seem to have very good returns on their invested capital. For one thing, they have sizable leverage over drug manufacturers through their decisions about which drugs are available through their services — the PBM’s “formulary.”

Drug makers with competing medications must therefore “play ball” with the PBMs in order to be included on the preferred tiers of the formulary, which means lower copays and a tendency to be used more often by the corporate employees who are served. Typically, PBMs have a three-tiered formulary allowing patients to pay a lower copay for generic drugs, for example, a middle-tier copay for certain “preferred” branded drugs, and a higher out-of-pocket cost for “non-preferred” medications.

The Middlemen Win

Meanwhile, PBMs earn revenues from two sides of the equation: First, from the fees their clients pay to manage their employee prescription drug plans. Second, drug manufacturers rebate a portion of their sales revenue to the PBMs for the business they receive. The PBMs often pocket much of those rebates, sharing a portion with their clients to help keep costs down for employers.

His paper describing the “co-opetition” among drug makers is Kouvelis’s second in a series of papers on pharmacy benefit managers. His first looked at how PBM clients make decisions about which middlemen to select and how that selection process drives formulary decisions and the fees competing PBMs charge for their plans.

As PBMs now merge with insurance companies, he is embarking on research to examine what that will mean for consumers and clients. His previous research substantiated why vertical integration of drug manufacturers and PBMs — which ended in the late 1980s — was not increasing social welfare.

That research also offered insights on conditions under which mergers of competing PBMs might not always translate into lower drug costs. Now, with the PBM ownership model focused on insurance companies or pharmacy chains, it is time to decipher their implications for drug prices and social welfare.

“The role of the PBM and how its ownership aligns with the overall drug supply chain is not very well understood. Other supply chains are a little more linear, a little more transparent,” Kouvelis said. “That’s what we were trying to understand in this paper — the role of the PBM in this process, how these negotiations happen among PBMs, drug manufacturers, and clients.

“Who makes most of that money in the drug supply chain? Hard to always say, but the middlemen in the industry — wholesalers, PBMs, and insurance companies — appropriate quite a lot for the investments they make in it,” Kouvelis said. “The benefits of further merging of such middlemen in an opaque supply chain are far from a no-brainer.”




Written by Ross J. Brown, BSBA 2018, on behalf of Bauer Leadership Center.

Treat others the way you want to be treated. Do right by the organization. Stick to your values. Don’t be afraid to speak up. Last Thursday, Michael Holmes imparted his lessons of leadership during his presentation at Olin’s Defining Moments course.

Holmes is chairman and founder of Rx Outreach. This nonprofit company focuses on providing medicine to individuals who cannot afford it. Since its inception in 2010, after originally being a part of Express Scripts, the company has been able to provide 670 medication strengths, by more than 70 employees, serving more than 210,000 patients. Rx Outreach patients have saved than $320 million.

Throughout his career, Holmes has worked at variety of companies and in executive positions with Edward Jones and Express Scripts.

With his charismatic personality, Holmes’ presentation captivated the audience with his story of success—and mistakes—that allowed students to understand his underlying points of respect, values, and reflection. With consistent excellence in his career path, he was also able to demonstrate consistent and equal respect to all his coworkers—from secretaries to superiors.

This equal respect came from his religious beliefs, which he also proudly speaks about. I find this impressive. Religion can be a controversial topic, but Holmes is confident enough in himself and who he is to share this part of his background with others.

Finally, Holmes mentioned that he believes we should “enjoy every step of the journey”—enjoy every victory, learn from mistakes, and ultimately, have fun. The time spent with Michael Holmes was inspiring and enjoyable as we learned how to become better employees, better leaders, and overall better people in and out of the work place.




Michael Wall

Under pressure, we don’t rise to the level of our expectations, we fall to the level of our training – Archilochus

Inspired by the curiosity of my students and their desire to understand the needs of those at the leading edge of marketing, I continuously seek the guidance of industry leaders to enhance the student experience. A recent discussion with an accomplished marketer about about the unprecedented pressure marketers are under to succeed took an unexpected turn, which led us both down a path of possibility—a path, perhaps, that other marketers should consider as well.

Her perspective on the cause of this pressure pointed to the rapid increase in technology, a global economy, and customers who are more demanding and wield more control. This aligns with what academic research and industry thought leaders have discovered. For example, concepts such as Google’s “Micro-Moments” and Forrester Research’s Age of the Customer.

Her approach to succeeding in this new climate is consistent with what other marketing leaders have shared. They all realize that they must cater to the actual needs of an individual versus the perceived needs of many. Hence, the birth of one-to-one marketing, account-based marketing and, of course, personalization. What’s more, all of these leaders say succeeding has proven to be very difficult. The data agrees. For example, Accenture recently uncovered that approximately 50 percent of US consumers said they switched companies because the brand failed to deliver on these demands.

As we shared ideas on possible causes an almost flippant comment was made that marketers should receive sales training. We explored this idea further, agreeing that catering to an individual’s customer journey requires a very specific set of skills which differ from traditional  mass marketing. As we brainstormed, we noticed common sales-oriented methodologies that were most applicable and actionable for marketers:

Uncovering Pain: When you market your solutions, are you focused on the “who” and the “why,” or are you focused on the “what”?

Meaningful interaction with an individual requires a more thorough understanding of who they are. Beyond the functional, there are social and emotional factors that drive their buying decisions. Great salespeople understand this. They are trained to immerse themselves in the client’s circumstances to uncover the pain that individual is experiencing. These insights enable them to understand what value means to the buyer and what factors will drive their decision to buy.

Relationship Building: Does your marketing strategy provide value throughout the customer journey or is it really just about the sale?

Google recently introduced “the age of assistance,” which is essentially stretching the customer journey both before and after purchase. Great salespeople have been trained to do this for quite some time. They understand that customers buy from those they trust, respect, and like (most often in that order). Salespeople get there by providing value throughout the relationship lifecycle. It is important to note that this is inclusive of value that has nothing to do with making a sale.

Keeping Your Word: Do customer touchpoints with your brand deliver on your brand promise and provide great experiences?

Marketers know success is dependent on your ability to inspire customers to stay with you. Great salespeople are trained to know that keeping your word is the most important factor related to long-term success. It enables you to create the great experiences needed to do so. They only sell you what you need, guide you as to what you don’t, and work to proactively remedy a situation if things don’t go to plan.

At Olin, new Dean Mark Taylor introduced our new vision which highlights five specific ways we are going to adapt for the 21st century while building on our very solid foundation. One of those pillars is innovative thinking. Sales training for marketers? Now that’s an innovative idea.


Imagine you and your significant other finally carved out some time for a vacation getaway. You did your research—booked flights, picked a few promising restaurants, dug up your favorite fanny pack—and now it’s time to find a place to stay.

You’ve heard a lot about Airbnb, so you decide to give it a try. After some deliberation, you’ve both agreed on a place within walking distance of all the local attractions, so you send a request to the owner.

But after a couple hours, you get a message from Airbnb saying that your request has been denied without explanation. For a significant number of Airbnb users, this scenario is all too real.

Dennis Zhang

Dennis Zhang

In the Boeing Center for Supply Chain Innovation’s latest video, Dennis Zhang, Olin assistant professor of operations and manufacturing management, discusses the topic of racial discrimination on peer-to-peer platforms.

According to Zhang, Airbnb requests made by accounts with distinctly African American names were 19 percent less likely to be accepted compared to other accounts. However, if those accounts have additional review data (i.e., at least one positive or negative review), all accounts are equally likely to be accepted.

Zhang believes that people require a bit more information to nudge them in a non-discriminatory direction. He thinks that if Airbnb offered more information within the platform, it would reduce the likelihood of discrimination by those looking to rent out their space.

Zhang goes on to mention that platforms conducting business via peer-to-peer transactions face a higher likelihood of discrimination. He says that discovering how discrimination happens on those platforms is a critical step to ensuring equal consumer treatment. Zhang’s research emphasizes the importance of information, and hopes it will be effective in the fight against discrimination.

[RELATED: Airbnb nondiscrimination policy may backfire]




Pictured above: Roger, Fran, Elke, and Paul Koch, attending the 2018 Family Business Symposium where their $12 million gift to the university was announced.


Four members of St. Louis’s Koch family have contributed $12 million to endow and establish the Koch Center for Family Business and two professorships—one at Olin Business School and the other at the Washington University School of Law.

The family provided the gift to raise awareness about the complexities of family businesses and engage students in understanding the career opportunities available in such enterprises.

Paul, Elke, Roger, and Fran Koch at the third annual
Family Business Symposium on Feb. 20, 2018
(in front row with Dean Mark Taylor
and Chancellor Mark S. Wrighton).

Roger and Fran Koch and Paul and Elke Koch “have been passionate about seeing a greater focus on family businesses here at Olin for many years,” said Chancellor Mark S. Wrighton, as he announced the gift.

“There’s a lack of perception about how many family businesses there are and what role they play,” Paul Koch said, following the announcement. “There’s also a lack of perception about the complexities of family businesses.”

The announcement kicked off the third annual Family Business Symposium at Olin—part of a family business initiative the Kochs established several years ago. The brothers noted how frequently family businesses fail to survive past the third generation of family ownership—a phenomenon Paul Koch said was “a waste of resources.”

Paul A. Koch (BSBA ’61, JD ’64, MBA ’68) and Roger L. Koch (BSBA ’64, MBA ’66) are co-chairmen of the board, and the third generation in leadership at Koch Development Co., a St. Louis-based developer and manager of commercial real estate and owner/operator of select entertainment attractions.

“It was clear from the moment I arrived in St. Louis that family business is integral to the community,” Dean Mark Taylor said during the announcement. “Some of the very first people I met—even before I became dean—were Roger, Fran, Paul, and Elke Koch. They have been extremely instrumental in thinking about how we can move forward scholarship in family business.”

Taylor noted that family businesses are a substantial driver of the global economy, responsible for 80 percent of new job creation. Family businesses contribute more than $68 trillion to global GDP and drive 64 percent of the US economy.

With the announcement, Olin will launch a search for the Koch Distinguished Professorship in Family Business, who will lead the new family business center, contributing to a curriculum for students and research in the field.

The center “will have a strong practical application and will also have a very, very strong research side,” Taylor said. “The Kochs were keen in their discussions that we should have a strong research leader.”

The Kochs’ $12 million gift also creates a distinguished professorship at the Washington University School of Law. Wrighton noted that the Kochs will “be providing additional expendable gifts, which will help with the ongoing growth and development of the Family Business Center and the endowed chair holder who will lead that center.”




Most successful leaders are able to point to a handful of defining moments in their careers – instances that defined the trajectory of their career and their company. Olin’s graduate-level course Defining Moments: Lessons in Leadership and Character from the Top examines these situations by bringing in notable leaders who exemplify both business excellence and personal character.

Perri Goldberg, MBA ’18, wrote this post on behalf of the Bauer Leadership Center.


Managing change—even drastic change—happens more naturally if a company has built a strong, values-based culture, according to Alaina Macia, MBA ’02, president and CEO of Medical Transport Management.

Speaking to Olin’s “Defining Moments” class recently, Macia highlighted the fact that leading a values-driven organization helps eliminate the fear of implementing drastic changes—as long as the changes are aligned with the company strategy, culture, and values.

Macia provided unique perspective as the female leader of a private, family-owned business—particularly because most of the speakers for our “Defining Moments” class have been senior executives of large public corporations.

Macia started her career as a research engineer at the Washington University School of Medicine, following her undergraduate education at WashU focused in biomedical engineering. After a couple of years as a research engineer, Macia realized she was more attracted to business, and enrolled at Olin for her MBA.

Following her MBA, Macia worked at Maritz Inc., but joined Medical Transportation Management, her family-owned business, as an analyst, and was quickly promoted to director of corporate strategy, VP of operations, and finally to president and CEO.

Culture is a touchstone

A key to MTM’s success is its corporate culture, one that fosters successful company growth and an environment in which employees work hard but also have fun. Maintaining that culture is important in the company’s hiring practices, Macia said.

“MTM hires slow, but fires fast,” she said, stressing the importance of hiring the right individuals for the right roles to maintain the company culture and drive success.

I really enjoyed Macia’s focus on the importance of peer-to-peer learning and surrounding yourself with the appropriate individuals at all stages in your career. When she first joined Medical Transportation Management, Macia admitted she did not know everything she needed to know to be successful.

As such, she made it her mission to surround herself with those who could teach her what she didn’t know and support her through decision-making processes, company reorganizations, and dramatic growth spurts.

Finally, one of the biggest takeaways from Macia’s presentation was her emphasis on self-awareness. Understanding your strengths, weaknesses, leadership style, and values will help you understand your colleagues and guide you through your career. Whether you are self-aware or not, she mentioned that it can easily be learned and will only benefit you as a leader.

Macia’s presentation was extremely insightful and a fantastic way to kick off a great class filled with many successful senior executives across all industries.


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