David 0:00

When we used to talk about fiduciaries, we were talking about investment advisors. Now we're talking about TPAs. What does that mean? We'll find out on this episode of Shift Shapers.

Announcer 0:14

Change either paralyzes or energizes. The choice is yours. You're listening to the Shift Shapers podcast. You're about to learn firsthand from businesses and entrepreneurs who have successfully shaped the shifts in their industries. Get ready to become the change you want to see. This episode is brought to you by Shift Shaper Strategies. In sales, if you confuse, you lose. Clarify your message so you win more clients, crush your sales goals, and build your practice. Learn more at ShiftShaper Strategies.com. And now, here's your host, Story Brand Certified Guide and Chief Transformation Strategist at Shift Shaper Strategies, David Saltzman.

David 1:21

And that's interesting. But I and we've talked about it a couple of times on the program, but we've never really defined it well or found anybody who could really dig in. And because we are who we are, we went out looking and we found my friend Nathan Gebhardt who's founder of TrueScripts. And Nathan is actually in the middle of that part of the industry. And so he can explain every no pressure, Nathan. We he can explain everything. Welcome. Thanks for being with us.

SPEAKER_02 1:45

Thanks, David. It's a pleasure to be here.

David 1:48

Give us a few minutes, just on your background, a quick uh thumbnail so we kind of know what how where you're coming from.

SPEAKER_02 1:53

Yes, I'm a registered pharmacist. I graduated from Purdue back in 1998, and I've got my start in retail pharmacy. I had the privilege of working with some of the larger uh chain pharmacies in college and at their headquarters, and I was able to see really kind of the inside workings. But retail pharmacy has always been my passion, and that's where I spent my first uh really 15 years of my career. I was a part owner operator of a small chain of pharmacies. But I really went back to when I was in high school was my first pharmacy job. So I've really lived and breathed pharmacy. I love pharmacy, I love helping people, answering questions. I've had the privilege of serving in a number of leadership capacities with the Indiana Pharmacist Alliance and the Community Pharmacies of Indiana. I've had the privilege of serving as president of both of those organizations for a number of years legislatively, being at the State House, working on some legislation to help protect the consumer ultimately. So pharmacies has been near and dear to my heart ever since I was in high school.

David 2:57

So let's kind of level set for the audience. First of all, what is a fiduciary? And then second of all, what's the problem?

SPEAKER_02 3:06

Sure, a fiduciary in my mind, and I try to simplify things down, is basically we're looking out for the financial well-being of the people that we are serving. Are they getting the best value for the product that they're being delivered? And are we making decisions that's that are in the best interest of the patient? Or are we making decisions that's in the best interest of us? So that's what I think a fiduciary is, is that you cannot make decisions based off your own financial well-being, but it's got to be the financial well-being of the consumer. So that's my definition. The problem is, is in the pharmacy space, uh, PBMs, which are pharmacy benefit managers, they sit in the middle of virtually every transaction of every prescription that gets filled. A PBM is involved with 90 plus percent of all of those. And PBMs are not considered fiduciary agents. So ultimately, that's where the problem lies.

David 4:01

So let's identify the players. A drug gets manufactured at step one, and a drug gets prescribed at the end of the of that chain. How many hands and who are they does that drug pass through until it gets to me and I take it with a glass of water?

SPEAKER_02 4:16

Great question. So basically, you almost need a whiteboard to draw it out, but I'll try to keep it high-level and simplistic. So the manufacturer obviously uh manufactures the drug. Then they send drug reps out to the marketplace to market their drug to prescribers because most drugs have other competing products in that same therapeutic class. So it's like the Chevy and the Ford. So these drugs are out competing against each other in order for the prescriber to write for that drug. Most drug companies go to the hospitals because if you're an inpatient and you're prescribed a drug, then you are going to remain on that drug when you become an outpatient. So hospitals are really a big target for manufacturers because they want you to be on that drug. And in a hospital, they have a pretty strict formulary where it's only one drug per therapeutic class. So, but ultimately, the manufacturer is trying to get their patients on that particular drug. So it goes from the manufacturer to the prescriber to the pharmacy, then to the patient, is how it used to work. So, therefore, whatever the prescriber prescribed you is ultimately what the pharmacy dispensed. So basically, there's four people in that pathway. But back in the 1980s, what was happening was members were having to turn in their receipts back to their HR department for reimbursement for those once employee benefits and insurance became a thing, it became more of an administrative burden. So the first PBM came out in the 1980s to coordinate all those processing of all those claims to make it easier for the employers. But now ultimately, what happens is, and I'll break it down like this I mean, most of us are prescription drug users at some point in our life. So break it down to your own personal experience. When you go to a pharmacy and the pharmacy tells you that your prescription is not covered or that you have a much higher copay than you otherwise would have, most of us are inclined to do whatever we need to do to lower that drug cost. So therefore, the prescriber is contacted to change the drug from drug A to drug B in order to lower the cost to the consumer. So as we sit here today, the PBM is kind of that fifth spot, even though they don't technically handle that drug, they're the ones who determine which drugs are covered and which drugs are not covered. And from my experience as a retail pharmacist, if a drug is not covered, the member typically doesn't just pull out their wallet and pay five or six hundred dollars. They have us call the prescriber and ask what is covered.

David 7:04

So at this point in the process, there's a lot of extra hands that, I mean, maybe needed to be there at one point, but didn't don't need to necessarily be there today. I mean, are PBMs really important today? If PBMs evaporated, just poof, they were gone, would that change how either I as a plan or I as a consumer interact with getting my drugs?

SPEAKER_02 7:24

So it would. And as a pharmacist, I am traditionally anti-PBM. PBMs have caused a lot of harm to the profession of pharmacy. They really have. And they've caused a lot of harm to employers. However, if we remove that entire system from our industry, our industry would collapse, in my opinion, because there would be no way for the billions of prescription claims, who's going to pay for them at point of sale? When you go to the pharmacy and pick up your prescription, and who's going to, you're not going to pay out of pocket and then turn it back into your HR department. So it's a situation where we have to have PBMs. I know some of my pharmacy friends would shiver hearing me say that, but just think about where we were back in the 1980s. Any pharmacy, and there's about 70,000 pharmacies, could charge any price that they wanted for any product. And your prescriber could prescribe any product he or she wanted. So in the 80s, you got whatever you want, wherever you want, and the pharmacy could charge however much they wanted. The problem with that is we have such a distorted system today, and it's all based off greed, in my opinion, because it's all about the bottom line. We actually have drugs today that are prescription only that contain over-the-counter products, and that's all they contain. But if you buy them with a prescription, it will cost about $30,000 to $40,000 a year. If you buy the individual over-the-counter ingredients, it'll cost you about $200 a year for the exact same ingredients. And pharmacies are allowing that to happen. So if it wasn't for PBMs, especially the good PBMs, and there are in any industry, there are good players in that industry. But if it was not for the good PBMs out there protecting the employer and that member, because you, you, you know, David, you don't know what's in that particular pill your doctor is prescribing you. Think it's the best pill for you. But when I tell you that it's Pepsid AC and ibuprofen, and you could get them over the counter, you start to wonder why is my employer spending $30,000 a year. So ultimately, the the PBM system has to remain in effect for our healthcare system to continue the way it is. As far as the access to care, and the member goes into the pharmacy, you get your, you ultimately get your medication, you pay only your copay, and you walk away. And then all the drug-drug interactions and so forth that happens behind the scene. If you went to any retail pharmacy, you you wanted and paid cash, their systems are not integrated. So Walmart does not know what you filled at Walgreens if you paid cash. And in some cases, those drug interactions can and will kill you. So we've got to have this clearing house that all these drugs are processed through to ensure that there's no early refills, therapeutic duplications, or drug-drug interactions.

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David 11:35

If I'm an employer, let's say I'm an employer of a self-funded plan where I actually get some data and I can look at things and whatnot, am I not sitting here wondering why in the name of God somebody didn't tell my employee or the plan's member that they should have just bought Pepsid and ibuprofen at 200 bucks a year?

SPEAKER_02 11:53

Yeah, so the employers, there's a mindset out there that these employers they hire brokers and or consultants or advisors. They they all go by the different names and doing basically the same function. There's an inherent belief that these brokers and consultants are working in the best interest of the employer. And in most cases, there they are. But what happens, in my opinion, and from what I have seen personally, is that the brokers are given misleading information from the different vendors they may be using. So for particularly in the PBM industry, our industry defies the laws of mathematics. And what I mean by that is that a higher discount does not necessarily mean that your net cost is going to be lower. And that would be basically a 30-minute podcast just to explain on how that works.

David 12:38

No, but it's exactly what people hate about this whole part of the business.

SPEAKER_02 12:42

It is. But I break it down to fifth-grade math and common sense, David. And at the end of the day, we built a huge company here, a nine-figure company here in just little old Washington, Indiana, which is about the same size as Bentonville, Arkansas in 1968. I like to remind people of that. Actually, we're a little larger than they were when Sam went down there. But what happens is this fifth grade math and common sense, we are all employers, we're all business owners. That this is the crowd that we're I'm referring to at this point. You're hiring a vendor to provide a service, and you're not asking that vendor how much are they charging? And worse yet, when they tell you that they are charging you nothing, you're actually signing the contract. So just let that soak in for a minute. Out of all the services that your business uh procures, how many of those services are given to you for free? I mean, none, right? They can't be because how would that business even exist? So, yet in our industry, the big three PBMs can generate $100 to $200 billion a year in net revenue and charge you nothing. I mean, worse yet, they are working on your behalf to ensure that the right drugs are on the formulary and that and to ensure that we are negotiating the best contracted price with all the pharmacies in the United States. Yet, most of the PBMs out there own pharmacies. So on one hand, they're negotiating on your behalf for the best pharmacy discount they can get. On the other hand, they're negotiating with companies that they own. And worst yet, they're signing contracts with the manufacturers where a large portion of that drug cost is coming back to the PBM as a pay-to-play revenue stream. Because if your drug's not on the PBM's formulary, those members are not going to pay cash for it. Almost never will they pay cash for it. They're going to take what's covered. So the manufacturers know the only way they sell their product is if they get on a formulary. And now they have to pay for that. But in our industry, the manufacturer determines the ultimate cost of the drug. So if they have to pay a PBM 40% of that drug cost, they just increase their list price 40% to factor that in because the manufacturer is a publicly traded company as well. And if they don't meet their quarterly earnings projections, then that's bad news. So that's why the end user, the cost continues to go up as the discounts continue to increase.

David 15:25

What you just described, with all due respect to an entire industry, sounds like a RICO violation.

SPEAKER_02 15:31

It's 100% should be a RICO violation. 100%, but in the pharma industry, and I'll get the numbers wrong a little bit, but the point's still the same. There's like a 10 to 1 or an 11 to 1 lobbyist to legislator ratio in Washington, D.C. If there's more lobbyists in our industry, there's nothing's going to change in the PBM or pharma industry because then those two entities could wreak havoc on the healthcare system if they chose. So we've got ourselves in this situation to where to fix the problem. It's like going in, it's perhaps a bad analogy, but it's like going into the Middle East and you remove a terrible government regime and then it creates a vacuum, and then the new regime is even worse than what you had started with.

David 16:17

Well, it sounds like an offer that a cross between a mafiosi and an academic might make.

SPEAKER_02 16:38

And it happens here as well, where anytime you can have an industry that defies the laws of mathematics, then that's really challenging to prove until you get the actual claims. And once you get the actual incurred claims, and you can go back to the David Saltzmans of the world who owns their companies and say, look, here's a list of drugs that you paid for, and here's what you could have gotten. Now you got 10% more of a discount on this drug over here, but you paid 1200% more for it.

David 17:10

So this is mind-boggling. It is just completely mind-boggling. And I've I've been in the industry a long, long time, and I've run a TPA. And every time somebody explains this to me, it gets more and more Machiavellian and just more weird. So we've got four or five minutes left. How do you fit? If I'm an employer running a plan, how do I fix this? What can I do to protect my plan from some of this nonsense and some of this incredible spend?

SPEAKER_02 17:35

So follow the money. Anyone you have working around the table on your behalf, ask them how are they generating their revenue? Every penny that's generated off of your account, you need to know that. Because what happens is there's a lot of money flowing under the table. And you mentioned the TPA, the TPAs on the medical side, the PBMs on the pharmacy side. We've actually been told by some TPAs out there that we have to pay them $2 to $8 a claim in order to be their preferred PBM. And we can't tell the client about it. Otherwise, we can't, they won't integrate with us. And then the client can't ultimately use us. So basically, at the end of the day, you've got to ask all vendors around the table, who are you generating revenue from on my account? And then two, what are you charging me for your services? If they cannot clearly articulate that, then that's concern number one. And you should be asking those questions with any vendor that you use. Otherwise, you don't know what they're going to cross-sell you on, and do they really have your best interests? Because we don't have to abide by the fiduciary laws. So it really goes back to the fifth-grade math and common sense that even nonprofits have to generate a profit, no money, no mission. So everyone has to generate revenue. It's not a bad thing, but everyone just needs to let you let the client know, the employer know, who's generating what and how much. And then, two, if you're negotiating on my half with any certain business in the industry, do you own any of those types of business? Because that's an inherent conflict of interest. So those are ultimately the first two things that you can ask. And there's a lot of good PBMs out there, uh, transparent and traditional, those words are way overutilized. But at the end of the day, you know, you want to work with people you know, like, and trust, but trust but verify.

David 19:25

We've got a minute or two left. I want to go back to the example about the antacid and the ibuprofen. Sure. Is that the doctor's responsibility to say, look, here's what you need to get, or you can buy this prescription that's gazillion dollars?

SPEAKER_02 19:38

U theoretically, yes, but the system doesn't work like that. Um the doctor has to see 25 patients a day, or they don't make any money. So the drug reps come in, the drug reps show them a nice pretty piece of paper with a big green check mark that says this drug is good, and it's on your local employer's formulary. So the doctor looks at it, says, okay, yes, it's effective, and my local employers cover it. Perfect. And here's some free copay cards, so my patients don't have to pay a penny. Well, and then you're off to the races. That drug gets prescribed, and if your PBM's on the take by that manufacturer, the patient's gonna get it. So ultimately, the doctor simply doesn't have the time or the ability. The doctors take like one semester of pharmaceutics, I believe. They don't know the differences between one drug or the other. They pull up their pad, it lists their drugs. If it's on formulary, they prescribe it.

David 20:29

Scary. And so they don't look for pharmaceutical equivalents or or any of those kinds of things.

SPEAKER_02 20:34

Well, they always try to give you something that has a generic if possible. So, but in some cases there's no generic available, like do X's. There's not a generic for that. You can get the individual ingredients separately, but the pharmacist can't substitute it. The pharmacist can tell you, hey, use these other two drugs, but then the pharmacist lose money, loses money because they may make a couple hundred bucks on that $30,000 drug. Well, now they're gonna make $40 on the $200 drug. So it kind of comes back to greed over best interest of the patient.

David 21:04

And for better or worse, that's a great place to end our conversation for today. Nathan Gabhard, who's founder of TrueScripts. Nathan, thank you so much. It's been very enlightening. And uh, we hope you'll come back and talk some more about this.

SPEAKER_02 21:15

I'd love to, David. Thanks for having me.

Announcer 21:18

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