David 0:00

PBMs

PBM Industry Challenges and Solutions

David 0:01

catch a lot of blame and a lot of enmity, and you know, some of it's deserved. But what if a small independent TPA decided that they were committed to doing the right thing for both the client and the member? We'll find out on this episode of Shift Shapers.

SPEAKER_00 0:18

This is the Shift Shapers Podcast, connecting benefits advisors with thought leaders and entrepreneurs who are shaping the shifts in the industry. And now, here's your host, David Saltzman.

David 0:31

And to help us answer that question, we've invited Dave Parker, who is Vice President of Sales and Marketing at TrueScripts. Hey Dave, welcome. Hey, David, thank you. Um, so let's talk a little bit about your background. We always ask that question because it's fascinating to see how people ended up doing what they're doing.

SPEAKER_04 0:47

You know, it's uh I have been in the the industry for 36 years now, and the majority of it spent on the third-party administrator side. Um uh did a five-year stint on the stop loss carrier side, and most recently, about 18 months ago, moved over to the PBM side of the business. So it has been a uh a great career, fun career. Um, amazing people throughout the the time I've I've been in the business and am having a lot of fun now.

David 1:18

Yeah, it's you know that's that's almost my story. Different places that I stopped at, but the but it's it's a great business with a lot of really wonderful folks. And part of the reason that we continue doing the podcast, even now, eight years in, is because I get to meet really interesting people who are doing cool things and bring all that information to the audience, which is which is awesome. It's a nice way to give back. And Lord knows I have plenty for which to give back. Absolutely. At any rate, um let's start by level setting. What's the problem or what are the problems? I know we've only got 20 minutes, but what are the problems with the traditional T uh the traditional PBM relationship?

SPEAKER_04 1:54

You know, the the yeah, we only have 20 minutes. Um, you know, I think the the the most unique challenges uh and they're going on right now, you know, in in con congressional hearings, is you know, the the PBM that existed 30 years ago isn't the same PBM that exists today. And it should be a transactional business, it should be a transparent business, and instead it has turned into one that has so many puts and pulls of revenue, so many puts and pulls of how do we uh how do we make money in in different ways? And it's lost sight of what it's really all about is the member and delivering the total lowest net cost and the best service to them.

David 2:43

So let's talk about some definitions because there's all kinds of phraseology that floats around the PBM universe. What do what do advisors really need to know about?

SPEAKER_04 2:53

You know, I think the first and biggest question is how do PBMs make money? And so when you sit down with a PBM and they're giving you their presentation, just stop, ask them. Show me in black and white, how do you make money? Um that that is as basic as it can be, and that's as as real as it should be. Um from from there, it's what what investments do you have? Um, because again, that's disclosure of how you make money. If I own a pharmacy, if I own a specialty pharmacy, if I own a mail order pharmacy, I'm making money. And that's something that a lot of people overlook in the process. Then it gets down to the the perspective of rebates and how do you handle rebates and how do you distribute the money from the rebates? So those are those are some of the key areas, I think, that that really just breaking it down to basic questions. And again, how do you make money? Where does a rebate come from? And why is it called a rebate? Um boy, there's a long history there, and lots, lot smarter people that have been on the PBM side that can answer better than me. But essentially rebate is was created to uh provide other individuals from the manufacturer um a source of revenue for for distributing their product.

David 4:16

So it's an additional markup, if you will. Correct. Correct. Okay. Um another term that people get hung up on is average wholesale price. What means that?

SPEAKER_04 4:26

Average wholesale price is a number that is established at at the point of of sale um from from you know the pharmaceutical companies from the pharmacy. And uh as you go down the road, it it varies by entity and again what they want to market up or what they want to discount it by.

David 4:47

And the last thing I'd I'd like you to find, because you mentioned it earlier, and it's a springboard for the rest of our conversation, I think, is the concept of net cost.

SPEAKER_04 4:56

So uh net cost is is eliminating all of the malarkey, and and that's really the only way to put it, is um, you know, when when when I sell something, I I I don't think that somebody should pay an egregious price for it. Um, pay a fair cost and and move on. Uh pharmaceutical companies, they have the markup for the rebates, they have the markup for the providers, anybody else that are that's involved in the mix, and suddenly you've inflated that price to a to a point that's that's way out of control.

David 5:35

But if if you're a PBM today, even a newfangled PBM like you guys are, where you're committed to all that transparency and stuff, how do you get rid of all of those pieces that the middlemen normally take? Or are they still there?

SPEAKER_04 5:49

They're still there. And I I it's it's becoming more and more um open from the manufacturers. They are trying to get closer to the employer, which is a positive thing to see. Um there will always be that that layer um because you have the the big PBMs that control so much of the business with the private networks, etc. But the the there is a push to push more towards the transparent movement, um, get rid of spread pricing models. I think three states right now have legislation in place, or not in place, excuse me, legislation they're considering um that that will push to uh uh eliminate spread pricing models. Those types of things are the steps that that that need to be taken.

David 6:43

So since you brought it up, let's also ask you to define spread pricing.

SPEAKER_04 6:47

Okay. Go ahead. Well, most people will hear spread pricing, they they don't always know what it is, and it really is the margin that is charged to a plan sponsor, to the plan, um, and the amount paid by the PBM to the pharmacies for a prescription. So there's that spread that exists between those those costs.

David 7:07

That makes sense. If I'm an advisor and I'm trying to not totally dunk the existing PBM and the grease, but talk to my client about a better way of doing stuff, what's that conversation like? How how do you get these concepts across to an employer? I know you you know you you help brokers understand this all the time.

SPEAKER_04 7:25

Yeah, that the the the first and hardest thing, and and after having you know worked in the the other roles I've I've been in, you know, the so many employers, first off, have been sold on the concept of rebates. And rebates are great, and they don't understand the fact that you know eliminating that and and getting the lowest net cost is the is the most important part. The the second part is getting them away from the brand. Um, you know, we all grew up in the Nike generation, and we all had at some point a pair of Nikes. And you know, we had to have them because that was the brand. So understanding that there are great companies out there that may not have a brand, and by the way, the rebates may be less because you're saving the plan a lot more money are the two biggest concepts. The hardest part again gets back to when a CFO or an HR person is completely sold on both of those items, it's it's a difficult sale. So it really gets back to educating them. A, how do PPMs make money? B, do you really need the rebates, you know, and the brand?

David 8:42

Well, is it maybe this is really simplistic, but it's it's always seemed to me that the rebates, and I as you I ran a TPA for a while. Um it's always seemed to me like the rebates are kind of like we're picking your left pocket and putting some money back in your right pocket. Absolutely.

SPEAKER_04 8:58

Absolutely. And and so a a great example of that is the new Biosimilar to compete with Humira, um, Amgevita. So Amgevita came out with two price points. One that has a rebate and one that doesn't. And we're we're opting to, as members, you know, convert, we're opting and trying to steer them to the one that doesn't because the cost is significantly lower. And this the member and the plan save money. That's a that's the simplest solution. That's the best solution.

David 9:31

More or less, what's that delta on those two drugs?

SPEAKER_04 9:33

Um the delta is well over $5,000 for the for the the I think it's a two-week dose.

David 9:42

Yikes. Well, and though it's you know, it's those kinds of specialty drugs, injectables, etc., that are that are running costs up because I guess they can. Um and and it's you start looking, you start pulling apart claims for pharma and you you see where the money's going, it's it's clear. Why would anybody opt for taking the drug, you know, for allowing the drug on their formulary that does have a rebate? Right.

SPEAKER_04 10:08

Well, that this gets back to the brand and the name and the advertisements. Uh last night my wife and I were watching a show, and three pharmaceutical companies pretty much covered about 85% of the advertising time. And so as a consumer, I know those names. Um if I'm a patient and I don't know a biosimilar or what a biosimilar is, I'm probably a bit scared because I haven't heard that name.

David 10:39

Now, you know, it's interesting. We've had a few conversations recently, and and one of my consulting clients is a company that's that's doing huge large-scale trials with insurance carriers on pharmacogenetic testing. Is is that something that you include when you when you're building kind of a newfangled PBM? Is that something that that you embrace and that you include, or is that just coming to market? Where do you guys stand on that?

SPEAKER_04 11:04

It's coming to market. Um, as as uh unique as it sounds, we actually just have done a trial on all of our team members. And um it's a fantastic, fascinating process to go through, David. Um, and and one that I highly encourage uh groups to truly consider and brokers to consider. Um, you know, personally, from from a personal experience, you know, I can jokingly wave my right tip to PHI, but I do not um process or or uh uh Lipitor was prescribed for me several years ago. And within a three-day period of being on the drug, I was not metabolizing it. I was in bed. I was feeling like I was on death's bed and called the doctor, and he's immediately pulled me off, put me over to Crestor, and everything has been fine ever since. And of course, I did the other steps to help lower my cholesterol. But the the reality is that's really what we're looking at is what does your body metabolize? And there are so many psychotropic mental drugs out there, they're heavily on the list. There are just a number of drugs that people are misprescribed. And um, we really need to be able to identify what those are. The our our five farm Ds are, or excuse me, three of our farm Ds are all certified in pharmacogenomics testing, so they can do consults. And going through that consulting process was fascinating for me just to see again what what should shouldn't I take? And then

Pharmacogenomics Testing for Prescription Drugs

SPEAKER_04 12:41

at the end of the consult, our farm D said, you know, you may want to take that report to your primary care physician. So I did. And my primary care physician actually spent more time with me talking about that report than he did my true checkup. And it was really because he was fascinated with it, had never seen anything like that, and it used it as a learning tool to be careful with, you know, anything for me going forward. So it is absolutely something that that we are moving forward with, and and I highly, highly encourage people to consider it.

David 13:16

Yeah, well, I think where the rubber meets the road on that is always going to be at the PBM level because you can intervene early before the before the restriction is filled. Um, you know, I I was blown away um the stats. If if I don't have them exactly, I'm really close. But if you take 10 folks who are taking Plavix, which is a drug that's, you know, widely prescribed, three of them can't metabolize it at all. Right. And one of the seven who are left is a hypermetabolizer, meaning they get too much of that drug in their system too quickly, it thins their blood and they become a stroke candidate.

SPEAKER_04 13:47

Right.

unknown 13:47

Right.

David 13:48

And now that the tests are, what, a couple hundred bucks, um, and and dropping. I mean, when they first started, they were thousands of dollars and they were primarily used, but for cancer patients, I guess mostly. But there's also a patient satisfaction piece there too. Did you did you find that? I mean, it's absolutely so rather than saying, let's try this, let's try that, and then you're the guinea pig and you sit in bed, as you say, feeling terrible, you get the right drug the first time.

SPEAKER_04 14:10

Right. Right. And, you know, the the other part of it is it's a one-time test unless you have a a bone marrow transplant because you're your genes won't change. And so that test is there, it's in the system, and and as for me, you know, it's in my doctor's hands, and unless I change doctors, but uh no intention of that. So, you know, really from that perspective, it's it's there, and our our farms can can constantly check if I get prescribed something, they can catch it immediately and and eliminate the process.

David 14:43

So, and that's also part of the new wave of stuff that's coming from, you know, I would say smarter, more O'Court uh PBMs, if you will, where you said you've got three of your farm Ds who are who are certified on pharmacogenetic counseling. And that's that it's going to be huge. I suspect that there will be a time when this is a test that's routinely done when a baby is born. Um and then you just have that data, you know, as a routine cost. Why wouldn't you do this?

SPEAKER_04 15:08

Right. It it it could be. You know what? I have actually spoken with several stop loss carriers in terms of thinking about what the future looks like for them. The the hard part is, you know, sometimes it's a smaller expense. And and so it's it's harder for a stop loss carrier to really grasp it from what what would it do should I cover it in the long run? But I think employers should consider taking it, I you know, offering the test to all their team members.

David 15:38

Well, you know, well, most insurers have not paid for these tests until recently. And one of the big trials that's going on happens to be with my client, is one of the major carriers who is giving them 10,000 patients who are multipharmic and have multiple chronic conditions. And um they're gonna pay for it. And they think that this will save them enough money so that it's more than worth paying for the for the test. Again, from the member level, if you're using a um a test like this, it's a much better satisfaction. It's a much better deal than saying, well, let's try this drug, especially with the psychotropics, you know, or the set, you know, those those drugs that are based for mental illness. Let's try this and see how you do. And then you spend 90 days being miserable and you go back to your therapist and you go, Nope, that didn't work. Exactly. Exactly. So we've wasted time, we've wasted money, we've hassled the patient. As we wrap up, let's go back to the Go ahead.

SPEAKER_04 16:29

I'm sorry. Oh, oh, I'm I'm sorry. Well, you you have the other cause. I've I've got a personal friend who almost lost their spouse due to mis misprescribing a drug. And, you know, I was I felt lousy to the contrary. They had to be hospitalized. And uh so so that's the other part of it is you uh you are actually eliminating a claim in in at certain instances.

David 16:54

Yeah, and and I think I think other instances where it's not quite as you know binary a thing, but you're you're also saving money because somebody's not getting sicker while they think they're being treated for their disease, which is pretty horrible, I would say. Yeah. Um again, as as we wrap up, we've got a couple of minutes left. When when you're dealing with a fully transparent uh PBM, is there a difference at the member level? Does the member actually see a difference?

SPEAKER_04 17:24

I think they they do. Um and and I would say that more from the perspective of a a member service level. I I and it's not picking on the the big PBMs, but most of your transparent PBMs are small in nature. They're focused on the member service because that's a key differentiation. And um, so we're not outsourcing our member services. We're we're doing most everything in-house, if not everything. And so the members feel a different point of service. And let's face it, when they call us, they're not calling us to check on a medical claim. They're calling us because they've typically been prescribed something that's big. Um, they've got a bad situation, a cancer claim, a heart claim that, and and so there they need to understand that. So I I do believe that that, especially in the area of the the transparent PBMs, you get a much more boutique level of service, which is extremely important.

David 18:25

Well, yeah, especially for some of the younger folks who are coming into the marketplace because they're used to completely frictionless transactions. And right, if there's a hassle, they they won't go near it. They'll just avoid it, and then we lose the reason for doing it in the first place. What a fascinating conversation. Dave Parker, Vice President of Sales and Marketing at TrueScripts. Dave, thanks for bringing us up to date on what's happening with with new style PBMs, and we hope you'll come back. Oh, absolutely. I appreciate it very much.

SPEAKER_04 18:51

Good chatting with you today.

SPEAKER_01 18:57

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