David: 0:02

Hi friends, David Saltzman here. As we slide into the end of the year, we're serving up a few encore episodes. These are conversations our listeners love the most, or at least didn't complain about, so they earned a replay. It's a great chance to revisit some big ideas, get a spark of inspiration, or finally catch that episode you meant to listen to before the fourth quarter turned into a holiday-themed obstacle course. We'll be back on January 6th with brand new interviews and insights. Until then, I hope you get a little time to rest, recharge, and please hang out with people who don't ask you for benefits advice over dessert. Thanks so much for being a part of the Shift Shapers community, and here's to a healthy, happy start to the new year. Most everyone agrees that the traditional PBM arrangements are bloated, unsustainable, and frankly don't always work in the best interest of plans and their members. One PVM is trying to fix that. What are they doing? We'll find out on this episode of Shift Shapers.

Announcer: 1:02

Change either energizes or paralyzes. The choice is yours. This is the Shift Shapers Podcast, bringing the employee benefits industry interviews with individuals and companies who are shaping the industry's shifts. And now, here's your host, David Saltzman.

David: 1:23

And to help us answer that question, we have invited Susan Thomas, Chief Commercial Officer at Lucy RX. Welcome, Susan. Well, thank you. Thank you for having me. It's our pleasure. So we always like to ask people how you got to be doing what you're doing because there aren't a lot of straight lines in our industry. How did you end up doing what you're doing?

Susan: 1:43

Well, not through a straight line, that's for sure. I'm actually a registered nurse by background and got into healthcare really because I wanted to help people get better. Um, early in my career, I worked in oncology and specialty pharmacy, and then just kind of gradually morphed into the PBM industry about two decades ago. Uh I realized healthcare is more than just the care of people. It's a business. And um, so I really wanted to understand how the business works and have spent my last two decades trying to understand that and make it better.

David: 2:18

I have a bunch of nurses in the family. How did how did your nursing experience inform what you do today?

Susan: 2:23

Or did it and it still does? Um, you know, I consider myself a clinician. I'm still a licensed registered nurse. Uh, it certainly helps me from the perspective of who we're caring for, and that's the patients that need prescriptions at the end of the day. Uh certainly we serve payers as well. Um, but my knowledge of disease states and conditions and medications certainly serves me well in the PBM space.

David: 2:51

Well, and you know, unfortunately, once again, the PBMs like every time we talk to somebody from a PBM, there seems there's something in the news. This week it was congressional hearings. The FTC found that back on January 14th, that PBMC collected five, almost six billion dollars in specialty drug markups. What's that all about?

Susan: 3:14

Uh, you know, it's really why Lucy was formed is that um misaligned incentives. In the traditional PBM space, uh, we've seen over the last several decades this vertical integration where PBMs have aligned themselves with large insurance companies. They own their own mail and specialty, they manage and control the formularies, they have rebate GPOs that are largely offshore, making it difficult for plan sponsors to understand kind of what's going on under the hood. Um and when PBM's revenues come from those owned assets, the incentives are going to be to drive up volume, drive up cost for plan sponsors. That's that's how they make their money.

David: 3:58

But it but it's interesting that there's so much money floating around in this industry. I mean, the the FTC hearings talked a little bit about this $5.9 billion, but they were almost talking about it like it was a day-to-day expense. I mean, I don't know for you or for me, I guess $5.9 billion is serious money. But it is it is is is the are the problems in the industry a function of how much money there is floating around in, or is that vice versa?

Susan: 4:26

I think I think it is a um a measure of how much money is in the space. I mean, uh we're expected to spend $500 billion in pharmacy this year. It'll be a trillion dollars by 2030. So there's a significant amount of money in the pharmacy benefits space.

David: 4:44

For sure. Loaded question, but and we probably talked about this for an hour. How the hell did we get here?

Susan: 4:52

We probably could talk about it for an hour or a day. Um You know, I I I wonder about that myself because back in the 90s, uh, the government created laws that prevented physicians from self-dealing, from referring, you know, clients or patients to owned entities, um, physical therapy uh entities that fa physicians owned or uh pharmacies, et cetera. So there's a law preventing that self-dealing. How did we not create similar laws for insurance companies or PBMs that sell now sell drugs to members, not just manage benefits? I think that's part of it. The the lack of regulation in the industry has allowed the traditional PBMs to just control the whole ecosystem.

David: 5:41

Well, I mean, but I think you're right. I've been at this since 81, back when dinosaurs roamed the earth. And pharmacy was a problem back then. So we all kind of know some of the problems, and we know that the money is driving some of the problems. To your point, there haven't been a lot of regulations. Is do you attribute that just to big pharma having a big checkbook? Because I think in other industries there would have been a hue and cry already, and something would have been done.

Susan: 6:10

Yeah, I think it's big pharma. I think it's lobbyists for the PBM industry, retail drugstores. Um, I think there's a lot of muscle in this industry that has prevented change, frankly.

David: 6:23

What if if you had to put your finger on one or two huge problems that you're working on in Lucy Rx that you folks are working on solving, what would they be?

Susan: 6:34

Really, it's um conflict of interest. So when we formed Lucy, we asked ourselves, what if there were no conflicts? What if the our incentives were aligned around the plan sponsors and the patients and members that they serve? And if we eliminated conflicts, where would those be? Where are the most prevalent conflicts that exist in the space today that are causing rising drug costs, preventing plan sponsors from really managing their own benefits? So it's really eliminating conflicts. And we we've selected two key areas where we believe the conflicts are so rampant. Um, and that's formulary management and then retail or sorry, mail and specialty ownership, really the network. Um, so around formulary management, we believe that because the traditional PBMs have their own GPOs, group purchasing organizations that are offshore, hard to audit, hard to get access to. We think that the way they create their formularies incentivizes higher cost brand drugs so that they can retain a piece of the rebate. We've eliminated an exclusive arrangement with anyone of any one GPO. And when you think about this industry, you either are the big three or you use the big three for um their scale and their supply chain economics. We've decided we're not gonna have an exclusive arrangement with a GPO. We've created a marketplace, a formulary marketplace that gives us much broader access to what's going on in the whole ecosystem. And now we're not handcuffed to one GPO's decision making around formulary uh drugs and preferred brand drugs. It also gives us flexibility to create utilization management criteria that really makes more sense for plan sponsors and their members. I've heard so many times in the last 12 months, you can't put that in place for GLP ones, you'll lose all the rebates. But we know that's a category that requires really close monitoring and intense utilization management criteria. And if a PBM is going to handcuff or uh tie a planned sponsor who's paying for these drugs to, you know, basically open up the floodgates to paying for drugs, it just doesn't make any sense. So our formulary marketplace gives us much broader decision making and um eliminates the conflict that exists.

David: 9:13

Before we get onto that work, a little bit about, on a practical sense, if I'm an advisor and I'm building a plan for employer, how does how does being able to play around with the formulary help both the employer and deliver better outcomes for the members?

Susan: 9:28

We've obviously connected the dots there. What it allows us to do is align the specific plan sponsors' utilization to the right value stream, so where they can achieve the greatest rebate value across the ecosystem. In other words, they're they're not locked into one GPO for their rebates and one set of decisions. Um if a plan sponsor says, you know, we really think that Humira is costing our plan millions of dollars and would like to consider a biosimilar approach where it's a less expensive net cost to our members and to our plan, one PBM GPO might say, you can't do that, or well, here's your option, and it's only there's only one. With our marketplace approach, we have multiple options and we can shop those across the different GPOs to give plans more options. And then we also can provide them with drug-level rebate value so they can make you know really um real-time decisions on is that a better net cost position for me as a plant sponsor.

David: 10:40

There's a lot of talk, especially since the J and J lawsuit last year, um, about fiduciary responsibility and especially for around pharma. Does that kind of an approach, the approach that you're taking, help advisors and plans meet those requirements of saying, look, we did our due diligence. We really looked through a bunch of different options instead of just saying we swallowed whatever we were taking and and we moved on.

Susan: 11:06

Yeah, I think I think that's um really why we're seeing those those lawsuits. I think many employers have just resigned to the fact that they're stuck and they they don't have control. And that's unfortunate. Um, but uh the large PBMs have taken that control away in many cases and not allowed when a PBM says you can't do that, but you're the payer, it really does tie their hands, right? So um I think that's part of the challenge. Our our approach is to enable better decision making and actually provide net cost information. Traditional PBMs are inclined to say that data is proprietary or we can't share that value, or um, they give averages. And that doesn't really allow plans to make decisions in their best interest.

David: 12:02

And now a word from our sponsor. You're not just an advisor, you're a game changer. Forget Cookie Cutter off-the-shelf solutions. That's yesterday's news. It's 2025, and it's all about delivering bold, custom-crafted plans that truly make a difference. At the core is a razor-sharp self-insured framework, but the real magic? That's in the high impact point solutions you strategically layer in to slash costs and supercharge member outcomes. But let's be real, that's where the headaches start. Hours wasted sifting through endless options, wrestling with integration issues, and fighting data sharing roadblocks. It's a time suck and it's holding you back. Not anymore. Meet Benepower, the AI-powered game changer that builds killer plan. So if you're if you're a plan, you know, what do you need to ask for? What are the things that you should demand that you have in order to be able to manage your pharmacy benefits appropriately?

Susan: 13:05

You should ask for clarity around um the true net cost. The true net cost. So um the way pricing is structured in this industry today is we guarantee minimums. We guarantee um minimum rebates by channel and we guarantee network discounts. If a if a PBM uses that guarantee as a measure of a uh net cost equation, that doesn't work because all drugs have different rebate um values. So if you're looking at a class of drugs and and it's off the charts on your budget, your PBM should be able to provide you true rebate values so you know that that net cost is um compared to generics or biosimilars, is actually real, not just averages or not using your um rebate guarantee minimums as a as a denominator.

David: 14:06

You know, it it's always amazing to me that folks who spend billions and billions of dollars on plans don't demand those kinds of things. And uh it it pharmacy seems to be the last place where employers and plans don't feel as though they can be in the driver's seat. So it's nice to see new models coming along that offer both plans and their advisors who put these plans together for them different options. You you mentioned formulas being one of the two problems. Then you mentioned network. Would you talk a little bit about network and why that's important and what to look for there?

Susan: 14:37

Absolutely. I mentioned at the beginning the traditional PBMs have entered into or acquired their own mail and specialty pharmacies. And those are revenue streams for the for the entities. You can see um that in many of the, you know, earnings calls for the largest PBMs. Well, I mean, imagine you're a cancer patient and you leave your oncologist and he says, you know, you need to start taking this oral chemo agent, but my PBM is forcing me to use their own specialty pharmacy. Now I have to wait five days to get the medication. I'm a little bit anxious if that's the scenario. In our model, we have eliminated the ownership of specialty in that case, and we have contracted with large national integrated health systems. So our model is allow the member to pick up their oral chemo agent at the pharmacy in their cancer center. It's so much more effective. Um, the speed that therapy is the same day. It also eliminates the waste because uh in a traditional specialty pharmacy, they're shipping a 30-day supply, whether you your dose was changed or not, and there's you know five to seven thousand dollars of waste for an average uh cancer patient in the in the pharmacy space. So um just changing that model gives members a better experience, eliminates waste for plan sponsors, and um, you know, isn't isn't a hidden fee that plans don't understand. And on the mail side, so we've seen the big three push, push, push prescriptions to either their mail facility or the retail chain that they own. Um again, why should we lock a member into a channel that that they're not custable? We've we are contracting with um best in class mail facilities like Amazon, who doesn't have Amazon on their phone as an app? Amazon offers a modern, truly efficient member experience at a lower cost. Imagine med ship next day delivery at no additional cost. That doesn't happen in the traditional PBM space.

David: 16:56

Other than being kind enough to do interviews like this, what's Lucy Arts doing to help uh educated advisors and the plans they serve?

Susan: 17:06

Well, uh our roadshow has been pretty intense this year. You know, we've um we imagined this new way of doing pharmacy care about three years ago and um have have made the investments in um a couple of PBMs that give us the platform to run a new a new business. That was in 2024. Since then, we have been really spreading this message and sharing with consultants and brokers how formulary autonomy or a marketplace of formulary that requires the GPOs to compete against one another and an independent pharmacy network change the game. And we've been um putting together our case studies to share examples of how that works. Uh so we've been out in front of all the large national practices as well as local health and benefits brokers to help them understand that things really really can be different and just you know let us share how that could work.

David: 18:08

Well, and for their own protection, as we discussed, and for the betterment of their members, things have to change. It's I guess it's gonna be a bottom-up grassroots approach, which is what we're seeing. I still don't see anything for all of the as we started the conversation today, wailing and moaning and gnashing of teeth in Washington, not seeing anything happen up there except a whole bunch of conversation. Um, are you aware of anything that that stands a snowball's chance in hell of passing that's floating around Congress right now?

Susan: 18:36

There's certainly conversations going on. Um, you know, we saw um some an introductory bipartisan bill um before the inauguration, um, and that all the pharmacy components largely were removed from that. Uh we think that something will pass um this year, probably not all components that were in that bipartisan bill, but um it's it's too soon probably to know how um Congress is going to look at what's been submitted. Uh we're just what we know at Lucy is we're already aligned to that, to the vision of eliminating conflicts. We don't own mailer specialty. We're not affiliated with a giant insurance company. Uh, we don't own our own retail pharmacy and sell drugs to members. So uh whatever comes to light, we're already aligned and won't have to pivot or you know, divest of assets like would we think will happen in this space. And, you know, you already see companies like CVS starting to consider uh losing or divesting some of the assets in their organization. Don't know if it's related to some of the scrutiny in the space. Um, you've seen in a recent earnings call, the CEO of United Healthcare state that we um they already passed 98% of rebates to to their plan sponsors and expect to pass the other 2% within the next three years. Now, is that because of the scrutiny uh from Washington? Maybe. Um, my I you know, I question there, that 2% must be a pretty big number to take three more years to get it into the right hands.

David: 20:20

Well, yeah, somebody once told me that human beings never act with the light, they act with the heat that comes from it. So maybe there are some changes, you know, finally coming. But look, I think he said it best. The entire health insurance industry, writ large, has been the poster child for misaligned incentives. And it for a long time, it's been the entirety of the industry there. I don't think there was one component that I could point to with all my years of practicing that was exempt from that. So it's nice to see. I mean, if the pharmacy piece is going to be the piece that pulls away, it's certainly a big percentage of spend. So it's nice to see that there are some changes, you know, happening there. What do you see in the next couple of years? We heard a press conference um from uh I guess it was from the White House day one, where folks are talking about AI and the impact that AI may have on designing genetically perfect drugs for individuals. Um, we've had conversations on this podcast before about pharmacogenetic testing and what that might bring. What do you what do you folks see coming?

Susan: 21:21

Certainly that kind of technology advancement for sure. Um, yeah, you know, GLP1s is a really good example of a lot of lot of people um have conditions that are indicated for GLP1s. Now, plan sponsors largely can't afford them, but with precision and AI and machine learning and um genomic um advances, we'll know exactly who's going to benefit benefit from those types of drugs. And I think that'll make a huge difference if those kinds of things actually advance. Because, you know, as the skeptic in me says, you know, if those things advance, then you have a smaller target for a population of drugs. And does pharma really want that? And do the large PBMs and pay payers really want a smaller population when you can fine-tune who's gonna respond and who's not gonna respond. So um a little skeptic, but I think technology is definitely gonna play a role. I'm I mean, we use AI in our reporting and um um specialty navigator tool today to determine what the best solution for a given patient is in their journey for specialty drugs, for example.

David: 22:39

I think there's a lot of really interesting stuff coming down the pike, but we saved the most interesting question for last. Lucy Rx. Where did Lucy come from? Or is there a Lucy?

Susan: 22:51

Um I I like how you phrase the question because we've thought a lot about the name. Um, it actually derives from the Latin word for light. And our vision is Lucy Rx will shed a light on the opaque practices in this space and be much more transparent and provide clarity around options. See, transparency in this space has become kind of a uh everyday word and it does and basically meaningless. If you're passing through the value of drugs or rebates, okay, but are you making decisions in my best interest? That's true transparency. And um, that's our our purpose, really, is to shed a light on how decisions are made in the space and how to make make them more beneficial for employers and brokers to understand and for members to actually access medications. Um it's a it's a woman's name. It's a name. Um, and we think that brings the humanity back into this space. So it definitely a you know a very um intentional choice of our brand uh and and we like it.

David: 24:03

Awesome. And that's a great place to end our conversation. Susan Thomas, Chief Commercial Officer at Lucy Rx. Susan, thanks so much for sharing your expertise with the audience. We hope you'll come back.

Susan: 24:13

Thank you so much, David. It was great.

David: 24:20

I want to give a quick shout out to our sponsor and our producer, Hatcher Media. Hey, if you need podcast production or professional graphic design, Josh Hatcher's the expert to contact. For more information, visit him at hatchermedia.net. That's h-t-c-h-rmedia.net.

Announcer: 24:38

This Shipchapers podcast is copyrighted content and may not be reproduced in whole or in part without the express written permission of Ship Chaper Solutions LLC. Copyright 2024.