This episode is not about the when, why, or how of GLP-1s for weight loss or best-practice prescribing; and we do not wade into anything about lifestyle changes or who is adherent or clinical considerations and needed support. There are a plethora of shows on these topics, and this is not one of them. This episode very, very specifically is about the how and why of the pickle plan sponsors get themselves into often enough where if they impose formulary restrictions to limit the volume of meds that they are paying for, then unit prices go up, which is a thing for GLP-1s. For a full transcript of this episode, click here. If you enjoy this podcast, be sure to subscribe to the free weekly newsletter to be a member of the Relentless Tribe. And this is critical just given how the costs associated with GLP-1s for weight loss contribute to some pretty significant increases in pharmacy trend for plan sponsors who choose to cover the GLP-1s for weight loss. Okay, so back to the conundrum topic of this podcast. Let us dig into the “What is going on here?” portion of this episode. Keep in mind, total plan sponsor pharmacy trend or the total cost of drugs is going to be this equation: drug volume times the unit price of each drug. Thus, the pickle if you’re trying to lower total cost because, as I just mentioned as is often the case for plan sponsors, you can have an either-or scenario on your hands. You can either lower volume and pay a higher unit price or vice versa, but not both. So, yeah … it’s not easy to lower pharmacy trend when you’re faced with this either-or scenario. So, we talk about this relative to GLP-1s today, and we also talk about how those new direct-to-consumer Web sites that some of the manufacturers like Lilly and Pfizer are standing up, the why these can matter to plan sponsors in interesting ways, which really I had not thought about before this conversation with Chris Crawford. Bottom line, there are some really impactful and not frequently delved into perverse incentives at play here. And we’re gonna talk about these today. And these are really key for anybody on or about the pharmacy supply chain in the U.S. to know about. This is very actionable insight. So, again, there’s an unfortunate tradeoff, as it stands right now, for many plan sponsors. Lower your volume and raise the unit price or vice versa. Here’s the short version of the tangled web of the story for how this tradeoff comes to be. Once upon a time, a plan sponsor does an RFP (request for proposal) for PBMs (pharmacy benefit managers) to manage their branded drugs. And I keep saying branded drugs because there’s a whole different story here, which is similar but not the same for generics and also so-called specialty generics that I’m not gonna talk about with Chris Crawford today but I will talk with him about it next month. So, stay tuned. But in this case, there’s an RFP sent out, and part of that RFP is evaluating PBMs on their “rebate yields.” So, we, the plan sponsor, are going to evaluate PBMs and pick our RFP winner, not based on their lowest unit net prices but on how big the kitty of rebates they can drag in is. Pausing to reflect on that last part of our hypothetical play-by-play. We, this hypothetical plan sponsor and/or our broker consultant, are evaluating PBMs based on the size of their rebates; and we’re gonna pick the PBM with the biggest rebates, thus the biggest rebate yield. A few issues here. What does this incent? I’ll take higher list prices as my first guess because obviously the higher the list, the bigger the rebate yield can be. But what it also incents is a little less, I’m gonna say, brutally obvious. Say I’m a PBM or whatever, a GPO (group purchasing organization). Say I go to a pharma manufacturer, and I demand a ginormous rebate. What is Pharma going to ask for in return in their negotiation with me, the PBM? Oh, right … Pharma is going to say, “Well, sure, I’ll give you that bigger rebate but only if you can guarantee me volume. Only if you do not restrict access to my pharmaceutical product. If you restrict access and limit the ability of any member to get access to my drug and, therefore, lower my drug sales volume that’s possible within this contract, then all bets are off and no rebates for you.” Okay, so the PBM is incented to maximize rebate yield. So, the PBM is gonna angle to get the biggest rebates possible. And in this scenario, if the rebates go up, net unit prices will, in fact, go down for the plan sponsor. However, the PBM’s leverage to get those bigger rebates is to pull back restrictions. So, the lower the unit cost, the higher the volume of patients are now going to be eligible to get that drug without restrictions because there can be no restrictions beyond maybe the usage restrictions indicated in the pharma package insert/label. And now, here we are at the finale of our play-by-play, where plan sponsors are asked to choose the side of the balloon that they are going to squeeze. And they can only pick one side: Lower unit prices and volume goes up, or lower volume and unit prices go up. For more on this whole dynamic and how it can go horribly wrong, read the article in the New York Times (you are welcome) about how PBMs took secret payments for the free flow of opioids. My guest, Chris Crawford, excitingly enough, gives us a sort of “have your cake and eat it, too” option in the conversation that follows. And this third way is now available because of the growing cash marketplace that is emerging and getting bigger and bigger. It’s growing, this cash marketplace, because the more times a patient wanders into a pharmacy with a discount card or shops on Mark Cuban or Amazon or goes to a direct-to-consumer Web site and discovers that they can get a drug or an MRI or other medical service, nothing for nothing, but if they discover that they can get whatever it is they’re looking for for less than they would pay if they used their insurance … yeah. Every time that happens, the cash marketplace grows; and this is happening a lot. Middlemen are taking such a chunk of overall healthcare spend that cutting them out has become a very fruitful endeavor. Okay, so the solution Chris Crawford offers up today is for plan sponsors to leverage this cash marketplace. Members get a discount card with money put on it (potentially) by the plan sponsor. This lets employers get the frequently lower cash price, and employees get dollars on their card to that end (potentially). So, a plan sponsor can restrict access to GLP-1s through their PBM for weight loss but then choose to give some members who qualify based on whatever criteria the plan sponsor wants to set. They can give members money toward the purchase of the GLP-1s, and then they, the member, can go buy them at a direct-to-consumer Web site. This whole thing, by the way, has nothing to do with the PBM contract. It’s not considered, I guess, a carve-out. It’s nothing that any PBM has to approve. What’s crazy to me is that the cash price for GLP-1s, the branded ones, can be better than the PBM-negotiated net prices. That’s just nuts to hear, given all the talk about needing the muscle of a big PBM to negotiate those rebate yields but, I don’t know, maybe not as surprising as it should be. This episode is sponsored by RxSaveCard, and a big thanks for that. I really appreciate RxSaveCard for its financial support because this episode covers a really important topic that we probably would have covered anyway over here at Relentless Health Value. And so, RxSaveCard standing up and offering their financial support to cover it was a really nice thing to do. And I thank them for their generosity. Also mentioned in this episode are RxSaveCard; Mark Cuban Cost Plus Drug Company; Brian Reid; Ge Bai, PhD, CPA; and Luke Slindee, PharmD. You can learn more at RxSaveCard.com and on LinkedIn and by following Chris on LinkedIn. Chris Crawford is CEO and founder of RxSaveCard, with a mission to make prescriptions more affordable for employers and their employees. He recognized the complexities and frustrations often associated with changing pharmacy benefit managers (PBMs) and sought a better way. He also recognized that in many cases, prescriptions cost more when someone uses their insurance than what is available through “cash” and discount card options. RxSaveCard is the solution: a simple way to unlock lower cash and discount card prices without requiring a PBM switch, all while ensuring compliance with ERISA fiduciary standards. Chris has over 25 years of experience in employee benefits, including 9 years at Mercer, where he served in national leadership roles. He also founded a benefits consulting firm in 2009, CMC Advisory Group, that was sold to Cottingham & Butler in 2015. More recently, he has narrowed his focus to pharmacy benefits and the PBM industry. Prior to founding RxSaveCard, he served as chief growth officer for VIVIO, a specialty drug management solution. Prior to VIVIO, Chris served as chief growth officer for HealthStrategy, LLC, a leading pharmacy benefits consulting firm that manages over $150 billion in drug spend for many of the largest employers and health plans in the United States. 07:57 What are the two pieces going on with GLP-1 PBM prices and rebates for employers? 10:00 Is the cash price for these name brand drugs currently less than the rebated PBM price? 11:49 Why does the rebate for GLP-1s disappear if employers try to put restrictions on who can receive access to these drugs? 15:07 Where does RxSaveCard come in to play here? 19:55 “We exist to save people money.” 20:45 EP456 with Brian Reid. 21:16 EP356 with Ge Bai, PhD, CPA. 21:37 EP439 with Luke Slindee, PharmD. You can learn more at RxSaveCard.com and on LinkedIn and by following Chris on LinkedIn. Chris Crawford of #rxsavecard discusses #GLP1 on our #healthcarepodcast. #healthcare #podcast #changemanagement #healthcareleadership #healthcaretransformation #healthcareinnovation Recent past interviews: Click a guest’s name for their latest RHV episode! Dr Rushika Fernandopulle, Bill Sarraille, Stacey Richter (INBW41), Andreas Mang (Encore! EP419), Dr Komal Bajaj, Cynthia Fisher, Stacey Richter (INBW40), Mark Cuban and Ferrin Williams (Encore! EP418), Rob Andrews (Encore! EP415), Brian Reid
This episode is not about the when, why, or how of GLP-1s for weight loss or best-practice prescribing; and we do not wade into anything about lifestyle changes or who is adherent or clinical considerations and needed support. There are a plethora of shows on these topics, and this is not one of them. This episode very, very specifically is about the how and why of the pickle plan sponsors get themselves into often enough where if they impose formulary restrictions to limit the volume of meds that they are paying for, then unit prices go up, which is a thing for GLP-1s.
For a full transcript of this episode, click here.
If you enjoy this podcast, be sure to subscribe to the free weekly newsletter to be a member of the Relentless Tribe.
And this is critical just given how the costs associated with GLP-1s for weight loss contribute to some pretty significant increases in pharmacy trend for plan sponsors who choose to cover the GLP-1s for weight loss.
Okay, so back to the conundrum topic of this podcast. Let us dig into the “What is going on here?” portion of this episode.
Keep in mind, total plan sponsor pharmacy trend or the total cost of drugs is going to be this equation: drug volume times the unit price of each drug. Thus, the pickle if you’re trying to lower total cost because, as I just mentioned as is often the case for plan sponsors, you can have an either-or scenario on your hands.
You can either lower volume and pay a higher unit price or vice versa, but not both. So, yeah … it’s not easy to lower pharmacy trend when you’re faced with this either-or scenario.
So, we talk about this relative to GLP-1s today, and we also talk about how those new direct-to-consumer Web sites that some of the manufacturers like Lilly and Pfizer are standing up, the why these can matter to plan sponsors in interesting ways, which really I had not thought about before this conversation with Chris Crawford.
Bottom line, there are some really impactful and not frequently delved into perverse incentives at play here. And we’re gonna talk about these today. And these are really key for anybody on or about the pharmacy supply chain in the U.S. to know about. This is very actionable insight.
So, again, there’s an unfortunate tradeoff, as it stands right now, for many plan sponsors. Lower your volume and raise the unit price or vice versa.
Here’s the short version of the tangled web of the story for how this tradeoff comes to be.
Once upon a time, a plan sponsor does an RFP (request for proposal) for PBMs (pharmacy benefit managers) to manage their branded drugs. And I keep saying branded drugs because there’s a whole different story here, which is similar but not the same for generics and also so-called specialty generics that I’m not gonna talk about with Chris Crawford today but I will talk with him about it next month. So, stay tuned.
But in this case, there’s an RFP sent out, and part of that RFP is evaluating PBMs on their “rebate yields.” So, we, the plan sponsor, are going to evaluate PBMs and pick our RFP winner, not based on their lowest unit net prices but on how big the kitty of rebates they can drag in is.
Pausing to reflect on that last part of our hypothetical play-by-play. We, this hypothetical plan sponsor and/or our broker consultant, are evaluating PBMs based on the size of their rebates; and we’re gonna pick the PBM with the biggest rebates, thus the biggest rebate yield.
A few issues here. What does this incent? I’ll take higher list prices as my first guess because obviously the higher the list, the bigger the rebate yield can be. But what it also incents is a little less, I’m gonna say, brutally obvious.
Say I’m a PBM or whatever, a GPO (group purchasing organization). Say I go to a pharma manufacturer, and I demand a ginormous rebate. What is Pharma going to ask for in return in their negotiation with me, the PBM?
Oh, right … Pharma is going to say, “Well, sure, I’ll give you that bigger rebate but only if you can guarantee me volume. Only if you do not restrict access to my pharmaceutical product. If you restrict access and limit the ability of any member to get access to my drug and, therefore, lower my drug sales volume that’s possible within this contract, then all bets are off and no rebates for you.”
Okay, so the PBM is incented to maximize rebate yield. So, the PBM is gonna angle to get the biggest rebates possible. And in this scenario, if the rebates go up, net unit prices will, in fact, go down for the plan sponsor.
However, the PBM’s leverage to get those bigger rebates is to pull back restrictions. So, the lower the unit cost, the higher the volume of patients are now going to be eligible to get that drug without restrictions because there can be no restrictions beyond maybe the usage restrictions indicated in the pharma package insert/label.
And now, here we are at the finale of our play-by-play, where plan sponsors are asked to choose the side of the balloon that they are going to squeeze. And they can only pick one side: Lower unit prices and volume goes up, or lower volume and unit prices go up.
For more on this whole dynamic and how it can go horribly wrong, read the article in the New York Times (you are welcome) about how PBMs took secret payments for the free flow of opioids.
My guest, Chris Crawford, excitingly enough, gives us a sort of “have your cake and eat it, too” option in the conversation that follows. And this third way is now available because of the growing cash marketplace that is emerging and getting bigger and bigger.
It’s growing, this cash marketplace, because the more times a patient wanders into a pharmacy with a discount card or shops on Mark Cuban or Amazon or goes to a direct-to-consumer Web site and discovers that they can get a drug or an MRI or other medical service, nothing for nothing, but if they discover that they can get whatever it is they’re looking for for less than they would pay if they used their insurance … yeah.
Every time that happens, the cash marketplace grows; and this is happening a lot. Middlemen are taking such a chunk of overall healthcare spend that cutting them out has become a very fruitful endeavor.
Okay, so the solution Chris Crawford offers up today is for plan sponsors to leverage this cash marketplace. Members get a discount card with money put on it (potentially) by the plan sponsor. This lets employers get the frequently lower cash price, and employees get dollars on their card to that end (potentially).
So, a plan sponsor can restrict access to GLP-1s through their PBM for weight loss but then choose to give some members who qualify based on whatever criteria the plan sponsor wants to set. They can give members money toward the purchase of the GLP-1s, and then they, the member, can go buy them at a direct-to-consumer Web site.
This whole thing, by the way, has nothing to do with the PBM contract. It’s not considered, I guess, a carve-out. It’s nothing that any PBM has to approve.
What’s crazy to me is that the cash price for GLP-1s, the branded ones, can be better than the PBM-negotiated net prices. That’s just nuts to hear, given all the talk about needing the muscle of a big PBM to negotiate those rebate yields but, I don’t know, maybe not as surprising as it should be.
This episode is sponsored by RxSaveCard, and a big thanks for that. I really appreciate RxSaveCard for its financial support because this episode covers a really important topic that we probably would have covered anyway over here at Relentless Health Value.
And so, RxSaveCard standing up and offering their financial support to cover it was a really nice thing to do. And I thank them for their generosity.
Also mentioned in this episode are RxSaveCard; Mark Cuban Cost Plus Drug Company; Brian Reid; Ge Bai, PhD, CPA; and Luke Slindee, PharmD.
You can learn more at RxSaveCard.com and on LinkedIn and by following Chris on LinkedIn.
Chris Crawford is CEO and founder of RxSaveCard, with a mission to make prescriptions more affordable for employers and their employees. He recognized the complexities and frustrations often associated with changing pharmacy benefit managers (PBMs) and sought a better way. He also recognized that in many cases, prescriptions cost more when someone uses their insurance than what is available through “cash” and discount card options. RxSaveCard is the solution: a simple way to unlock lower cash and discount card prices without requiring a PBM switch, all while ensuring compliance with ERISA fiduciary standards.
Chris has over 25 years of experience in employee benefits, including 9 years at Mercer, where he served in national leadership roles. He also founded a benefits consulting firm in 2009, CMC Advisory Group, that was sold to Cottingham & Butler in 2015. More recently, he has narrowed his focus to pharmacy benefits and the PBM industry. Prior to founding RxSaveCard, he served as chief growth officer for VIVIO, a specialty drug management solution. Prior to VIVIO, Chris served as chief growth officer for HealthStrategy, LLC, a leading pharmacy benefits consulting firm that manages over $150 billion in drug spend for many of the largest employers and health plans in the United States.
07:57 What are the two pieces going on with GLP-1 PBM prices and rebates for employers?
10:00 Is the cash price for these name brand drugs currently less than the rebated PBM price?
11:49 Why does the rebate for GLP-1s disappear if employers try to put restrictions on who can receive access to these drugs?
15:07 Where does RxSaveCard come in to play here?
19:55 “We exist to save people money.”
20:45 EP456 with Brian Reid.
21:16 EP356 with Ge Bai, PhD, CPA.
21:37 EP439 with Luke Slindee, PharmD.
You can learn more at RxSaveCard.com and on LinkedIn and by following Chris on LinkedIn.
Chris Crawford of #rxsavecard discusses #GLP1 on our #healthcarepodcast. #healthcare #podcast #changemanagement #healthcareleadership #healthcaretransformation #healthcareinnovation
Recent past interviews:
Click a guest’s name for their latest RHV episode!
Dr Rushika Fernandopulle, Bill Sarraille, Stacey Richter (INBW41), Andreas Mang (Encore! EP419), Dr Komal Bajaj, Cynthia Fisher, Stacey Richter (INBW40), Mark Cuban and Ferrin Williams (Encore! EP418), Rob Andrews (Encore! EP415), Brian Reid