Frank Thomas interviews Dr. Geri Bemberg. Geri specializes in prescription drug formulary and pharmacy benefit management solutions. Geri explains what a pharmacy benefit manager does. She covers the types of contracts PBMs make with plans, pharmacy groups and drug makers, and the differences between traditional and pass-through plans. Geri explains the benefits of having Stephens Insurance get involved between the plan and the PBM, and also offer formulary management and pharmacy benefit auditing. Finally, Geri leaves advice for plan managers to know how they can get the most transparent pharmacy benefit contracts to save money for their plans and their members.
[:24] Frank Thomas introduces Dr. Geri Bemberg.
[1:31] Over the years, the definition of a pharmacy benefit manager has changed quite a bit. Historically, pharmacy benefit managers have been evaluated on their ability to lower ‘total spend’ on prescription medicines for employers in health plans.
[1:49] Pharmacy benefit managers (PBMs) do this primarily by using their collective buying power to obtain discounts from pharmacies and rebates from drugmakers.
[2:01] At first, PBMs came onto the market as a way to electronically process prescriptions. Previously, the pharmacy had to send off paper prescriptions and it could take weeks or longer to find out how much they were going to be paid for them.
[2:21] When PBMs emerged, pharmacies could submit claims electronically. It also helped broaden pharmacy networks so patients traveling could go to different pharmacies where they were. Also, workers’ compensation plans could use multiple pharmacies.
[2:38] As pharmacy has changed and drugs have become more expensive, PBMs have started to take a more active role in plan management. You’ll start seeing them have clinical input. They’ll put prior authorization or step therapy on some medications.
[2:56] PBMs may also say we’re going to exclude a drug because they may have a rebate with another drug manufacturer for something similar.
[3:04] In the rebate area, PBMs may go to more narrow network pharmacy plans. A plan may completely eliminate a chain or group of pharmacies to try to get better rates at another group of pharmacies.
[3:27] The role of PBMs has changed over the years but essentially, they pay claims, they manage a pharmacy network, and now they’re in that plan management space. This is where Stephens believes they could use some help.
[3:42] PBMs would say they serve plans, consumers, and the market overall. Others might say PBMs serve themselves.
[4:04] Theoretically, PBMs should provide patients with greater access to the medicines at better cost. What is their process of negotiating rates with the wholesaler? Geri explains that the world of PBMs is opaque, at best. There’s not just one contract that’s held with a pharmacy supplier.
[4:26] PBMs first contract with the plan. If somebody is self-funded, or if they’re fully insured, they have a contract with a PBM to manage their pharmacy plan. Then, PBMs have contracts with pharmacies, in terms of a pharmacy network, negotiating a discount and providing a group of members.
[4:54] PBMs will also have contracts with manufacturers. Through these contracts, they negotiate a discount on the drug in exchange for a preferred place in the formulary. PBMs also have contracts from pharmacies to pharmaceutical wholesalers. The issue here becomes there’s not any clarity on what any of those contracts look like.
[5:45] The PBM is the holder of the ‘black box,’ if you will, on contracting and nobody’s really certain how the money is flowing.
[5:55] Stephens Insurance inserts themselves in between the PBM and the plan. They make sure that they guide the plan not only toward the best PBM for them but also the best contract for them.
[6:21] When Stephens Insurance is involved in monitoring the health plans, it benefits plan sponsors in four ways. First, plans get savings by knowing what you are paying for and second, by having that transparency put into your plan.
[6:55] Stephens talks plan sponsors through what the plan options are and how moving in a different avenue can save them money. Third, Stephens helps hold PBMs accountable to their plan contracts.
[7:14] Finally, Stephens helps provide guidance to the plan. After guiding the sponsors to a plan contract, Stephens is on hand to help find coverage solutions for issues that may come up throughout the year.
[7:43] According to the Pharmaceutical Care Management Association, over the next 10 years, PBMs are projected to save employers as much as $654 billion.
[7:54] PBMs can also push prices up. Geri explains it has to do with contracts. There are two main types of PBM contracts.
[8:28] The two types are traditional and pass-through. In a traditional contract, a PBM manages the pharmacy benefit for the plan. In return, they take some off the top of every claim they process for the plan. There is no way to know how much they take. In the contract, there is no limit to the spread.
[9:54] In a pass-through contract, there is no spread. In that contract, the PBM charges an administration fee that could be per claim, per month or per member, per month or per employee, per month.
[10:06] That charge is what the PBM makes on your plan. A big part of pass-through contracts is making sure that the rebate portion is also passed through to the plan.
[10:55] The PBM can drive up costs to the pian and to the member in a traditional contract. Geri explains how the plan pays more money to the pharmacy than they would in a pass-through contract.
[11:51] What ends up happening, is that as plans spend more money in pharmacy, they have to make up the difference somewhere, especially in self-funded plans.
[12:00] The plans make up the difference through increased premiums or reduced coverage. That’s where you start seeing the increase in costs.
[12:10] You also have the back-and-forth argument between PBMs and drug manufacturers that rebates are a big cost driver right now.
[12:33] So the rebate portion is something that’s very opaque in the industry. As we drive toward more transparency, hopefully, you will see that become more clear or go away completely.
[12:44] The only way to keep PBMs accountable is through transparency. Stephens gets better contracts for plans, so they know what’s going on in the pharmacy world, and Stephens also offers the auditing of how the PBM performs against their contract.
[13:24] Rising drug prices have been in the news for several years. They have been creeping up under the radar for many years. Several drugs are going through accelerated FDA approval.
[14:34] Accelerated approval happens when a disease doesn’t have many treatment options so the clinical trial segments are shortened to get the drug on the market sooner.
[14:47] Sometimes surrogate endpoints (e.g. a lower amount of uric acid in the blood) are used instead of clinical endpoints (e.g. a smaller number of gout flares) to accelerate drug approval. However, surrogate endpoints do not always translate to clinical endpoints.
[15:41] Geri tells how drug companies price their drugs as ‘cures’ after meeting surrogate endpoints, and they charge what the market can bear for a cure, when the drug may not really be a clinically effective treatment option.
[16:27] When you start looking at pricing on drugs, the market can’t bear what drug companies are charging. Geri gives the example of a drug that lowers the Hepatitis C virus in the lab 12 weeks out from treatment and is sold as a cure when the clinical results are not yet proven.This happens time and time again.
[17:10] In the case of Hep C, clinical results are starting to come in, and they look promising, but they are not complete.
[17:20] When you have high prices on medications, plans have to be more aware of how often they can provide that medication because there is a limited amount of funds. At the end of the day, you have to make sure those funds are dispersed the best way that you can disperse them.
[17:39] This puts both plans and consumers in a frustrating spot. Plans are frustrated because they have to say no. Plans have to turn on prior authorization or step therapies to limit access for drugs that are expensive and unproven.
[18:28] It’s extremely frustrating for the consumer who sees a commercial for a drug that sounds ideal and the plan administrator needs to say, not yet, or maybe you don’t need it at all. It puts everyone in a bad place.
[18:52] Stephens Insurance offers formulary management to plan sponsors to take a step further in a proactive approach. Formulary management uses clinical data to assess if a new drug is better than what is currently available in the market, or if it was based on surrogate endpoints and we need to wait and see how it translates clinically.
[19:42] Formulary management is able to help the plan control costs a little bit better. When a plan is able to know they are spending their money on the best drugs possible, then they are able to get better outcomes both on the pharmacy side and the medical side.
[19:57] Geri uses the example of diabetic drugs. They may lower your A1C but are they shown to clinically reduce the risk of any of the cardiovascular events or other clinical endpoints that diabetics deal with on a day-to-day basis?
[20:26] If the plan stays with drugs that are known to provide cardiovascular benefits as well as lowering blood sugar, that is the best way to spend the money that is available.
[29:41] Formulary management is not yet an industry standard. Geri notes that FDA head Scott Gottlieb says the FDA is not going to be the regulator of what plans should it should not cover. Plans are going to need somebody to help them make that choice.
[21:00] Plans don’t have the resources to hire pharmacists and educate themselves to figure out what they need to be covering for their members. They should work with a formulary manager.
[21:11] Stephens Insurance comes in with an unbiased third-party approach to formulary management.
[21:17] Stephens is not related to a PBM nor do they receive payment from PBMs. More plans will move in the direction of having a formulary manager as more drugs come out.
[21:33] The drugs coming out now are not $100 blood pressure medications. The new drugs are five-digit cancer treatments and five-digit per year cholesterol treatments.
[21:59] Geri hopes to see PBMs returning to the roles for which they were developed, network management and claims processing. Geri sees the rebate management and plan management aspects of PBMs as being too opaque.
[23:14] Increased consolidation between healthcare retail chains and insurers as well as between health insurers and PBMs is concerning for Geri. Consolidation traditionally leads to increased pricing.
[23:43] Only time will tell where consolidation is leading in the world of pharmacy benefits.
[23:53] Amazon purchased a company called PillPack recently. PillPack mails you your prescriptions. Amazon is known for their shipping service and quickness. It looks like they are getting into the pharmacy benefit world. Geri is interested to see where they will go over the next few years, possibly including PBM service.
[25:02] Geri considers how she might be able to help drive the industry in her position at Stephens Insurance. In this time of high prices, she sees opportunities for change in the pharmacy benefit world. Stephens Insurance can take this disruption and use it as teaching points for their plans and the plan members.
[26:28] Geri’s advice for plan sponsors: First, know your contracts. What are you paying for and who are you paying? Are you paying just for drugs, or for profit on the side? Ask how innovative is your plan design. Are you taking advantage of different PBM programs? Are you helping your members save money?
[27:15] Finally, Geri says, take a look at your formulary. What are you paying for in your drug benefit design? Are you paying for expensive, marginally effective treatments or for treatments with proven important clinical benefits?
[27:41] Geri says, we like to say we want to cover drugs that make your life better and longer. And so that’s really looking into your formulary and saying, are we doing those two things?
[27:53] Frank thanks Geri for this fascinating discussion and information.
[28:00] For more information on this topic, please contact Stephens Insurance at 1-800-643-9691. To listen to more Stephens Viewpoints, check out our website. Insurance products offered through Stephens Insurance, LLC, National Producer Number 8844362. Securities offered by Stephens, Inc., Member NYSE, SIPC.