The Hidden Costs of PBMs: How Aggregate Discount Guarantees Inflate Drug Prices. In episode 465 of Relentlessly Seeking Value, host Stacey Richter interviews Chris Crawford, CEO of RxSaveCard, about the inflated costs within the pharmacy benefits industry.
The discussion centers around a lawsuit involving J&J, highlighting how large PBMs can significantly overcharge for drugs that are available much cheaper through cash-pay options like Mark Cuban's Cost Plus Drugs.
Crawford explains how Aggregate Discount Guarantees, a common contracting mechanism, often fail to control spread pricing effectively and instead may lead to higher costs for plan sponsors and employees. The episode also covers how RxSaveCard can help employers and employees access these lower cash prices, circumventing the inflated costs from traditional PBMs.
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07:12 EP365 with Scott Haas.
07:17 EP397 with Paul Holmes.
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Episode 465, "The Not Super EffectiveContracting Industry Norm, Where
Jumbo Plans and Others Wind UpPaying $10,000 for $50 Drugs".
Today, I speak with Chris Crawford.
(00:24):
American Healthcare Entrepreneurs andExecutives You Want to Know, Talking.
Relentlessly Seeking Value.
First of all, everybody listening herehas probably heard of the lawsuit in
which J&J, and talking about J&J as alarge employer here now, not as a drug
company, but J&J is, or maybe was,there's action afoot, being sued by a
(00:49):
plan member because, here's the shortversion, allegedly, the J&J pharmacy
benefits plan, through their large PBM,was paying over $10,000 a month for a
drug that can be purchased for somethinglike $50 bucks on Mark Cuban and other
pay cash, get the drug types of places.
Right?
(01:10):
A giant PBM was charging $10,000 amonth to the plan sponsor and member,
and a rando individual with a crumpledJefferson in their pocket could pick
up that same drug for around $50 bucks.
Five zero, dollars.
I don't know, for every excess $9,550a month, I mean, how many members
(01:33):
could get prepaid advanced primarycare or other high value care or meds,
assuming that the plan can capturethose in air quotes, wasted dollars.
And this is just one example with J&J.
J&J is not an outlier here.
I mean, talk to anybody in pharmacybenefits and you will get a rundown of
plan sponsors who are paying way toomuch for the in air quotes specialty
(01:55):
generic drugs in the same exact way.
It's word on the street.
And when I say word on the street, Idon't mean some kind of like wonky street.
I mean, main street.
It is becoming pretty common knowledgehow often if you go to a cash pay
website, especially for some of thesespecialty generics, it's cheaper than
if you go through your insurance.
(02:15):
Now might be a great time to bringup the Aggregate Discount Guarantee,
because the Aggregate Discount Guaranteeis the mechanism, the contracting
mechanism, by which a lot of plansponsors hope to control spread pricing,
which is what jacks up the cost to$10,000 for a drug that can cost $50.
(02:35):
Right, that's spread, thePBM is taking the balance and
putting it in their pocket.
It's what many consultants recommend,this Aggregate Discount Guarantee, to
plan sponsors when they do PBM RFPs, also.
And, not sure if it's working out great,obviously for the plan sponsor and
member, but let's talk quickly aboutwhy it's not working out great and
(02:57):
results in $50 drugs costing $10,000.
We'll just do this quickly becauseI'm going to let my guest today, Chris
Crawford, do the heavy lifting in termsof digging into the why the Aggregate
Discount Guarantee doesn't actuallycontrol spread so well, and also what
you can do about it, which I don't know,doesn't seem to be all that terribly
hard and might be what employeesare doing anyway, all by themselves.
(03:20):
So here's my dramatic reinterpretationof what Chris Crawford says
during the interview about theAggregate Discount Guarantees.
Who remembers that kid'sbook, Briar Rabbit?
Briar Rabbit, a rabbit, ate acarrot, I think, out of a field
and got caught by the farmer.
The farmer wanted to punish BriarRabbit and was sitting there
(03:41):
contemplating the best way to do thatwhen Briar Rabbit started wailing.
Whatever you do, farmer, don'tthrow me in that briar patch.
The farmer is obviously not connecting thedots between Briar Rabbit and briar patch,
so yeah, he believed the tricky rabbit.
And the farmer throws Briar Rabbitinto the briar patch as the punishment
(04:03):
and yeah, happy scampering ensues.
So here's my reinterpretation ofany PBM either suggesting or getting
confronted with an Aggregate DiscountGuarantee by a plan sponsor looking to
control spread pricing on generic meds.
Oh no!
Whatever you do, don't throw me in thatAggregate Discount Guarantee briar patch.
(04:24):
And in the PBMs, I don't know, maybedefense, if plan sponsors or their
consultants insist on including AggregateDiscount Guarantees in their RFPs and
will select PBMs on their ability tohaul in the biggest discount, Yeah,
it's just like the selecting PBMs basedon rebate yields for branded drugs.
Both are great examples of howsomething that might seem intuitive
(04:46):
actually is a perverse incentive.
Chris Crawford, my guest todayand CEO over at RxSaveCard, who is
also our sponsor of the show today.
Thank you very much to RxSaveCard.
RxSaveCard clients are typicallyseeing about 50 percent of total
retail generic spend being reducedjust by having access to cash prices.
And generic drugs, by the way, arethe most utilized benefit for most
(05:10):
employees, 92 percent of all prescriptionsare generic, and this matters for
not only financial reasons, it alsohas huge perception consequences.
For example, I was talking to someonerecently, because apparently I am a
magnet for people who want to talk abouttheir drug benefits, but this person
said, Oh, hey, this generic med I'vebeen taking for a long time, five years
(05:33):
ago, my copay was like seven bucks.
Then it became $15.
It was $25 last year.
And in January last month, whenI went to fill it, they told
me that through my employer'sinsurance, it would be $34 copay.
I went on Mark Cuban Cost PlusDrugs because I heard you talk
about it and the total cost was $7.
(05:54):
And then this person said, I feellike an idiot, you know, having paid
more than $7 for more than five years.
And I'm not sure what to make of myemployer, you know, are they unaware?
Do they not care?
I mean, we all talk about pharmacytrend going up, and then you
see stuff like this going on.
I do scratch my head, and I do thinkto myself, Well, if we got rid of
these thousands and millions, maybebillions of dollars across the
(06:17):
country in spread, could we actuallyhave a decrease in pharmacy trend?
Even as more patients tooksome of the branded drugs?
I don't know.
But I will say in the wild, the impactof the Aggregate Discount Guarantee
not guaranteeing much is becoming veryobvious to plan members at this time.
My name is Stacey Richter.
(06:38):
This episode of Relentless Health Value,as I mentioned, is sponsored by RxSaveCard
and thanks so much to them for doing so.
I loved this conversation with ChrisCrawford and I think that you will too.
And listen to episode 461, also withChris Crawford for more on the GLP-1
goings on and the manufacturer websiteswhere if an individual goes on the
(07:00):
manufacturer website, they can access alist price that is less than the price an
employer with a big PBM contract will pay.
Chris Crawford, welcome toRelentless Health Value.
Yeah, I'm excited to be here.
As has been said over and over andover again in earlier podcasts with
Scott Haas and Paul Holmes and LukeSlindee, AJ Loiacono, there is a great
(07:23):
opportunity for PBMs to take spread.
Now we're going to walk into SurpriseValley, Chris, because I kind of thought
that the reason for this was just,obviously, PBMs are for profit entities,
and I'm talking about the big ones, right?
I don't necessarily want to throweverybody in the same bucket there but if
you're talking to a for profit entity andno one's stopping them, like why wouldn't
(07:43):
they take as much spread as possible?
But you introduced another concept here.
So let's talk about AggregateDiscount Guarantees.
What is an Aggregate Discount Guarantee?
Yeah.
So when you contract with a PBM, this ismostly spread PBMs, although sometimes a
pass through PBM will do that same thing.
And so an Aggregate DiscountGuarantee, and generally it's
around all generic drugs.
(08:03):
So it says if we purchase as a plannedsponsor 100,000 drugs, when you throw
all those drugs into a bucket at theend of the year, we guarantee you, we
the PBM, an aggregate discount of somepercentage off of average wholesale price.
And so that is sold as a form ofprotection to the plan sponsor.
Okay, I know I'm going toget at least this discount.
(08:27):
The challenge comes inwhere you are getting that
discount on every single drug.
There's some drugs where you mightget a greater discount than that,
and some drugs where you mightget a lower discount than that.
And so the lower discount ones are alsothe ones that end up costing more to
the plan sponsor and to the employee.
And so when we look at the numbers,essentially it's pretty consistent.
(08:50):
30 to 40 percent of the scripts thatare running through are cheaper if you
just don't use insurance and pay cash.
Use a discount card or getthrough Cost Plus Drugs.
So that is the real issue.
That's kind of one of the thingsthat I'm not sure if everybody
appreciated about the lawsuits, youcould audit them and go through it.
They met their contractguarantee I'm guessing.
(09:11):
This wasn't a missing guarantee.
There's a big bottom tier of drugs thatlots of patients take, so there's a big
aggregate discount there at the bottom.
This then enables the top of the stack,the more expensive specialty generics
say, to have far less discount, right?
The bottom half pulls the average down.
So this was the keys are given to the PBMto say, I'm going to meet this guarantee,
(09:36):
and that's where you had these issuescoming up of just the overcharging and
the extra spread on someone's because atthe end, when we throw them all in the
bucket we're going to meet that guarantee.
And then it gets even better becausethe how it gets better is that
discount is based on somethingcalled average wholesale price.
So let me just interject before we get,before we go to the next level here.
(09:58):
Plan sponsors may feel confident.
It's almost like the solution has,to the problem has as many issues
as the problem is how I'm taking it.
Plan sponsors are kind of, I getwhat you guys are doing over there.
I see you.
So, we're going to put this averagediscount guarantee in so that you
can't spread to your heart's content.
This is going to be me being a smartnegotiator, and I'm like, throw in
(10:21):
the shade, this is a tangled webthat we weave in all circumstances.
So, the PBM walks into the plan sponsorand says, look, you see, we have an
incentive to do spread or whatever, butI'm gonna make you feel better about it.
I'm gonna offer you this AggregateDiscount Guarantee, and I solemnly
swear that I'm gonna honor it, andyou're gonna get some kind of discount
(10:42):
that limits my ability to chargeyou too much for generic drugs.
Like, that's how I'mreinterpreting what you're saying.
Almost this average discountguarantee is presented as a solution.
Yes, and it's what is the industry normwhen requests for proposals go out from
consulting firms, they're evaluatingPBMs, you know, the, the rebate issue
(11:04):
and how you guarantee rebates hasbeen discussed ad nauseam, but this is
another one of those, you get AggregateDiscount Guarantees and rebates, and
I think that what the lawsuits reallypointed to is the issue of, are we
really paying attention to this?
Do we know what could happen?
Because I think there's a thought of,well, generic drugs are just inexpensive.
Sometimes that's true.
Sometimes that's not true.
And that's where you kind of see theseexamples where you're saying, This is
(11:27):
a maintenance medication that somebodytakes every day and their savings of a
thousand, two thousand, five thousanddollars per fill for a generic drug.
How can that be?
Yet, if you were to audit it, you'd say,well, you've met your contract guarantee
because you're allowed to do that in thecontract because in total, you're still
meeting your Aggregate Discount Guarantee.
(11:48):
So basically, it's like the PBM inthis instance, if it's A divided
by B equals C, and you say C is theAggregate Discount Guarantee, right?
But if I control A divided byB, I can make A whatever I want,
I can make B whatever I want inorder to maximize my own profits.
(12:08):
You absolutely nailed it.
And the key headline there is thatyour Aggregate Discount Guarantee
percentage has literally no relationto what you actually pay for the drug.
Yeah.
If I walk into a store and this lipbalm costs five bucks and you're
like, oh, this is an amazing dealbecause it's list price is $1,000.
(12:28):
I'm saving so much money.
I can't help but purchasethis $1,000 lip balm.
Right?
Like if you jack up the originalcost, then the savings can be amazing.
And you have, if we can get intothe weeds a little bit, I think
it's also, these are the same drugs.
So from a generic perspective,remember, these drugs are off patent.
(12:50):
And so there's multiple manufacturersthat can be making one drug.
So that average wholesale price,which is what the discount guarantee
is based on, that average wholesaleprice is set by the manufacturer.
So if I had 10 different manufacturersmaking one drug, they can all set a
different average wholesale price,even though it's the same drug.
(13:13):
And so as the discounts play out, you cankind of see how that again, doesn't relate
to what actually costs less because that'swhat we care about in our everyday lives.
Yeah.
So AWP is the list price, like thisis what the price that a generic
manufacturer says is like, this is theAWP, also known as "Ain't What's Paid".
And Luke Slindee getsinto this in great detail.
(13:34):
So if anyone is really looking fornuance, then go listen to that show.
But what Luke says, hehas a funny term for it.
He calls the list price like the nonsenseprice or the gobbledygook or something.
He says something kind of funny becausehe's just like, to your exact point,
like it's the same exact ingredients.
It's the same exact formulation.
They are following a formula that was set.
(13:54):
It used to be patented.
Now it's not.
There could be six different manufacturersand they're all just making up a price
and they could be wildly different.
Like one of them could say,Oh, my list price is $9,000.
And the other one couldsay, my list price is $40.
Like, I mean, it just seems likethere's wildly divergent prices here.
It's not only wildly divergent,but then the manufacturers
(14:15):
have a perverse incentive.
And I know you've probably talkedabout this on rebated drugs,
like setting a higher wholesaleacquisition costs or WAC costs because
there's more room to give a rebate.
In generic drugs, if I'm a genericmanufacturer, I want my drug to
be the one that a pharmacy stocksor to be the one that is sold
through a formulary for a PBM.
Let's just take two examples, if we can.
(14:36):
So let's say drug A, again,same exact generic drug.
Drug manufacturer A sets the drug with anAWP of $1,000, but PBM says, we're going
to give you a 90 percent discount on that.
Right?
So that means that drug is now $100.
That's what she actually paid for.
Drug B, same exact drugagain, has an AWP of $100.
(15:00):
Let's say the PBM gives you a 50percent AWP discount on that one.
Now I'm paying $50 for that drug.
In PBM math, I want to put the $1,000 AWPdrug on my formula and in my math to your
earlier question, that's my numerator now.
And so if I get a 90 percent discount,wow, that is a great discount.
(15:21):
That spreadsheets really well.
Look at these amazing deals.
I'm giving you a 90 percent discount, eventhough the lower AWP with a discount of
50 percent costs literally half as much.
So that is the issue where even withinAWP discounts, that's how they can be
manipulated where the PBM still meets theguarantee, but again, it has no relation
(15:41):
to what a plan sponsor and employeesend up paying out of their pocket.
Just recalling, we started thisconversation talking about these
Aggregate Discount Guarantees, wherethe PBM, the way that they're going
to keep themselves under control isby the plan sponsor forcing a discount
guarantee on to the PBM, like, that'show this is gonna work, and that's
(16:03):
how PBMs will be held to account.
And what you just went throughis why that doesn't work so well.
Because, as you said, drug A, and it'sthe same generic composition, right?
Two different manufacturers.
The example that you gave was drugA manufacturer sets a list price
in AWP a "Ain't What's Paid".
They just make up a number and it's$1,000 for this particular set of
(16:27):
ingredients formulated in the same way.
And then the PBM like, but you know what?
We're so amazing.
We're going to give youa 90 percent discount.
So if you do the math, now theplan sponsor is paying a hundred
bucks for this particular generic.
Whereas you could have ManufacturerB who's like, it's a hundred bucks.
So, I'm gonna make this $100, butthen the discount's gonna be 50%, so
(16:51):
now that drug costs $50, as opposedto $100, which is what you said.
It's like actually half as expensivein absolute terms, but yet the
discount is only 50%, so if youlook at the aggregate discount
spreadsheet, it doesn't look as good.
And said another way, so let's alsogive PBM some credit for, well,
this is the contract I've signed.
(17:11):
So the PBM would actually be penalizedif they have a high Aggregate Discount
Guarantee for putting the lower AWP on it.
It'd be harder for them tomeet that guarantee, right?
So I'm guaranteeing an85 percent discount.
Why would I want to fill one at 50%?
That makes it harder forme to meet my guarantee.
Yeah.
And I'm going to underline two commonthemes that come up over and over
(17:33):
and over again on this podcast.
The first one is, and Rob Andrewssaid this very succinctly, so I'm
going to quote him, organizationsdo what you pay them to do.
So what in effect with these AggregateDiscount Guarantees we are paying people
to do is to maximize their discounts.
And which brings up the secondthing you hear over and over and
over again on this podcast, whichis, what's the absolute price?
(17:55):
What we should be looking at iswhat is the absolute unit price?
Not what are these savings?
When you have someone who can set alist price, like they can make the
savings whatever they want to suitthe people do what you pay them to do.
So we get ourselves in a very downwarddoom loop when both those things are
true and we set contract guaranteesthat are based on savings or discounts.
(18:18):
And that is really what Cost Plus Drugsand surely others have done, but Cost
Plus Drugs really is looked at now as abenchmark for the cash price, where before
these things are buried in an employer'sclaim file, what did the employee pay,
what was billed back to the employer.
It changes, you don't knowif you're getting a good deal
or not if you're an employer.
(18:39):
Now, this fiduciary lawsuit reallypointed out is you now have a reference.
Anybody can check that price.
Anybody can look at it.
And I think that's the thing that I'vealways told employers is, Hey, just
look at your claim file, select genericsonly, and do descending order, highest
cost to lowest cost in ingredient costs.
And then take those drugs and compareit to Cost Plus, just as an example.
(19:03):
And every employer is going to findexamples in there, frankly, that are
going to make them a little nauseous.
So yes, it matters to the plan sponsor.
Absolutely.
But one of the things you said earlier,where it really matters is to the employee
when they're in their deductible phase.
I mean, so we're just taking overa new client for January 1st.
(19:24):
with a PPM and we were just going throughand looking at some of these employees
and the benefit center is like, I wantto see who we're going to help in this.
So yes, we're going to save money.
Let's talk about the employees.
And so we looked at somebody ona cancer med for breast cancer.
This is a chronic med that she'staken to battle breast cancer.
The PBM charging $1,200 for that drug.
(19:44):
She was in her deductible phase.
Paying $360 out of her pocket, okay.
Leaves the plan to pay over $800.
That drug, through CostPlus Drugs, costs $43.70.
So the PBM, so this is a perfectexample of what we're talking about
here, or another example, I guess isprobably a better way to frame it.
That, you know, a PBM looking tomaximize Aggregate Discount Guarantees,
(20:08):
does the thing where they pick themanufacturer, oh, we're going to give
you this big discount, so patient indeductible phase, why is it paying $360.
Like that's a lot of money.
$360 a month is a lot of money.
That's something that as consultants,and I think I was certainly guilty of
this, you get in, you're negotiatingPBMs and the numbers just get so big
(20:29):
that sometimes it almost seems funnymoney where while you're spending $50
million on pharmacy, What's $500,000here, or what's a million here in
kind of the grand scheme of things.
But at the individual level, exactly whatyou said, these numbers are meaningful,
and you're already battling cancer, you'realready going through something, now you
gotta spend $360 out of your paycheck,and in this example, the employer's like,
(20:51):
we're just gonna pay 100 percent of it.
Because we win, because the employer nowsaves over $800, the employee gets a drug
for free, gets the medication they need.
Because the other piece of thattoo, where you really see this
play out, we're talking aboutAggregate Discount Guarantees.
Another way Aggregate Discount Guaranteescan be manipulated is if you're with
a PBM that owns their own pharmacy,so their mail pharmacy and their
(21:14):
specialty pharmacy, essentially, anytimesomething's sent to your home, with
the largest PBMs in this country, it'scoming through a pharmacy they also own.
So you have no ability to shop.
That's why Cost Plus Drugs is reallylocked out of the traditional market
because filling that drug for $43 throughCost Plus Drugs penalizes the PBM.
They lose the discount guarantee,they lose the margin as a PBM, and
(21:39):
they lose the revenue of shippingthat drug through their own pharmacy.
And we have no idea what theyactually bought the drugs for
from the manufacturer wholesalerat the start of this whole thing.
So I just want to interject two pointshere that go together and then I want
to really understand what RxSaveCard,how RxSaveCard fits in this mix.
So the first thing is, whatis happening right now is that
(22:01):
there is some transparency,which is entering the building.
And that transparency has come fromentities such as Cost Plus Drugs,
there's others, you know, Amazon, right?
There's a bunch of different players rightnow in the pharmacy space in particular,
where a somebody who is health literateat not even the highest level can go and
(22:24):
figure out how much the cash price ofa drug is or how much that drug costs.
You actually can go on Google andyou can do a search for what's
the cash price for this drug.
So it's not like you have to have arcanespreadsheets and proprietary information.
It's easy enough to figurethis out if you can use Google.
And because of that transparency,a couple of things are happening.
(22:46):
Number one, lawsuits.
Because what is the role of a fiduciary?
One of the criteria here isprices paid must be reasonable.
Because like, we have a fiduciaryresponsibility to spend plan
assets wisely on reasonable costs.
And costs have to be reasonable basedon information that is available.
(23:07):
Okay, well, information is availablethat you can get a drug for $53 and
the plan is paying thousands for itwith internal plan dollars and then
forcing members who choose to usethat plan to spend not reasonable,
not reasonable, it's not prudent.
So like, lawsuits are happening,that's kind of thing one, as
a basis of this transparency.
(23:28):
Here's just another point to ponder.
There was a big conference recently wherethe head of one of these, literally the
CEO of one of these big consolidatedentities stood up on stage and said,
And this is almost a direct quote.
Well, you know, everybody knowstransparency doesn't lower prices.
So, you also have comments likethat, which are clearly, on the
(23:53):
pharmacy side at least, incorrect?
What drives costs lower is competitionand the ability to see prices.
And so I think that is what hasreally changed everything with it.
So Cost Plus Drug is a great example.
Again, there's prices out there.
Now you can compare andsay, how good is my price?
(24:14):
And we'd love to see otherpharmacies doing that as well.
I think the other thing that you mentionedis there's more, you can go on Google,
but discount cards and how GoodRx createda category of people to be able to go
to their pharmacy, check prices, andpotentially pay less than their insurance
without having insurance, without payinga subscription fee, by just seeing it.
(24:37):
And so when you have competition,that is where you actually go again.
I can do unit cost to unitcost and I know what this is.
Why should I overpay?
And that is really the keypoint we saw that RxSaveCard.
We saw this environment where I'mlocked into only paying my prices
that my PBM tells me I'm going to pay.
(24:58):
I got to go to the pharmacies they tell meI can go to and here are the prices I pay.
And if I want it to be, I'm air quoting,"covered", right, by my insurance,
these are the rules I have to play by.
So how does RxSaveCard fit into this?
Yeah, so how RxSaveCard, becausewe're outside of that system.
There is an emergingecosystem of cash pay prices.
(25:20):
Right, so Cost PlusDrugs is a great example.
Discount cards, when I go intomy pharmacy and I use a discount
card, and I don't need insuranceto do that, that is an example.
We're seeing Eli Lilly going directand offering cash prices to people
without insurance for Zepbound andtheir GLP-1 at a cost that's 70 percent
(25:42):
less than what you pay through the PBM.
And listen to episode 461, alsowith Chris Crawford for more
on this, the GLP-1 goings on.
The rub on all that is ifI'm with a traditional PBM,
I can't access those prices.
What our solution really does isallow employers to access those
cash prices outside of their PBM.
(26:05):
They don't have to change PBM,they can still keep their PBM.
If they want the rebates, if theywant coverage for other things, you
stay with your PBM, but you're notlocked into only paying those rates.
And so that's really what we've done.
So if employers want to have accessto Cost Plus Drugs, their PBM
won't allow it, we can do that.
You want to access lower cost throughdiscount cards if they're less
(26:26):
expensive and I'm going to my localpharmacy, I always go to for my drug?
We can do that.
So it's this concept ofin our everyday lives.
I love Amazon, Amazon Prime.
I don't buy everything in my life fromAmazon Prime when it's shipped here.
If something's less expensive from Targetor Walmart, I'm going to go buy it.
Yet in our world, we've said, no,everything has to be purchased
through this one entity.
(26:47):
And that just, the fiduciarylawsuits are saying.
That's a problem.
What you're doing, and I think thisis the point that you're making, that
competition lowers prices, which by theway is also why GoodRx prices are often
lower than a PBM price just because theGoodRx forces PBMs to compete, right?
So what we've got going on here is anemployer, you have nothing to do with
(27:09):
a PBM relationship, like great, keepyour PBM, you do you, employer, client,
sponsor, as far as the PBM is concerned.
But also, give youremployees the RxSaveCard.
Because what you're going to be ableto demonstrate is that in any of these
cases where the cash price or the nonPBM price or whatever, like you are the
competition here, and it is eminentlypossible for a lot of these drugs,
(27:33):
especially the ones that are subject tothis Aggregate Discount Guarantee, if
that's afoot in anybody's circumstance,there is going to be a plethora of these
meds which are cheaper, just using thecard and not going through the PBM.
And it's meaningful.
I mean, we're typically seeingabout 50 percent of a total retail
generic spend being reduced justby having access to cash prices.
(27:57):
Well, wait, so it's 50 percent lessfor a planned sponsor to add the card?
If you look at all those drugs, theones I was talking about, so if you
take 30 to 40 percent of the drugs thatyou are overpaying for them, they're
the highest spread, they're all thosedrugs that are well below the Aggregate
Discount Guaranteed line where acash price exists that's less, right?
(28:18):
Which is where our save card comes in.
We access all those prices.
You're going to wipe 50 percentof your total retails you're going
to expend just off the board.
And more importantly, it's the mostutilized benefit by all your employees.
92 percent of all scripts inthis country are generic drugs.
This is what people aregoing to the pharmacy for.
This is what they're using.
These are where you hear those storieswhere people show up in January and
(28:41):
all of a sudden the pharmacist tellshim, well, that drug is now $500.
Like, wait a second.
I was just paying $20.
Last year, what happened?
Well, formulary changed.
It's like you're locked into theseprices and you alluded to it.
You touched on it a little bitin the discount card market where
it's like, well, GoodRx is kind ofusing some different PBM networks.
But the way to think about it is discountcards, that's really what they are doing.
(29:03):
So our solution, if you'rewith a PBM and you go in again,
you're locked in that price.
You're locked into that oneprice that they've negotiated.
That's what they're going to tell you.
What discount cards do.
So what ours is.
We had checked the price of 14 differentdiscount cards at that pharmacy
for that specific drug at the timewhen the member goes in to fill it.
(29:24):
So what do you thinkis going to be better?
One price?
Or letting all those discount cardsunderneath the hood compete and
the best price always comes up?
So it's almost like discounts themselveswhen you go to a retail pharmacy
are getting a little commoditized.
It's just how you access those.
And if you're, if you aren't locked intoonly paying the rates that a PBM tells
(29:47):
you, and you can open that up again,competition leads to lower prices.
Access leads to lower prices.
When you're locked in and youcan't change, you have to pay the
prices dictated by that one entity,that's where you end up overpaying
and you don't have the protection.
And is this considered like a carve out?
For example, do I have to get myPBM's permission to use RxSaveCard?
(30:08):
You do not, no.
So we, our solution specifically, we'renot violating any terms of a PBM contract.
The same way a PBM couldn't tell you,Stacey, You can't go to Cost Plus to get
your drug, even if it's on insurance, orhey Stacey, you can't use a discount card
when you show up at your local pharmacy.
Same thing here, we are just accessingcash prices where they exist for
(30:31):
employers and for their employees.
So yeah, we're sitting outsideof that PBM relationship.
And how this would look would be I wouldjust send all of my employees this card.
I mean, and I don't want to minimizewhat I'm sure is a ton of education
and stuff that goes on, but at theend of the day, it kind of looks
like all the employees get this card.
They can walk into a pharmacy.
(30:51):
It's not like this is alien to mostpeople at this time to like, pull out a
discount card and see if it's cheaper.
Like, people are doing that nowas kind of the course of how
they operate a lot of people.
So you're basically saying justsend everybody this card and
when they go into the pharmacy,they can, they can price check.
And that is what makes us feelso great about it too is, we
(31:14):
aren't denying anybody's drug.
We're not telling you youhave to switch a drug.
We exist to save people money.
And so when employers are rollingit out, they're rolling it out as,
hey, here's a new benefit where youmight be able to get a drug for free
or you might have an option to spendless than you were spending before.
So we really have worked hard to create aeverybody wins, employer saves, employee
(31:36):
saves, you don't have to change yourPBM, you don't have to go through that
migration or anything else, it's just anadded benefit that you can put on next
to it, and so, that's what's so fun,it's just, it's all good news, you know,
when we're looking at like, yeah, you cansave, and getting back to that, the cancer
patient or somebody else, couple hundredbucks, $300 bucks, that's meaningful.
And I think also I wouldsay $40 bucks is meaningful.
(31:59):
If you're filling it every 30 days goingthrough it, all of a sudden you get a
drug for free and everybody spends less.
Like why would we not do that?
I think that's very well put.
When lower costs exist and thecash marketplace is out there
and you decide that I want myfolks to have access to this.
Why overpay if you don't have to?
There is a market now and there's thisemerging market of cash and I think
(32:20):
that's what we're most excited about.
Chris, is there anything Ineglected to ask you that you
want to talk about right now?
We could talk about this for hoursand go in, you know, so many different
directions and everything else.
So I just think what you are highlightingis really important and in preparation for
this discussion, I went back and listenedto some older episodes that I hadn't
listened to, and it was fascinating.
Ge Bai, from almost three yearsago now, was talking about this
(32:43):
emerging cash marketplace, and somany of her predictions came through.
You mentioned the Luke Slindee discussion.
That was really fascinating.
It's like, why don't all pharmaciesjust do the Cost Plus model?
Well, if they offer cash and it'slike they're stuck in this position
of, well, if I enter into a PBMcontract, he gets into this usual
customary, which is essentially thecash rate and why they can't do it.
(33:04):
So I just think I'd say people goback and listen to those episodes.
And it really just gives a nicekind of overlay of the land.
Okay, now this is the market.
And now what can I do as an informedbuyer or an informed benefits leader,
knowing the market as exists andthere is this whole new area that we
can access and you don't have to onlypay the prices dictated by your PBM.
(33:27):
Chris Crawford, if someone is interestedin learning more about the work that
you're doing about RxSaveCard, wherewould you direct them to find you.
Yeah, rxsavecard.com.
You can reach out to us there.
We're very active on LinkedIn,trying to educate as much as we can
on the opportunities in the market.
So people can feel free tomessage me there as well.
Chris Crawford, thank you so much forbeing on Relentless Health Value today.
(33:48):
I loved it.
Thanks, Stacey.
Hi, this is Rob Marty.
The Relentless Health Tribe has hada positive impact on my life since I
first started listening two years ago.
Support this tribe by leaving a review,subscribing to the newsletter, and, most
importantly, inviting others to join thetribe by sharing the podcast with them.
Go ahead, forward it beforeyou tackle that next project.
(34:10):
Chances are the person youshare it with will thank you.
Episode 465, "The Not Super EffectiveContracting Industry Norm, Where
Jumbo Plans and Others Wind UpPaying $10,000 for $50 Drugs".
Today, I speak with Chris Crawford.
(00:24):
American Healthcare Entrepreneurs andExecutives You Want to Know, Talking.
Relentlessly Seeking Value.
First of all, everybody listening herehas probably heard of the lawsuit in
which J&J, and talking about J&J as alarge employer here now, not as a drug
company, but J&J is, or maybe was,there's action afoot, being sued by a
(00:49):
plan member because, here's the shortversion, allegedly, the J&J pharmacy
benefits plan, through their large PBM,was paying over $10,000 a month for a
drug that can be purchased for somethinglike $50 bucks on Mark Cuban and other
pay cash, get the drug types of places.
Right?
(01:10):
A giant PBM was charging $10,000 amonth to the plan sponsor and member,
and a rando individual with a crumpledJefferson in their pocket could pick
up that same drug for around $50 bucks.
Five zero, dollars.
I don't know, for every excess $9,550a month, I mean, how many members
(01:33):
could get prepaid advanced primarycare or other high value care or meds,
assuming that the plan can capturethose in air quotes, wasted dollars.
And this is just one example with J&J.
J&J is not an outlier here.
I mean, talk to anybody in pharmacybenefits and you will get a rundown of
plan sponsors who are paying way toomuch for the in air quotes specialty
(01:55):
generic drugs in the same exact way.
It's word on the street.
And when I say word on the street, Idon't mean some kind of like wonky street.
I mean, main street.
It is becoming pretty common knowledgehow often if you go to a cash pay
website, especially for some of thesespecialty generics, it's cheaper than
if you go through your insurance.
(02:15):
Now might be a great time to bringup the Aggregate Discount Guarantee,
because the Aggregate Discount Guaranteeis the mechanism, the contracting
mechanism, by which a lot of plansponsors hope to control spread pricing,
which is what jacks up the cost to$10,000 for a drug that can cost $50.
(02:35):
Right, that's spread, thePBM is taking the balance and
putting it in their pocket.
It's what many consultants recommend,this Aggregate Discount Guarantee, to
plan sponsors when they do PBM RFPs, also.
And, not sure if it's working out great,obviously for the plan sponsor and
member, but let's talk quickly aboutwhy it's not working out great and
(02:57):
results in $50 drugs costing $10,000.
We'll just do this quickly becauseI'm going to let my guest today, Chris
Crawford, do the heavy lifting in termsof digging into the why the Aggregate
Discount Guarantee doesn't actuallycontrol spread so well, and also what
you can do about it, which I don't know,doesn't seem to be all that terribly
hard and might be what employeesare doing anyway, all by themselves.
(03:20):
So here's my dramatic reinterpretationof what Chris Crawford says
during the interview about theAggregate Discount Guarantees.
Who remembers that kid'sbook, Briar Rabbit?
Briar Rabbit, a rabbit, ate acarrot, I think, out of a field
and got caught by the farmer.
The farmer wanted to punish BriarRabbit and was sitting there
(03:41):
contemplating the best way to do thatwhen Briar Rabbit started wailing.
Whatever you do, farmer, don'tthrow me in that briar patch.
The farmer is obviously not connecting thedots between Briar Rabbit and briar patch,
so yeah, he believed the tricky rabbit.
And the farmer throws Briar Rabbitinto the briar patch as the punishment
(04:03):
and yeah, happy scampering ensues.
So here's my reinterpretation ofany PBM either suggesting or getting
confronted with an Aggregate DiscountGuarantee by a plan sponsor looking to
control spread pricing on generic meds.
Oh no!
Whatever you do, don't throw me in thatAggregate Discount Guarantee briar patch.
(04:24):
And in the PBMs, I don't know, maybedefense, if plan sponsors or their
consultants insist on including AggregateDiscount Guarantees in their RFPs and
will select PBMs on their ability tohaul in the biggest discount, Yeah,
it's just like the selecting PBMs basedon rebate yields for branded drugs.
Both are great examples of howsomething that might seem intuitive
(04:46):
actually is a perverse incentive.
Chris Crawford, my guest todayand CEO over at RxSaveCard, who is
also our sponsor of the show today.
Thank you very much to RxSaveCard.
RxSaveCard clients are typicallyseeing about 50 percent of total
retail generic spend being reducedjust by having access to cash prices.
And generic drugs, by the way, arethe most utilized benefit for most
(05:10):
employees, 92 percent of all prescriptionsare generic, and this matters for
not only financial reasons, it alsohas huge perception consequences.
For example, I was talking to someonerecently, because apparently I am a
magnet for people who want to talk abouttheir drug benefits, but this person
said, Oh, hey, this generic med I'vebeen taking for a long time, five years
(05:33):
ago, my copay was like seven bucks.
Then it became $15.
It was $25 last year.
And in January last month, whenI went to fill it, they told
me that through my employer'sinsurance, it would be $34 copay.
I went on Mark Cuban Cost PlusDrugs because I heard you talk
about it and the total cost was $7.
(05:54):
And then this person said, I feellike an idiot, you know, having paid
more than $7 for more than five years.
And I'm not sure what to make of myemployer, you know, are they unaware?
Do they not care?
I mean, we all talk about pharmacytrend going up, and then you
see stuff like this going on.
I do scratch my head, and I do thinkto myself, Well, if we got rid of
these thousands and millions, maybebillions of dollars across the
(06:17):
country in spread, could we actuallyhave a decrease in pharmacy trend?
Even as more patients tooksome of the branded drugs?
I don't know.
But I will say in the wild, the impactof the Aggregate Discount Guarantee
not guaranteeing much is becoming veryobvious to plan members at this time.
My name is Stacey Richter.
(06:38):
This episode of Relentless Health Value,as I mentioned, is sponsored by RxSaveCard
and thanks so much to them for doing so.
I loved this conversation with ChrisCrawford and I think that you will too.
And listen to episode 461, also withChris Crawford for more on the GLP-1
goings on and the manufacturer websiteswhere if an individual goes on the
(07:00):
manufacturer website, they can access alist price that is less than the price an
employer with a big PBM contract will pay.
Chris Crawford, welcome toRelentless Health Value.
Yeah, I'm excited to be here.
As has been said over and over andover again in earlier podcasts with
Scott Haas and Paul Holmes and LukeSlindee, AJ Loiacono, there is a great
(07:23):
opportunity for PBMs to take spread.
Now we're going to walk into SurpriseValley, Chris, because I kind of thought
that the reason for this was just,obviously, PBMs are for profit entities,
and I'm talking about the big ones, right?
I don't necessarily want to throweverybody in the same bucket there but if
you're talking to a for profit entity andno one's stopping them, like why wouldn't
(07:43):
they take as much spread as possible?
But you introduced another concept here.
So let's talk about AggregateDiscount Guarantees.
What is an Aggregate Discount Guarantee?
Yeah.
So when you contract with a PBM, this ismostly spread PBMs, although sometimes a
pass through PBM will do that same thing.
And so an Aggregate DiscountGuarantee, and generally it's
around all generic drugs.
(08:03):
So it says if we purchase as a plannedsponsor 100,000 drugs, when you throw
all those drugs into a bucket at theend of the year, we guarantee you, we
the PBM, an aggregate discount of somepercentage off of average wholesale price.
And so that is sold as a form ofprotection to the plan sponsor.
Okay, I know I'm going toget at least this discount.
(08:27):
The challenge comes inwhere you are getting that
discount on every single drug.
There's some drugs where you mightget a greater discount than that,
and some drugs where you mightget a lower discount than that.
And so the lower discount ones are alsothe ones that end up costing more to
the plan sponsor and to the employee.
And so when we look at the numbers,essentially it's pretty consistent.
(08:50):
30 to 40 percent of the scripts thatare running through are cheaper if you
just don't use insurance and pay cash.
Use a discount card or getthrough Cost Plus Drugs.
So that is the real issue.
That's kind of one of the thingsthat I'm not sure if everybody
appreciated about the lawsuits, youcould audit them and go through it.
They met their contractguarantee I'm guessing.
(09:11):
This wasn't a missing guarantee.
There's a big bottom tier of drugs thatlots of patients take, so there's a big
aggregate discount there at the bottom.
This then enables the top of the stack,the more expensive specialty generics
say, to have far less discount, right?
The bottom half pulls the average down.
So this was the keys are given to the PBMto say, I'm going to meet this guarantee,
(09:36):
and that's where you had these issuescoming up of just the overcharging and
the extra spread on someone's because atthe end, when we throw them all in the
bucket we're going to meet that guarantee.
And then it gets even better becausethe how it gets better is that
discount is based on somethingcalled average wholesale price.
So let me just interject before we get,before we go to the next level here.
(09:58):
Plan sponsors may feel confident.
It's almost like the solution has,to the problem has as many issues
as the problem is how I'm taking it.
Plan sponsors are kind of, I getwhat you guys are doing over there.
I see you.
So, we're going to put this averagediscount guarantee in so that you
can't spread to your heart's content.
This is going to be me being a smartnegotiator, and I'm like, throw in
(10:21):
the shade, this is a tangled webthat we weave in all circumstances.
So, the PBM walks into the plan sponsorand says, look, you see, we have an
incentive to do spread or whatever, butI'm gonna make you feel better about it.
I'm gonna offer you this AggregateDiscount Guarantee, and I solemnly
swear that I'm gonna honor it, andyou're gonna get some kind of discount
(10:42):
that limits my ability to chargeyou too much for generic drugs.
Like, that's how I'mreinterpreting what you're saying.
Almost this average discountguarantee is presented as a solution.
Yes, and it's what is the industry normwhen requests for proposals go out from
consulting firms, they're evaluatingPBMs, you know, the, the rebate issue
(11:04):
and how you guarantee rebates hasbeen discussed ad nauseam, but this is
another one of those, you get AggregateDiscount Guarantees and rebates, and
I think that what the lawsuits reallypointed to is the issue of, are we
really paying attention to this?
Do we know what could happen?
Because I think there's a thought of,well, generic drugs are just inexpensive.
Sometimes that's true.
Sometimes that's not true.
And that's where you kind of see theseexamples where you're saying, This is
(11:27):
a maintenance medication that somebodytakes every day and their savings of a
thousand, two thousand, five thousanddollars per fill for a generic drug.
How can that be?
Yet, if you were to audit it, you'd say,well, you've met your contract guarantee
because you're allowed to do that in thecontract because in total, you're still
meeting your Aggregate Discount Guarantee.
(11:48):
So basically, it's like the PBM inthis instance, if it's A divided
by B equals C, and you say C is theAggregate Discount Guarantee, right?
But if I control A divided byB, I can make A whatever I want,
I can make B whatever I want inorder to maximize my own profits.
(12:08):
You absolutely nailed it.
And the key headline there is thatyour Aggregate Discount Guarantee
percentage has literally no relationto what you actually pay for the drug.
Yeah.
If I walk into a store and this lipbalm costs five bucks and you're
like, oh, this is an amazing dealbecause it's list price is $1,000.
(12:28):
I'm saving so much money.
I can't help but purchasethis $1,000 lip balm.
Right?
Like if you jack up the originalcost, then the savings can be amazing.
And you have, if we can get intothe weeds a little bit, I think
it's also, these are the same drugs.
So from a generic perspective,remember, these drugs are off patent.
(12:50):
And so there's multiple manufacturersthat can be making one drug.
So that average wholesale price,which is what the discount guarantee
is based on, that average wholesaleprice is set by the manufacturer.
So if I had 10 different manufacturersmaking one drug, they can all set a
different average wholesale price,even though it's the same drug.
(13:13):
And so as the discounts play out, you cankind of see how that again, doesn't relate
to what actually costs less because that'swhat we care about in our everyday lives.
Yeah.
So AWP is the list price, like thisis what the price that a generic
manufacturer says is like, this is theAWP, also known as "Ain't What's Paid".
And Luke Slindee getsinto this in great detail.
(13:34):
So if anyone is really looking fornuance, then go listen to that show.
But what Luke says, hehas a funny term for it.
He calls the list price like the nonsenseprice or the gobbledygook or something.
He says something kind of funny becausehe's just like, to your exact point,
like it's the same exact ingredients.
It's the same exact formulation.
They are following a formula that was set.
(13:54):
It used to be patented.
Now it's not.
There could be six different manufacturersand they're all just making up a price
and they could be wildly different.
Like one of them could say,Oh, my list price is $9,000.
And the other one couldsay, my list price is $40.
Like, I mean, it just seems likethere's wildly divergent prices here.
It's not only wildly divergent,but then the manufacturers
(14:15):
have a perverse incentive.
And I know you've probably talkedabout this on rebated drugs,
like setting a higher wholesaleacquisition costs or WAC costs because
there's more room to give a rebate.
In generic drugs, if I'm a genericmanufacturer, I want my drug to
be the one that a pharmacy stocksor to be the one that is sold
through a formulary for a PBM.
Let's just take two examples, if we can.
(14:36):
So let's say drug A, again,same exact generic drug.
Drug manufacturer A sets the drug with anAWP of $1,000, but PBM says, we're going
to give you a 90 percent discount on that.
Right?
So that means that drug is now $100.
That's what she actually paid for.
Drug B, same exact drugagain, has an AWP of $100.
(15:00):
Let's say the PBM gives you a 50percent AWP discount on that one.
Now I'm paying $50 for that drug.
In PBM math, I want to put the $1,000 AWPdrug on my formula and in my math to your
earlier question, that's my numerator now.
And so if I get a 90 percent discount,wow, that is a great discount.
(15:21):
That spreadsheets really well.
Look at these amazing deals.
I'm giving you a 90 percent discount, eventhough the lower AWP with a discount of
50 percent costs literally half as much.
So that is the issue where even withinAWP discounts, that's how they can be
manipulated where the PBM still meets theguarantee, but again, it has no relation
(15:41):
to what a plan sponsor and employeesend up paying out of their pocket.
Just recalling, we started thisconversation talking about these
Aggregate Discount Guarantees, wherethe PBM, the way that they're going
to keep themselves under control isby the plan sponsor forcing a discount
guarantee on to the PBM, like, that'show this is gonna work, and that's
(16:03):
how PBMs will be held to account.
And what you just went throughis why that doesn't work so well.
Because, as you said, drug A, and it'sthe same generic composition, right?
Two different manufacturers.
The example that you gave was drugA manufacturer sets a list price
in AWP a "Ain't What's Paid".
They just make up a number and it's$1,000 for this particular set of
(16:27):
ingredients formulated in the same way.
And then the PBM like, but you know what?
We're so amazing.
We're going to give youa 90 percent discount.
So if you do the math, now theplan sponsor is paying a hundred
bucks for this particular generic.
Whereas you could have ManufacturerB who's like, it's a hundred bucks.
So, I'm gonna make this $100, butthen the discount's gonna be 50%, so
(16:51):
now that drug costs $50, as opposedto $100, which is what you said.
It's like actually half as expensivein absolute terms, but yet the
discount is only 50%, so if youlook at the aggregate discount
spreadsheet, it doesn't look as good.
And said another way, so let's alsogive PBM some credit for, well,
this is the contract I've signed.
(17:11):
So the PBM would actually be penalizedif they have a high Aggregate Discount
Guarantee for putting the lower AWP on it.
It'd be harder for them tomeet that guarantee, right?
So I'm guaranteeing an85 percent discount.
Why would I want to fill one at 50%?
That makes it harder forme to meet my guarantee.
Yeah.
And I'm going to underline two commonthemes that come up over and over
(17:33):
and over again on this podcast.
The first one is, and Rob Andrewssaid this very succinctly, so I'm
going to quote him, organizationsdo what you pay them to do.
So what in effect with these AggregateDiscount Guarantees we are paying people
to do is to maximize their discounts.
And which brings up the secondthing you hear over and over and
over again on this podcast, whichis, what's the absolute price?
(17:55):
What we should be looking at iswhat is the absolute unit price?
Not what are these savings?
When you have someone who can set alist price, like they can make the
savings whatever they want to suitthe people do what you pay them to do.
So we get ourselves in a very downwarddoom loop when both those things are
true and we set contract guaranteesthat are based on savings or discounts.
(18:18):
And that is really what Cost Plus Drugsand surely others have done, but Cost
Plus Drugs really is looked at now as abenchmark for the cash price, where before
these things are buried in an employer'sclaim file, what did the employee pay,
what was billed back to the employer.
It changes, you don't knowif you're getting a good deal
or not if you're an employer.
(18:39):
Now, this fiduciary lawsuit reallypointed out is you now have a reference.
Anybody can check that price.
Anybody can look at it.
And I think that's the thing that I'vealways told employers is, Hey, just
look at your claim file, select genericsonly, and do descending order, highest
cost to lowest cost in ingredient costs.
And then take those drugs and compareit to Cost Plus, just as an example.
(19:03):
And every employer is going to findexamples in there, frankly, that are
going to make them a little nauseous.
So yes, it matters to the plan sponsor.
Absolutely.
But one of the things you said earlier,where it really matters is to the employee
when they're in their deductible phase.
I mean, so we're just taking overa new client for January 1st.
(19:24):
with a PPM and we were just going throughand looking at some of these employees
and the benefit center is like, I wantto see who we're going to help in this.
So yes, we're going to save money.
Let's talk about the employees.
And so we looked at somebody ona cancer med for breast cancer.
This is a chronic med that she'staken to battle breast cancer.
The PBM charging $1,200 for that drug.
(19:44):
She was in her deductible phase.
Paying $360 out of her pocket, okay.
Leaves the plan to pay over $800.
That drug, through CostPlus Drugs, costs $43.70.
So the PBM, so this is a perfectexample of what we're talking about
here, or another example, I guess isprobably a better way to frame it.
That, you know, a PBM looking tomaximize Aggregate Discount Guarantees,
(20:08):
does the thing where they pick themanufacturer, oh, we're going to give
you this big discount, so patient indeductible phase, why is it paying $360.
Like that's a lot of money.
$360 a month is a lot of money.
That's something that as consultants,and I think I was certainly guilty of
this, you get in, you're negotiatingPBMs and the numbers just get so big
(20:29):
that sometimes it almost seems funnymoney where while you're spending $50
million on pharmacy, What's $500,000here, or what's a million here in
kind of the grand scheme of things.
But at the individual level, exactly whatyou said, these numbers are meaningful,
and you're already battling cancer, you'realready going through something, now you
gotta spend $360 out of your paycheck,and in this example, the employer's like,
(20:51):
we're just gonna pay 100 percent of it.
Because we win, because the employer nowsaves over $800, the employee gets a drug
for free, gets the medication they need.
Because the other piece of thattoo, where you really see this
play out, we're talking aboutAggregate Discount Guarantees.
Another way Aggregate Discount Guaranteescan be manipulated is if you're with
a PBM that owns their own pharmacy,so their mail pharmacy and their
(21:14):
specialty pharmacy, essentially, anytimesomething's sent to your home, with
the largest PBMs in this country, it'scoming through a pharmacy they also own.
So you have no ability to shop.
That's why Cost Plus Drugs is reallylocked out of the traditional market
because filling that drug for $43 throughCost Plus Drugs penalizes the PBM.
They lose the discount guarantee,they lose the margin as a PBM, and
(21:39):
they lose the revenue of shippingthat drug through their own pharmacy.
And we have no idea what theyactually bought the drugs for
from the manufacturer wholesalerat the start of this whole thing.
So I just want to interject two pointshere that go together and then I want
to really understand what RxSaveCard,how RxSaveCard fits in this mix.
So the first thing is, whatis happening right now is that
(22:01):
there is some transparency,which is entering the building.
And that transparency has come fromentities such as Cost Plus Drugs,
there's others, you know, Amazon, right?
There's a bunch of different players rightnow in the pharmacy space in particular,
where a somebody who is health literateat not even the highest level can go and
(22:24):
figure out how much the cash price ofa drug is or how much that drug costs.
You actually can go on Google andyou can do a search for what's
the cash price for this drug.
So it's not like you have to have arcanespreadsheets and proprietary information.
It's easy enough to figurethis out if you can use Google.
And because of that transparency,a couple of things are happening.
(22:46):
Number one, lawsuits.
Because what is the role of a fiduciary?
One of the criteria here isprices paid must be reasonable.
Because like, we have a fiduciaryresponsibility to spend plan
assets wisely on reasonable costs.
And costs have to be reasonable basedon information that is available.
(23:07):
Okay, well, information is availablethat you can get a drug for $53 and
the plan is paying thousands for itwith internal plan dollars and then
forcing members who choose to usethat plan to spend not reasonable,
not reasonable, it's not prudent.
So like, lawsuits are happening,that's kind of thing one, as
a basis of this transparency.
(23:28):
Here's just another point to ponder.
There was a big conference recently wherethe head of one of these, literally the
CEO of one of these big consolidatedentities stood up on stage and said,
And this is almost a direct quote.
Well, you know, everybody knowstransparency doesn't lower prices.
So, you also have comments likethat, which are clearly, on the
(23:53):
pharmacy side at least, incorrect?
What drives costs lower is competitionand the ability to see prices.
And so I think that is what hasreally changed everything with it.
So Cost Plus Drug is a great example.
Again, there's prices out there.
Now you can compare andsay, how good is my price?
(24:14):
And we'd love to see otherpharmacies doing that as well.
I think the other thing that you mentionedis there's more, you can go on Google,
but discount cards and how GoodRx createda category of people to be able to go
to their pharmacy, check prices, andpotentially pay less than their insurance
without having insurance, without payinga subscription fee, by just seeing it.
(24:37):
And so when you have competition,that is where you actually go again.
I can do unit cost to unitcost and I know what this is.
Why should I overpay?
And that is really the keypoint we saw that RxSaveCard.
We saw this environment where I'mlocked into only paying my prices
that my PBM tells me I'm going to pay.
(24:58):
I got to go to the pharmacies they tell meI can go to and here are the prices I pay.
And if I want it to be, I'm air quoting,"covered", right, by my insurance,
these are the rules I have to play by.
So how does RxSaveCard fit into this?
Yeah, so how RxSaveCard, becausewe're outside of that system.
There is an emergingecosystem of cash pay prices.
(25:20):
Right, so Cost PlusDrugs is a great example.
Discount cards, when I go intomy pharmacy and I use a discount
card, and I don't need insuranceto do that, that is an example.
We're seeing Eli Lilly going directand offering cash prices to people
without insurance for Zepbound andtheir GLP-1 at a cost that's 70 percent
(25:42):
less than what you pay through the PBM.
And listen to episode 461, alsowith Chris Crawford for more
on this, the GLP-1 goings on.
The rub on all that is ifI'm with a traditional PBM,
I can't access those prices.
What our solution really does isallow employers to access those
cash prices outside of their PBM.
(26:05):
They don't have to change PBM,they can still keep their PBM.
If they want the rebates, if theywant coverage for other things, you
stay with your PBM, but you're notlocked into only paying those rates.
And so that's really what we've done.
So if employers want to have accessto Cost Plus Drugs, their PBM
won't allow it, we can do that.
You want to access lower cost throughdiscount cards if they're less
(26:26):
expensive and I'm going to my localpharmacy, I always go to for my drug?
We can do that.
So it's this concept ofin our everyday lives.
I love Amazon, Amazon Prime.
I don't buy everything in my life fromAmazon Prime when it's shipped here.
If something's less expensive from Targetor Walmart, I'm going to go buy it.
Yet in our world, we've said, no,everything has to be purchased
through this one entity.
(26:47):
And that just, the fiduciarylawsuits are saying.
That's a problem.
What you're doing, and I think thisis the point that you're making, that
competition lowers prices, which by theway is also why GoodRx prices are often
lower than a PBM price just because theGoodRx forces PBMs to compete, right?
So what we've got going on here is anemployer, you have nothing to do with
(27:09):
a PBM relationship, like great, keepyour PBM, you do you, employer, client,
sponsor, as far as the PBM is concerned.
But also, give youremployees the RxSaveCard.
Because what you're going to be ableto demonstrate is that in any of these
cases where the cash price or the nonPBM price or whatever, like you are the
competition here, and it is eminentlypossible for a lot of these drugs,
(27:33):
especially the ones that are subject tothis Aggregate Discount Guarantee, if
that's afoot in anybody's circumstance,there is going to be a plethora of these
meds which are cheaper, just using thecard and not going through the PBM.
And it's meaningful.
I mean, we're typically seeingabout 50 percent of a total retail
generic spend being reduced justby having access to cash prices.
(27:57):
Well, wait, so it's 50 percent lessfor a planned sponsor to add the card?
If you look at all those drugs, theones I was talking about, so if you
take 30 to 40 percent of the drugs thatyou are overpaying for them, they're
the highest spread, they're all thosedrugs that are well below the Aggregate
Discount Guaranteed line where acash price exists that's less, right?
(28:18):
Which is where our save card comes in.
We access all those prices.
You're going to wipe 50 percentof your total retails you're going
to expend just off the board.
And more importantly, it's the mostutilized benefit by all your employees.
92 percent of all scripts inthis country are generic drugs.
This is what people aregoing to the pharmacy for.
This is what they're using.
These are where you hear those storieswhere people show up in January and
(28:41):
all of a sudden the pharmacist tellshim, well, that drug is now $500.
Like, wait a second.
I was just paying $20.
Last year, what happened?
Well, formulary changed.
It's like you're locked into theseprices and you alluded to it.
You touched on it a little bitin the discount card market where
it's like, well, GoodRx is kind ofusing some different PBM networks.
But the way to think about it is discountcards, that's really what they are doing.
(29:03):
So our solution, if you'rewith a PBM and you go in again,
you're locked in that price.
You're locked into that oneprice that they've negotiated.
That's what they're going to tell you.
What discount cards do.
So what ours is.
We had checked the price of 14 differentdiscount cards at that pharmacy
for that specific drug at the timewhen the member goes in to fill it.
(29:24):
So what do you thinkis going to be better?
One price?
Or letting all those discount cardsunderneath the hood compete and
the best price always comes up?
So it's almost like discounts themselveswhen you go to a retail pharmacy
are getting a little commoditized.
It's just how you access those.
And if you're, if you aren't locked intoonly paying the rates that a PBM tells
(29:47):
you, and you can open that up again,competition leads to lower prices.
Access leads to lower prices.
When you're locked in and youcan't change, you have to pay the
prices dictated by that one entity,that's where you end up overpaying
and you don't have the protection.
And is this considered like a carve out?
For example, do I have to get myPBM's permission to use RxSaveCard?
(30:08):
You do not, no.
So we, our solution specifically, we'renot violating any terms of a PBM contract.
The same way a PBM couldn't tell you,Stacey, You can't go to Cost Plus to get
your drug, even if it's on insurance, orhey Stacey, you can't use a discount card
when you show up at your local pharmacy.
Same thing here, we are just accessingcash prices where they exist for
(30:31):
employers and for their employees.
So yeah, we're sitting outsideof that PBM relationship.
And how this would look would be I wouldjust send all of my employees this card.
I mean, and I don't want to minimizewhat I'm sure is a ton of education
and stuff that goes on, but at theend of the day, it kind of looks
like all the employees get this card.
They can walk into a pharmacy.
(30:51):
It's not like this is alien to mostpeople at this time to like, pull out a
discount card and see if it's cheaper.
Like, people are doing that nowas kind of the course of how
they operate a lot of people.
So you're basically saying justsend everybody this card and
when they go into the pharmacy,they can, they can price check.
And that is what makes us feelso great about it too is, we
(31:14):
aren't denying anybody's drug.
We're not telling you youhave to switch a drug.
We exist to save people money.
And so when employers are rollingit out, they're rolling it out as,
hey, here's a new benefit where youmight be able to get a drug for free
or you might have an option to spendless than you were spending before.
So we really have worked hard to create aeverybody wins, employer saves, employee
(31:36):
saves, you don't have to change yourPBM, you don't have to go through that
migration or anything else, it's just anadded benefit that you can put on next
to it, and so, that's what's so fun,it's just, it's all good news, you know,
when we're looking at like, yeah, you cansave, and getting back to that, the cancer
patient or somebody else, couple hundredbucks, $300 bucks, that's meaningful.
And I think also I wouldsay $40 bucks is meaningful.
(31:59):
If you're filling it every 30 days goingthrough it, all of a sudden you get a
drug for free and everybody spends less.
Like why would we not do that?
I think that's very well put.
When lower costs exist and thecash marketplace is out there
and you decide that I want myfolks to have access to this.
Why overpay if you don't have to?
There is a market now and there's thisemerging market of cash and I think
(32:20):
that's what we're most excited about.
Chris, is there anything Ineglected to ask you that you
want to talk about right now?
We could talk about this for hoursand go in, you know, so many different
directions and everything else.
So I just think what you are highlightingis really important and in preparation for
this discussion, I went back and listenedto some older episodes that I hadn't
listened to, and it was fascinating.
Ge Bai, from almost three yearsago now, was talking about this
(32:43):
emerging cash marketplace, and somany of her predictions came through.
You mentioned the Luke Slindee discussion.
That was really fascinating.
It's like, why don't all pharmaciesjust do the Cost Plus model?
Well, if they offer cash and it'slike they're stuck in this position
of, well, if I enter into a PBMcontract, he gets into this usual
customary, which is essentially thecash rate and why they can't do it.
(33:04):
So I just think I'd say people goback and listen to those episodes.
And it really just gives a nicekind of overlay of the land.
Okay, now this is the market.
And now what can I do as an informedbuyer or an informed benefits leader,
knowing the market as exists andthere is this whole new area that we
can access and you don't have to onlypay the prices dictated by your PBM.
(33:27):
Chris Crawford, if someone is interestedin learning more about the work that
you're doing about RxSaveCard, wherewould you direct them to find you.
Yeah, rxsavecard.com.
You can reach out to us there.
We're very active on LinkedIn,trying to educate as much as we can
on the opportunities in the market.
So people can feel free tomessage me there as well.
Chris Crawford, thank you so much forbeing on Relentless Health Value today.
(33:48):
I loved it.
Thanks, Stacey.
Hi, this is Rob Marty.
The Relentless Health Tribe has hada positive impact on my life since I
first started listening two years ago.
Support this tribe by leaving a review,subscribing to the newsletter, and, most
importantly, inviting others to join thetribe by sharing the podcast with them.
Go ahead, forward it beforeyou tackle that next project.
(34:10):
Chances are the person youshare it with will thank you.
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