December 2, 2025 • 24 mins
Pharmacy benefits shouldn’t feel like a black box. We sit down with Susan Thomas, Chief Commercial Officer at Lucy Rx, to unpack why drug costs keep rising and what it takes to build a benefit that serves patients and plans—not middlemen. Susan started as an oncology nurse and moved into PBM leadership, and that dual lens shows up in everything we cover: from the real-world stress of waiting days for an oral chemo to the hidden economics of rebate chains and vertically integrated networks.
We dig into the two biggest levers for change. First, formulary autonomy: instead of being locked to a single, opaque GPO, a marketplace approach lets employers compare multiple rebate contracts, see drug-level net cost, and choose the best path for categories like Humira biosimilars or GLP-1s. That shift enables utilization management that protects value without opening the floodgates. Second, network independence: when PBMs own specialty and mail, steering is inevitable. By contracting with integrated health systems for specialty and modern mail partners for home delivery, plans can speed therapy, reduce waste from 30-day auto-ships, and improve member experience at a lower overall cost.
We also talk fiduciary duty, policy momentum, and technology. Employers need verifiable net-cost math—not averages—to defend decisions in a post–J&J lawsuit world. Washington’s scrutiny is rising, and incumbents are signaling changes, but structural misalignments remain. On the tech front, AI-driven reporting and specialty navigation are already here, while precision medicine and pharmacogenomics promise to target high-cost drugs to the patients who will benefit most. The question is whether the industry will embrace smaller, smarter populations when volume shrinks and outcomes improve.
If you care about cutting pharmacy spend without compromising care, this conversation is a practical roadmap: ask for drug-level net cost, insist on formulary choice across GPOs, require independent specialty and mail, and set utilization criteria that put patients first. Subscribe, share this episode with a colleague who manages pharmacy benefits, and leave a review with the one PBM metric you wish you’d had sooner.
This episode is sponsored by Benepower, the platform of choice for a modern benefits experience. Benepower is an AI-powered benefits platform offering access to top products and services, enabling consultants and employers to create customized plans, optimize usage, and measure effectiveness. www.benepower.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
David (00:02):
Hi friends, David Saltzman here.
As we slide into the end of theyear, we're serving up a few
encore episodes.
These are conversations ourlisteners love the most, or at
least didn't complain about, sothey earned a replay.
It's a great chance to revisitsome big ideas, get a spark of
inspiration, or finally catchthat episode you meant to listen
to before the fourth quarterturned into a holiday-themed
(00:24):
obstacle course.
We'll be back on January 6thwith brand new interviews and
insights.
Until then, I hope you get alittle time to rest, recharge,
and please hang out with peoplewho don't ask you for benefits
advice over dessert.
Thanks so much for being a partof the Shift Shapers community,
and here's to a healthy, happystart to the new year.
Most everyone agrees that thetraditional PBM arrangements are
(00:47):
bloated, unsustainable, andfrankly don't always work in the
best interest of plans andtheir members.
One PVM is trying to fix that.
What are they doing?
We'll find out on this episodeof Shift Shapers.
Announcer (01:02):
Change either energizes or paralyzes.
The choice is yours.
This is the Shift ShapersPodcast, bringing the employee
benefits industry interviewswith individuals and companies
who are shaping the industry'sshifts.
And now, here's your host,David Saltzman.
David (01:23):
And to help us answer that question, we have invited
Susan Thomas, Chief CommercialOfficer at Lucy RX.
Welcome, Susan.
Well, thank you.
Thank you for having me.
It's our pleasure.
So we always like to ask peoplehow you got to be doing what
you're doing because therearen't a lot of straight lines
in our industry.
How did you end up doing whatyou're doing?
Susan (01:43):
Well, not through a straight line, that's for sure.
I'm actually a registered nurseby background and got into
healthcare really because Iwanted to help people get
better.
Um, early in my career, Iworked in oncology and specialty
pharmacy, and then just kind ofgradually morphed into the PBM
industry about two decades ago.
Uh I realized healthcare ismore than just the care of
(02:08):
people.
It's a business.
And um, so I really wanted tounderstand how the business
works and have spent my last twodecades trying to understand
that and make it better.
David (02:18):
I have a bunch of nurses in the family.
How did how did your nursingexperience inform what you do
today?
Susan (02:23):
Or did it and it still does?
Um, you know, I consider myselfa clinician.
I'm still a licensed registerednurse.
Uh, it certainly helps me fromthe perspective of who we're
caring for, and that's thepatients that need prescriptions
at the end of the day.
Uh certainly we serve payers aswell.
(02:43):
Um, but my knowledge of diseasestates and conditions and
medications certainly serves mewell in the PBM space.
David (02:51):
Well, and you know, unfortunately, once again, the
PBMs like every time we talk tosomebody from a PBM, there seems
there's something in the news.
This week it was congressionalhearings.
The FTC found that back onJanuary 14th, that PBMC
collected five, almost sixbillion dollars in specialty
drug markups.
What's that all about?
Susan (03:14):
Uh, you know, it's really why Lucy was formed is that um
misaligned incentives.
In the traditional PBM space,uh, we've seen over the last
several decades this verticalintegration where PBMs have
aligned themselves with largeinsurance companies.
They own their own mail andspecialty, they manage and
(03:34):
control the formularies, theyhave rebate GPOs that are
largely offshore, making itdifficult for plan sponsors to
understand kind of what's goingon under the hood.
Um and when PBM's revenues comefrom those owned assets, the
incentives are going to be todrive up volume, drive up cost
(03:54):
for plan sponsors.
That's that's how they maketheir money.
David (03:58):
But it but it's interesting that there's so much
money floating around in thisindustry.
I mean, the the FTC hearingstalked a little bit about this
$5.9 billion, but they werealmost talking about it like it
was a day-to-day expense.
I mean, I don't know for you orfor me, I guess $5.9 billion is
serious money.
But it is it is is is the arethe problems in the industry a
(04:20):
function of how much money thereis floating around in, or is
that vice versa?
Susan (04:26):
I think I think it is a um a measure of how much money
is in the space.
I mean, uh we're expected tospend $500 billion in pharmacy
this year.
It'll be a trillion dollars by2030.
So there's a significant amountof money in the pharmacy
benefits space.
David (04:44):
For sure.
Loaded question, but and weprobably talked about this for
an hour.
How the hell did we get here?
Susan (04:52):
We probably could talk about it for an hour or a day.
Um You know, I I I wonder aboutthat myself because back in the
90s, uh, the government createdlaws that prevented physicians
from self-dealing, fromreferring, you know, clients or
patients to owned entities, um,physical therapy uh entities
(05:14):
that fa physicians owned or uhpharmacies, et cetera.
So there's a law preventingthat self-dealing.
How did we not create similarlaws for insurance companies or
PBMs that sell now sell drugs tomembers, not just manage
benefits?
I think that's part of it.
The the lack of regulation inthe industry has allowed the
(05:37):
traditional PBMs to just controlthe whole ecosystem.
David (05:41):
Well, I mean, but I think you're right.
I've been at this since 81,back when dinosaurs roamed the
earth.
And pharmacy was a problem backthen.
So we all kind of know some ofthe problems, and we know that
the money is driving some of theproblems.
To your point, there haven'tbeen a lot of regulations.
Is do you attribute that justto big pharma having a big
(06:04):
checkbook?
Because I think in otherindustries there would have been
a hue and cry already, andsomething would have been done.
Susan (06:10):
Yeah, I think it's big pharma.
I think it's lobbyists for thePBM industry, retail drugstores.
Um, I think there's a lot ofmuscle in this industry that has
prevented change, frankly.
David (06:23):
What if if you had to put your finger on one or two huge
problems that you're working onin Lucy Rx that you folks are
working on solving, what wouldthey be?
Susan (06:34):
Really, it's um conflict of interest.
So when we formed Lucy, weasked ourselves, what if there
were no conflicts?
What if the our incentives werealigned around the plan
sponsors and the patients andmembers that they serve?
And if we eliminated conflicts,where would those be?
Where are the most prevalentconflicts that exist in the
(06:57):
space today that are causingrising drug costs, preventing
plan sponsors from reallymanaging their own benefits?
So it's really eliminatingconflicts.
And we we've selected two keyareas where we believe the
conflicts are so rampant.
Um, and that's formularymanagement and then retail or
(07:18):
sorry, mail and specialtyownership, really the network.
Um, so around formularymanagement, we believe that
because the traditional PBMshave their own GPOs, group
purchasing organizations thatare offshore, hard to audit,
hard to get access to.
(07:38):
We think that the way theycreate their formularies
incentivizes higher cost branddrugs so that they can retain a
piece of the rebate.
We've eliminated an exclusivearrangement with anyone of any
one GPO.
And when you think about thisindustry, you either are the big
three or you use the big threefor um their scale and their
(08:03):
supply chain economics.
We've decided we're not gonnahave an exclusive arrangement
with a GPO.
We've created a marketplace, aformulary marketplace that gives
us much broader access towhat's going on in the whole
ecosystem.
And now we're not handcuffed toone GPO's decision making
(08:23):
around formulary uh drugs andpreferred brand drugs.
It also gives us flexibility tocreate utilization management
criteria that really makes moresense for plan sponsors and
their members.
I've heard so many times in thelast 12 months, you can't put
that in place for GLP ones,you'll lose all the rebates.
(08:45):
But we know that's a categorythat requires really close
monitoring and intenseutilization management criteria.
And if a PBM is going tohandcuff or uh tie a planned
sponsor who's paying for thesedrugs to, you know, basically
open up the floodgates to payingfor drugs, it just doesn't make
(09:06):
any sense.
So our formulary marketplacegives us much broader decision
making and um eliminates theconflict that exists.
David (09:13):
Before we get onto that work, a little bit about, on a
practical sense, if I'm anadvisor and I'm building a plan
for employer, how does how doesbeing able to play around with
the formulary help both theemployer and deliver better
outcomes for the members?
Susan (09:28):
We've obviously connected the dots there.
What it allows us to do isalign the specific plan
sponsors' utilization to theright value stream, so where
they can achieve the greatestrebate value across the
ecosystem.
In other words, they're they'renot locked into one GPO for
(09:49):
their rebates and one set ofdecisions.
Um if a plan sponsor says, youknow, we really think that
Humira is costing our planmillions of dollars and would
like to consider a biosimilarapproach where it's a less
expensive net cost to ourmembers and to our plan, one PBM
(10:09):
GPO might say, you can't dothat, or well, here's your
option, and it's only there'sonly one.
With our marketplace approach,we have multiple options and we
can shop those across thedifferent GPOs to give plans
more options.
And then we also can providethem with drug-level rebate
value so they can make you knowreally um real-time decisions on
(10:35):
is that a better net costposition for me as a plant
sponsor.
David (10:40):
There's a lot of talk, especially since the J and J
lawsuit last year, um, aboutfiduciary responsibility and
especially for around pharma.
Does that kind of an approach,the approach that you're taking,
help advisors and plans meetthose requirements of saying,
look, we did our due diligence.
We really looked through abunch of different options
(11:02):
instead of just saying weswallowed whatever we were
taking and and we moved on.
Susan (11:06):
Yeah, I think I think that's um really why we're
seeing those those lawsuits.
I think many employers havejust resigned to the fact that
they're stuck and they theydon't have control.
And that's unfortunate.
Um, but uh the large PBMs havetaken that control away in many
cases and not allowed when a PBMsays you can't do that, but
(11:29):
you're the payer, it really doestie their hands, right?
So um I think that's part ofthe challenge.
Our our approach is to enablebetter decision making and
actually provide net costinformation.
Traditional PBMs are inclinedto say that data is proprietary
or we can't share that value, orum, they give averages.
(11:54):
And that doesn't really allowplans to make decisions in their
best interest.
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So if you're if you're a plan,you know, what do you need to
ask for?
What are the things that youshould demand that you have in
order to be able to manage yourpharmacy benefits appropriately?
Susan (13:05):
You should ask for clarity around um the true net
cost.
The true net cost.
So um the way pricing isstructured in this industry
today is we guarantee minimums.
We guarantee um minimum rebatesby channel and we guarantee
network discounts.
If a if a PBM uses thatguarantee as a measure of a uh
(13:31):
net cost equation, that doesn'twork because all drugs have
different rebate um values.
So if you're looking at a classof drugs and and it's off the
charts on your budget, your PBMshould be able to provide you
true rebate values so you knowthat that net cost is um
(13:53):
compared to generics orbiosimilars, is actually real,
not just averages or not usingyour um rebate guarantee
minimums as a as a denominator.
David (14:06):
You know, it it's always amazing to me that folks who
spend billions and billions ofdollars on plans don't demand
those kinds of things.
And uh it it pharmacy seems tobe the last place where
employers and plans don't feelas though they can be in the
driver's seat.
So it's nice to see new modelscoming along that offer both
plans and their advisors who putthese plans together for them
(14:28):
different options.
You you mentioned formulasbeing one of the two problems.
Then you mentioned network.
Would you talk a little bitabout network and why that's
important and what to look forthere?
Susan (14:37):
Absolutely.
I mentioned at the beginningthe traditional PBMs have
entered into or acquired theirown mail and specialty
pharmacies.
And those are revenue streamsfor the for the entities.
You can see um that in many ofthe, you know, earnings calls
for the largest PBMs.
Well, I mean, imagine you're acancer patient and you leave
(15:02):
your oncologist and he says, youknow, you need to start taking
this oral chemo agent, but myPBM is forcing me to use their
own specialty pharmacy.
Now I have to wait five days toget the medication.
I'm a little bit anxious ifthat's the scenario.
In our model, we haveeliminated the ownership of
(15:24):
specialty in that case, and wehave contracted with large
national integrated healthsystems.
So our model is allow themember to pick up their oral
chemo agent at the pharmacy intheir cancer center.
It's so much more effective.
Um, the speed that therapy isthe same day.
It also eliminates the wastebecause uh in a traditional
(15:48):
specialty pharmacy, they'reshipping a 30-day supply,
whether you your dose waschanged or not, and there's you
know five to seven thousanddollars of waste for an average
uh cancer patient in the in thepharmacy space.
So um just changing that modelgives members a better
experience, eliminates waste forplan sponsors, and um, you
(16:10):
know, isn't isn't a hidden feethat plans don't understand.
And on the mail side, so we'veseen the big three push, push,
push prescriptions to eithertheir mail facility or the
retail chain that they own.
Um again, why should we lock amember into a channel that that
(16:32):
they're not custable?
We've we are contracting withum best in class mail facilities
like Amazon, who doesn't haveAmazon on their phone as an app?
Amazon offers a modern, trulyefficient member experience at a
lower cost.
Imagine med ship next daydelivery at no additional cost.
(16:52):
That doesn't happen in thetraditional PBM space.
David (16:56):
Other than being kind enough to do interviews like
this, what's Lucy Arts doing tohelp uh educated advisors and
the plans they serve?
Susan (17:06):
Well, uh our roadshow has been pretty intense this year.
You know, we've um we imaginedthis new way of doing pharmacy
care about three years ago andum have have made the
investments in um a couple ofPBMs that give us the platform
to run a new a new business.
(17:26):
That was in 2024.
Since then, we have been reallyspreading this message and
sharing with consultants andbrokers how formulary autonomy
or a marketplace of formularythat requires the GPOs to
compete against one another andan independent pharmacy network
change the game.
(17:47):
And we've been um puttingtogether our case studies to
share examples of how thatworks.
Uh so we've been out in frontof all the large national
practices as well as localhealth and benefits brokers to
help them understand that thingsreally really can be different
and just you know let us sharehow that could work.
David (18:08):
Well, and for their own protection, as we discussed, and
for the betterment of theirmembers, things have to change.
It's I guess it's gonna be abottom-up grassroots approach,
which is what we're seeing.
I still don't see anything forall of the as we started the
conversation today, wailing andmoaning and gnashing of teeth in
Washington, not seeing anythinghappen up there except a whole
(18:28):
bunch of conversation.
Um, are you aware of anythingthat that stands a snowball's
chance in hell of passing that'sfloating around Congress right
now?
Susan (18:36):
There's certainly conversations going on.
Um, you know, we saw um some anintroductory bipartisan bill um
before the inauguration, um,and that all the pharmacy
components largely were removedfrom that.
Uh we think that something willpass um this year, probably not
(18:58):
all components that were inthat bipartisan bill, but um
it's it's too soon probably toknow how um Congress is going to
look at what's been submitted.
Uh we're just what we know atLucy is we're already aligned to
that, to the vision ofeliminating conflicts.
We don't own mailer specialty.
We're not affiliated with agiant insurance company.
(19:21):
Uh, we don't own our own retailpharmacy and sell drugs to
members.
So uh whatever comes to light,we're already aligned and won't
have to pivot or you know,divest of assets like would we
think will happen in this space.
And, you know, you already seecompanies like CVS starting to
consider uh losing or divestingsome of the assets in their
(19:44):
organization.
Don't know if it's related tosome of the scrutiny in the
space.
Um, you've seen in a recentearnings call, the CEO of United
Healthcare state that we umthey already passed 98% of
rebates to to their plansponsors and expect to pass the
other 2% within the next threeyears.
(20:05):
Now, is that because of thescrutiny uh from Washington?
Maybe.
Um, my I you know, I questionthere, that 2% must be a pretty
big number to take three moreyears to get it into the right
hands.
David (20:20):
Well, yeah, somebody once told me that human beings never
act with the light, they actwith the heat that comes from
it.
So maybe there are somechanges, you know, finally
coming.
But look, I think he said itbest.
The entire health insuranceindustry, writ large, has been
the poster child for misalignedincentives.
And it for a long time, it'sbeen the entirety of the
(20:42):
industry there.
I don't think there was onecomponent that I could point to
with all my years of practicingthat was exempt from that.
So it's nice to see.
I mean, if the pharmacy pieceis going to be the piece that
pulls away, it's certainly a bigpercentage of spend.
So it's nice to see that thereare some changes, you know,
happening there.
What do you see in the nextcouple of years?
We heard a press conference umfrom uh I guess it was from the
(21:05):
White House day one, where folksare talking about AI and the
impact that AI may have ondesigning genetically perfect
drugs for individuals.
Um, we've had conversations onthis podcast before about
pharmacogenetic testing and whatthat might bring.
What do you what do you folkssee coming?
Susan (21:21):
Certainly that kind of technology advancement for sure.
Um, yeah, you know, GLP1s is areally good example of a lot of
lot of people um have conditionsthat are indicated for GLP1s.
Now, plan sponsors largelycan't afford them, but with
precision and AI and machinelearning and um genomic um
(21:46):
advances, we'll know exactlywho's going to benefit benefit
from those types of drugs.
And I think that'll make a hugedifference if those kinds of
things actually advance.
Because, you know, as theskeptic in me says, you know, if
those things advance, then youhave a smaller target for a
population of drugs.
And does pharma really wantthat?
(22:07):
And do the large PBMs and paypayers really want a smaller
population when you canfine-tune who's gonna respond
and who's not gonna respond.
So um a little skeptic, but Ithink technology is definitely
gonna play a role.
I'm I mean, we use AI in ourreporting and um um specialty
(22:29):
navigator tool today todetermine what the best solution
for a given patient is in theirjourney for specialty drugs,
for example.
David (22:39):
I think there's a lot of really interesting stuff coming
down the pike, but we saved themost interesting question for
last.
Lucy Rx.
Where did Lucy come from?
Or is there a Lucy?
Susan (22:51):
Um I I like how you phrase the question because
we've thought a lot about thename.
Um, it actually derives fromthe Latin word for light.
And our vision is Lucy Rx willshed a light on the opaque
practices in this space and bemuch more transparent and
provide clarity around options.
(23:12):
See, transparency in this spacehas become kind of a uh
everyday word and it does andbasically meaningless.
If you're passing through thevalue of drugs or rebates, okay,
but are you making decisions inmy best interest?
That's true transparency.
And um, that's our our purpose,really, is to shed a light on
(23:35):
how decisions are made in thespace and how to make make them
more beneficial for employersand brokers to understand and
for members to actually accessmedications.
Um it's a it's a woman's name.
It's a name.
Um, and we think that bringsthe humanity back into this
space.
So it definitely a you know avery um intentional choice of
(23:59):
our brand uh and and we like it.
David (24:03):
Awesome.
And that's a great place to endour conversation.
Susan Thomas, Chief CommercialOfficer at Lucy Rx.
Susan, thanks so much forsharing your expertise with the
audience.
We hope you'll come back.
Susan (24:13):
Thank you so much, David.
It was great.
David (24:20):
I want to give a quick shout out to our sponsor and our
producer, Hatcher Media.
Hey, if you need podcastproduction or professional
graphic design, Josh Hatcher'sthe expert to contact.
For more information, visit himat hatchermedia.net.
That's h-t-c-h-rmedia.net.
Announcer (24:38):
This Shipchapers podcast is copyrighted content
and may not be reproduced inwhole or in part without the
express written permission ofShip Chaper Solutions LLC.
Copyright 2024.
Hi friends, David Saltzman here.
As we slide into the end of theyear, we're serving up a few
encore episodes.
These are conversations ourlisteners love the most, or at
least didn't complain about, sothey earned a replay.
It's a great chance to revisitsome big ideas, get a spark of
inspiration, or finally catchthat episode you meant to listen
to before the fourth quarterturned into a holiday-themed
(00:24):
obstacle course.
We'll be back on January 6thwith brand new interviews and
insights.
Until then, I hope you get alittle time to rest, recharge,
and please hang out with peoplewho don't ask you for benefits
advice over dessert.
Thanks so much for being a partof the Shift Shapers community,
and here's to a healthy, happystart to the new year.
Most everyone agrees that thetraditional PBM arrangements are
(00:47):
bloated, unsustainable, andfrankly don't always work in the
best interest of plans andtheir members.
One PVM is trying to fix that.
What are they doing?
We'll find out on this episodeof Shift Shapers.
Announcer (01:02):
Change either energizes or paralyzes.
The choice is yours.
This is the Shift ShapersPodcast, bringing the employee
benefits industry interviewswith individuals and companies
who are shaping the industry'sshifts.
And now, here's your host,David Saltzman.
David (01:23):
And to help us answer that question, we have invited
Susan Thomas, Chief CommercialOfficer at Lucy RX.
Welcome, Susan.
Well, thank you.
Thank you for having me.
It's our pleasure.
So we always like to ask peoplehow you got to be doing what
you're doing because therearen't a lot of straight lines
in our industry.
How did you end up doing whatyou're doing?
Susan (01:43):
Well, not through a straight line, that's for sure.
I'm actually a registered nurseby background and got into
healthcare really because Iwanted to help people get
better.
Um, early in my career, Iworked in oncology and specialty
pharmacy, and then just kind ofgradually morphed into the PBM
industry about two decades ago.
Uh I realized healthcare ismore than just the care of
(02:08):
people.
It's a business.
And um, so I really wanted tounderstand how the business
works and have spent my last twodecades trying to understand
that and make it better.
David (02:18):
I have a bunch of nurses in the family.
How did how did your nursingexperience inform what you do
today?
Susan (02:23):
Or did it and it still does?
Um, you know, I consider myselfa clinician.
I'm still a licensed registerednurse.
Uh, it certainly helps me fromthe perspective of who we're
caring for, and that's thepatients that need prescriptions
at the end of the day.
Uh certainly we serve payers aswell.
(02:43):
Um, but my knowledge of diseasestates and conditions and
medications certainly serves mewell in the PBM space.
David (02:51):
Well, and you know, unfortunately, once again, the
PBMs like every time we talk tosomebody from a PBM, there seems
there's something in the news.
This week it was congressionalhearings.
The FTC found that back onJanuary 14th, that PBMC
collected five, almost sixbillion dollars in specialty
drug markups.
What's that all about?
Susan (03:14):
Uh, you know, it's really why Lucy was formed is that um
misaligned incentives.
In the traditional PBM space,uh, we've seen over the last
several decades this verticalintegration where PBMs have
aligned themselves with largeinsurance companies.
They own their own mail andspecialty, they manage and
(03:34):
control the formularies, theyhave rebate GPOs that are
largely offshore, making itdifficult for plan sponsors to
understand kind of what's goingon under the hood.
Um and when PBM's revenues comefrom those owned assets, the
incentives are going to be todrive up volume, drive up cost
(03:54):
for plan sponsors.
That's that's how they maketheir money.
David (03:58):
But it but it's interesting that there's so much
money floating around in thisindustry.
I mean, the the FTC hearingstalked a little bit about this
$5.9 billion, but they werealmost talking about it like it
was a day-to-day expense.
I mean, I don't know for you orfor me, I guess $5.9 billion is
serious money.
But it is it is is is the arethe problems in the industry a
(04:20):
function of how much money thereis floating around in, or is
that vice versa?
Susan (04:26):
I think I think it is a um a measure of how much money
is in the space.
I mean, uh we're expected tospend $500 billion in pharmacy
this year.
It'll be a trillion dollars by2030.
So there's a significant amountof money in the pharmacy
benefits space.
David (04:44):
For sure.
Loaded question, but and weprobably talked about this for
an hour.
How the hell did we get here?
Susan (04:52):
We probably could talk about it for an hour or a day.
Um You know, I I I wonder aboutthat myself because back in the
90s, uh, the government createdlaws that prevented physicians
from self-dealing, fromreferring, you know, clients or
patients to owned entities, um,physical therapy uh entities
(05:14):
that fa physicians owned or uhpharmacies, et cetera.
So there's a law preventingthat self-dealing.
How did we not create similarlaws for insurance companies or
PBMs that sell now sell drugs tomembers, not just manage
benefits?
I think that's part of it.
The the lack of regulation inthe industry has allowed the
(05:37):
traditional PBMs to just controlthe whole ecosystem.
David (05:41):
Well, I mean, but I think you're right.
I've been at this since 81,back when dinosaurs roamed the
earth.
And pharmacy was a problem backthen.
So we all kind of know some ofthe problems, and we know that
the money is driving some of theproblems.
To your point, there haven'tbeen a lot of regulations.
Is do you attribute that justto big pharma having a big
(06:04):
checkbook?
Because I think in otherindustries there would have been
a hue and cry already, andsomething would have been done.
Susan (06:10):
Yeah, I think it's big pharma.
I think it's lobbyists for thePBM industry, retail drugstores.
Um, I think there's a lot ofmuscle in this industry that has
prevented change, frankly.
David (06:23):
What if if you had to put your finger on one or two huge
problems that you're working onin Lucy Rx that you folks are
working on solving, what wouldthey be?
Susan (06:34):
Really, it's um conflict of interest.
So when we formed Lucy, weasked ourselves, what if there
were no conflicts?
What if the our incentives werealigned around the plan
sponsors and the patients andmembers that they serve?
And if we eliminated conflicts,where would those be?
Where are the most prevalentconflicts that exist in the
(06:57):
space today that are causingrising drug costs, preventing
plan sponsors from reallymanaging their own benefits?
So it's really eliminatingconflicts.
And we we've selected two keyareas where we believe the
conflicts are so rampant.
Um, and that's formularymanagement and then retail or
(07:18):
sorry, mail and specialtyownership, really the network.
Um, so around formularymanagement, we believe that
because the traditional PBMshave their own GPOs, group
purchasing organizations thatare offshore, hard to audit,
hard to get access to.
(07:38):
We think that the way theycreate their formularies
incentivizes higher cost branddrugs so that they can retain a
piece of the rebate.
We've eliminated an exclusivearrangement with anyone of any
one GPO.
And when you think about thisindustry, you either are the big
three or you use the big threefor um their scale and their
(08:03):
supply chain economics.
We've decided we're not gonnahave an exclusive arrangement
with a GPO.
We've created a marketplace, aformulary marketplace that gives
us much broader access towhat's going on in the whole
ecosystem.
And now we're not handcuffed toone GPO's decision making
(08:23):
around formulary uh drugs andpreferred brand drugs.
It also gives us flexibility tocreate utilization management
criteria that really makes moresense for plan sponsors and
their members.
I've heard so many times in thelast 12 months, you can't put
that in place for GLP ones,you'll lose all the rebates.
(08:45):
But we know that's a categorythat requires really close
monitoring and intenseutilization management criteria.
And if a PBM is going tohandcuff or uh tie a planned
sponsor who's paying for thesedrugs to, you know, basically
open up the floodgates to payingfor drugs, it just doesn't make
(09:06):
any sense.
So our formulary marketplacegives us much broader decision
making and um eliminates theconflict that exists.
David (09:13):
Before we get onto that work, a little bit about, on a
practical sense, if I'm anadvisor and I'm building a plan
for employer, how does how doesbeing able to play around with
the formulary help both theemployer and deliver better
outcomes for the members?
Susan (09:28):
We've obviously connected the dots there.
What it allows us to do isalign the specific plan
sponsors' utilization to theright value stream, so where
they can achieve the greatestrebate value across the
ecosystem.
In other words, they're they'renot locked into one GPO for
(09:49):
their rebates and one set ofdecisions.
Um if a plan sponsor says, youknow, we really think that
Humira is costing our planmillions of dollars and would
like to consider a biosimilarapproach where it's a less
expensive net cost to ourmembers and to our plan, one PBM
(10:09):
GPO might say, you can't dothat, or well, here's your
option, and it's only there'sonly one.
With our marketplace approach,we have multiple options and we
can shop those across thedifferent GPOs to give plans
more options.
And then we also can providethem with drug-level rebate
value so they can make you knowreally um real-time decisions on
(10:35):
is that a better net costposition for me as a plant
sponsor.
David (10:40):
There's a lot of talk, especially since the J and J
lawsuit last year, um, aboutfiduciary responsibility and
especially for around pharma.
Does that kind of an approach,the approach that you're taking,
help advisors and plans meetthose requirements of saying,
look, we did our due diligence.
We really looked through abunch of different options
(11:02):
instead of just saying weswallowed whatever we were
taking and and we moved on.
Susan (11:06):
Yeah, I think I think that's um really why we're
seeing those those lawsuits.
I think many employers havejust resigned to the fact that
they're stuck and they theydon't have control.
And that's unfortunate.
Um, but uh the large PBMs havetaken that control away in many
cases and not allowed when a PBMsays you can't do that, but
(11:29):
you're the payer, it really doestie their hands, right?
So um I think that's part ofthe challenge.
Our our approach is to enablebetter decision making and
actually provide net costinformation.
Traditional PBMs are inclinedto say that data is proprietary
or we can't share that value, orum, they give averages.
(11:54):
And that doesn't really allowplans to make decisions in their
best interest.
David (12:02):
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So if you're if you're a plan,you know, what do you need to
ask for?
What are the things that youshould demand that you have in
order to be able to manage yourpharmacy benefits appropriately?
Susan (13:05):
You should ask for clarity around um the true net
cost.
The true net cost.
So um the way pricing isstructured in this industry
today is we guarantee minimums.
We guarantee um minimum rebatesby channel and we guarantee
network discounts.
If a if a PBM uses thatguarantee as a measure of a uh
(13:31):
net cost equation, that doesn'twork because all drugs have
different rebate um values.
So if you're looking at a classof drugs and and it's off the
charts on your budget, your PBMshould be able to provide you
true rebate values so you knowthat that net cost is um
(13:53):
compared to generics orbiosimilars, is actually real,
not just averages or not usingyour um rebate guarantee
minimums as a as a denominator.
David (14:06):
You know, it it's always amazing to me that folks who
spend billions and billions ofdollars on plans don't demand
those kinds of things.
And uh it it pharmacy seems tobe the last place where
employers and plans don't feelas though they can be in the
driver's seat.
So it's nice to see new modelscoming along that offer both
plans and their advisors who putthese plans together for them
(14:28):
different options.
You you mentioned formulasbeing one of the two problems.
Then you mentioned network.
Would you talk a little bitabout network and why that's
important and what to look forthere?
Susan (14:37):
Absolutely.
I mentioned at the beginningthe traditional PBMs have
entered into or acquired theirown mail and specialty
pharmacies.
And those are revenue streamsfor the for the entities.
You can see um that in many ofthe, you know, earnings calls
for the largest PBMs.
Well, I mean, imagine you're acancer patient and you leave
(15:02):
your oncologist and he says, youknow, you need to start taking
this oral chemo agent, but myPBM is forcing me to use their
own specialty pharmacy.
Now I have to wait five days toget the medication.
I'm a little bit anxious ifthat's the scenario.
In our model, we haveeliminated the ownership of
(15:24):
specialty in that case, and wehave contracted with large
national integrated healthsystems.
So our model is allow themember to pick up their oral
chemo agent at the pharmacy intheir cancer center.
It's so much more effective.
Um, the speed that therapy isthe same day.
It also eliminates the wastebecause uh in a traditional
(15:48):
specialty pharmacy, they'reshipping a 30-day supply,
whether you your dose waschanged or not, and there's you
know five to seven thousanddollars of waste for an average
uh cancer patient in the in thepharmacy space.
So um just changing that modelgives members a better
experience, eliminates waste forplan sponsors, and um, you
(16:10):
know, isn't isn't a hidden feethat plans don't understand.
And on the mail side, so we'veseen the big three push, push,
push prescriptions to eithertheir mail facility or the
retail chain that they own.
Um again, why should we lock amember into a channel that that
(16:32):
they're not custable?
We've we are contracting withum best in class mail facilities
like Amazon, who doesn't haveAmazon on their phone as an app?
Amazon offers a modern, trulyefficient member experience at a
lower cost.
Imagine med ship next daydelivery at no additional cost.
(16:52):
That doesn't happen in thetraditional PBM space.
David (16:56):
Other than being kind enough to do interviews like
this, what's Lucy Arts doing tohelp uh educated advisors and
the plans they serve?
Susan (17:06):
Well, uh our roadshow has been pretty intense this year.
You know, we've um we imaginedthis new way of doing pharmacy
care about three years ago andum have have made the
investments in um a couple ofPBMs that give us the platform
to run a new a new business.
(17:26):
That was in 2024.
Since then, we have been reallyspreading this message and
sharing with consultants andbrokers how formulary autonomy
or a marketplace of formularythat requires the GPOs to
compete against one another andan independent pharmacy network
change the game.
(17:47):
And we've been um puttingtogether our case studies to
share examples of how thatworks.
Uh so we've been out in frontof all the large national
practices as well as localhealth and benefits brokers to
help them understand that thingsreally really can be different
and just you know let us sharehow that could work.
David (18:08):
Well, and for their own protection, as we discussed, and
for the betterment of theirmembers, things have to change.
It's I guess it's gonna be abottom-up grassroots approach,
which is what we're seeing.
I still don't see anything forall of the as we started the
conversation today, wailing andmoaning and gnashing of teeth in
Washington, not seeing anythinghappen up there except a whole
(18:28):
bunch of conversation.
Um, are you aware of anythingthat that stands a snowball's
chance in hell of passing that'sfloating around Congress right
now?
Susan (18:36):
There's certainly conversations going on.
Um, you know, we saw um some anintroductory bipartisan bill um
before the inauguration, um,and that all the pharmacy
components largely were removedfrom that.
Uh we think that something willpass um this year, probably not
(18:58):
all components that were inthat bipartisan bill, but um
it's it's too soon probably toknow how um Congress is going to
look at what's been submitted.
Uh we're just what we know atLucy is we're already aligned to
that, to the vision ofeliminating conflicts.
We don't own mailer specialty.
We're not affiliated with agiant insurance company.
(19:21):
Uh, we don't own our own retailpharmacy and sell drugs to
members.
So uh whatever comes to light,we're already aligned and won't
have to pivot or you know,divest of assets like would we
think will happen in this space.
And, you know, you already seecompanies like CVS starting to
consider uh losing or divestingsome of the assets in their
(19:44):
organization.
Don't know if it's related tosome of the scrutiny in the
space.
Um, you've seen in a recentearnings call, the CEO of United
Healthcare state that we umthey already passed 98% of
rebates to to their plansponsors and expect to pass the
other 2% within the next threeyears.
(20:05):
Now, is that because of thescrutiny uh from Washington?
Maybe.
Um, my I you know, I questionthere, that 2% must be a pretty
big number to take three moreyears to get it into the right
hands.
David (20:20):
Well, yeah, somebody once told me that human beings never
act with the light, they actwith the heat that comes from
it.
So maybe there are somechanges, you know, finally
coming.
But look, I think he said itbest.
The entire health insuranceindustry, writ large, has been
the poster child for misalignedincentives.
And it for a long time, it'sbeen the entirety of the
(20:42):
industry there.
I don't think there was onecomponent that I could point to
with all my years of practicingthat was exempt from that.
So it's nice to see.
I mean, if the pharmacy pieceis going to be the piece that
pulls away, it's certainly a bigpercentage of spend.
So it's nice to see that thereare some changes, you know,
happening there.
What do you see in the nextcouple of years?
We heard a press conference umfrom uh I guess it was from the
(21:05):
White House day one, where folksare talking about AI and the
impact that AI may have ondesigning genetically perfect
drugs for individuals.
Um, we've had conversations onthis podcast before about
pharmacogenetic testing and whatthat might bring.
What do you what do you folkssee coming?
Susan (21:21):
Certainly that kind of technology advancement for sure.
Um, yeah, you know, GLP1s is areally good example of a lot of
lot of people um have conditionsthat are indicated for GLP1s.
Now, plan sponsors largelycan't afford them, but with
precision and AI and machinelearning and um genomic um
(21:46):
advances, we'll know exactlywho's going to benefit benefit
from those types of drugs.
And I think that'll make a hugedifference if those kinds of
things actually advance.
Because, you know, as theskeptic in me says, you know, if
those things advance, then youhave a smaller target for a
population of drugs.
And does pharma really wantthat?
(22:07):
And do the large PBMs and paypayers really want a smaller
population when you canfine-tune who's gonna respond
and who's not gonna respond.
So um a little skeptic, but Ithink technology is definitely
gonna play a role.
I'm I mean, we use AI in ourreporting and um um specialty
(22:29):
navigator tool today todetermine what the best solution
for a given patient is in theirjourney for specialty drugs,
for example.
David (22:39):
I think there's a lot of really interesting stuff coming
down the pike, but we saved themost interesting question for
last.
Lucy Rx.
Where did Lucy come from?
Or is there a Lucy?
Susan (22:51):
Um I I like how you phrase the question because
we've thought a lot about thename.
Um, it actually derives fromthe Latin word for light.
And our vision is Lucy Rx willshed a light on the opaque
practices in this space and bemuch more transparent and
provide clarity around options.
(23:12):
See, transparency in this spacehas become kind of a uh
everyday word and it does andbasically meaningless.
If you're passing through thevalue of drugs or rebates, okay,
but are you making decisions inmy best interest?
That's true transparency.
And um, that's our our purpose,really, is to shed a light on
(23:35):
how decisions are made in thespace and how to make make them
more beneficial for employersand brokers to understand and
for members to actually accessmedications.
Um it's a it's a woman's name.
It's a name.
Um, and we think that bringsthe humanity back into this
space.
So it definitely a you know avery um intentional choice of
(23:59):
our brand uh and and we like it.
David (24:03):
Awesome.
And that's a great place to endour conversation.
Susan Thomas, Chief CommercialOfficer at Lucy Rx.
Susan, thanks so much forsharing your expertise with the
audience.
We hope you'll come back.
Susan (24:13):
Thank you so much, David.
It was great.
David (24:20):
I want to give a quick shout out to our sponsor and our
producer, Hatcher Media.
Hey, if you need podcastproduction or professional
graphic design, Josh Hatcher'sthe expert to contact.
For more information, visit himat hatchermedia.net.
That's h-t-c-h-rmedia.net.
Announcer (24:38):
This Shipchapers podcast is copyrighted content
and may not be reproduced inwhole or in part without the
express written permission ofShip Chaper Solutions LLC.
Copyright 2024.
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