‘We don’t set the price. Phar­ma­ceu­ti­cal man­u­fac­tur­ers set the price.’

Modern Healthcare - - Q&A -

Phar­macy ben­e­fit man­agers are fac­ing heat for not do­ing enough to slow down drug price hikes.

Unit­edHealth Group’s sub­sidiary, Op­tumRx, re­cently ac­quired Cata­ma­ran Corp. for al­most $13 bil­lion, mak­ing it the third-largest PBM in the coun­try by mar­ket share. Mod­ern Health­care Mid­west Bureau Chief Bob Her­man re­cently asked Op­tumRx CEO Mark Thierer about the con­tro­versy swirling around the in­dus­try. The fol­low­ing is an edited ex­cerpt.

Mod­ern Health­care: Does the PBM busi­ness model need an over­haul given the scru­tiny around es­ca­lat­ing drug prices?

Mark Thierer: The in­dus­try model is fun­da­men­tally a con­sump­tion model. And when I say this, I mean PBMs profit from in­creased use of mail or­der. In the case of the largest play­ers, they profit from in­creas­ing uti­liza­tion of med­i­ca­tions, from di­rect­ing traf­fic into a spe­cific store, and driv­ing up foot traf­fic and fron­tend-of-store pur­chases and pre­scrip­tion drug pur­chases. They ac­tu­ally ben­e­fit from price in­creases.

There’s a mis­align­ment here of in­ter­ests be­cause that’s not what so­phis­ti­cated buy­ers want. They don’t want to drive in­creased uti­liza­tion. They want some­one to stand in front of this train. They want some­one to be a guardian of their phar­macy spend.

We’ve con­cluded at Op­tumRx that our model is re­ally a phar­macy care ser­vices model. Un­der­neath ev­ery de­ci­sion we make is a data play that’s fo­cused on tak­ing every­thing we know about a mem­ber—their en­tire con­di­tion in­clud­ing their pre­scrip­tion drug us­age—and mak­ing a de­ci­sion about the next best clin­i­cal ac­tion.

MH: Op­tumRx has re­cently won sev­eral large phar­macy ben­e­fits con­tracts, in­clud­ing deals with Gen­eral Elec­tric, the Cal­i­for­nia Pub­lic Em­ploy­ees’ Re­tire­ment Sys­tem and the Texas Pub­lic Em­ploy­ees As­so­ci­a­tion. How?

Thierer: It is this new model. What we’re do­ing for them is align­ing our in­ter­ests with what they’re hop­ing to ac­com­plish, and it’s sim­ple. This is not rocket science when you think about it— we’re tak­ing the fact that we have full man­age­ment of phar­macy, and the fact in a cou­ple of those cases where we’ve got med­i­cal ben­e­fit man­age­ment.

We’re in­te­grat­ing those things and cre­at­ing a bet­ter out­come. We take your data, and then we take your med­i­cal claims data and other claims feeds into this (pro­pri­etary) data­base, and this is the thing that sets us apart.

By the way, GE—I’ve been hang­ing around this in­dus­try for­ever—there isn’t a more chal­leng­ing, so­phis­ti­cated, dif­fi­cult, tough ne­go­tia­tor. They are the top of the food chain. They picked us be­cause we have a tool set and a ca­pa­bil­ity and a fo­cus on align­ing in­ter­ests with them.

MH: If your busi­ness plan is as good as it sounds, does that mean in the fu­ture we’ll ac­tu­ally see the rate of growth for em­ployer pre­mium in­creases go down? Or even em­ployer pre­mium de­creases?

Thierer: To­day, we have cus­tomers who are see­ing year-over-year med­i­cal trend re­duc­tions, and this is a fact. Now, you have to sign on and uti­lize the ca­pa­bil­i­ties, all the ma­chin­ery, all the clin­i­cal pro­grams.

On the whole it’s up. It’s all up be­cause the ma­chin­ery in health­care is still built for vol­ume. We are re­ally build­ing this for value. This is what we’re re­ally talk­ing about. This is cre­at­ing a bet­ter value, more ap­pro­pri­ate uti­liza­tion, bet­ter care man­age­ment and only us­ing re­sources that are re­quired to make you bet­ter.

MH: If I’m an em­ployer and I hire you, and drug ex­penses are ac­tu­ally be­ing man­aged, do I re­ally want to tout how great things are go­ing? Don’t em­ploy­ers want to keep their com­peti­tors in the dark?

Thierer: There’s an el­e­ment of truth to that. But do you know what’s funny? Es­pe­cially since I’m run­ning in the same cir­cles as ben­e­fit man­agers and vice pres­i­dents of hu­man re­sources, they like to talk about what they’re do­ing. That’s what they do. There are peo­ple who want a new way right now, so tim­ing is every­thing.

MH: What was your re­ac­tion to Martin Shkreli and Valeant

“Even peo­ple in health­care don’t un­der­stand some­times or fully ap­pre­ci­ate what PBMs do.”

“So­phis­ti­cated buy­ers … want some­one to stand in front of this train. They want some­one to be a guardian of their phar­macy spend.”

Phar­ma­ceu­ti­cals, which raised drug prices of­ten and ex­ces­sively? What about other drug prices that are ris­ing?

Thierer: The in­no­va­tors of these drugs are cre­at­ing amaz­ing ther­a­pies and are sav­ing lives, and I think no­body can de­bate that. But what you’ve seen the phar­ma­ceu­ti­cal in­dus­try do is use price in­creases as a way to de­liver share­holder value. In par­tic­u­lar, it’s the high-cost biotech drugs.

They’re pass­ing through price in­creases that are ex­or­bi­tant, so we’re tak­ing a stand with the in­dus­try. And we’re act­ing as the guardian for our cus­tomers and con­tract­ing with the in­dus­try in a way that doesn’t al­low those full price in­creases to go through to the plan.

As an ex­am­ple, if you’re a man­u­fac­turer and you in­crease a price of a drug be­yond a 6% thresh­old, then any price in­crease above that num­ber—call it a 15% price in­crease—at the end of the year, you’re go­ing to pay the client back the 9% over the thresh­old that we con­tracted that you would cap.

This is one of the things that I think the Amer­i­can pub­lic doesn’t un­der­stand. Even peo­ple in health­care don’t un­der­stand some­times or fully ap­pre­ci­ate what PBMs do. We don’t set the price. Phar­ma­ceu­ti­cal man­u­fac­tur­ers set the price. We ne­go­ti­ate with them and try to talk sense to them and ac­tu­ally even ad­vo­cate for price changes. But then in the end we con­tract for pro­tec­tions for our clients. That’s what they pay us to do.

MH: What wor­ries peo­ple is that there’s not as much trans­parency about how that high list price goes down and how the PBM takes its cut.

Thierer: You’ve raised an im­por­tant is­sue, and trans­parency re­ally across the health­care spec­trum has been a pretty widescale de­bate. But as it re­lates to PBMs, that’s been an on­go­ing dis­cus­sion.

If you were to sit down and un­cou­ple a client con­tract, you’d see that these large, so­phis­ti­cated buy­ers have full vis­i­bil­ity be­cause they’re so large that they de­mand it. We pro­vide it: full trans­parency to what’s be­ing earned, where it’s be­ing dis­pensed, what are the re­bates, what do the net­work con­tracts look like. It’s a fully trans­par­ent busi­ness model.

MH: The PBM in­dus­try, and in­sur­ance in­dus­try more broadly, still has a pretty bad rap for cus­tomer ser­vice. What are you do­ing to fix that?

Thierer: We are go­ing to be the mar­ket leader on mem­ber ex­pe­ri­ence. We have room to im­prove for sure. But ev­ery sin­gle busi­ness unit start­ing with me has a spe­cific five-point plan on Net Pro­moter Score, (which mea­sures cus­tomer loy­alty). What are you go­ing to do to drive up the Net Pro­moter Scores? I re­port on it once a month to the CEO of this com­pany. It’s as se­ri­ous as a heart at­tack.

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