[00:00:00] Stacey Richter: Episode 397, the minefield that is a PBM contract, and also some advice for EBCs who are taking money under the table. Today I speak with Paul Holmes.
[00:00:29] Stacey Richter: If this were a video show, I would stare into the camera with steely eyeballs right now and say that I have a special message for employer CFOs. If you aren't a CFO, pretend that you are so that you get the full effect here.
So now that we're all CFOs, let's pull up the company p and l Profit and loss statement. This is what keeps us all up at night, right? Making sure that the net profit line at the bottom looks good. We could decide to lay off a few people reorg something or other, beat up a vendor, stop buying the gold paperclips.
We also could go over and have a strident conversation with sales leadership about what they can do to jack up their sales revenue. Top line begets bottom line and all that, or here's another idea. Today I am speaking with Paul Holmes, who is an ERISA attorney with a specialty in PBM contracts, especially the PBM contracts from the big PBMs that get jammed in employer plan, sponsor faces by whomever, and which they are told look fine, and that the employer plan sponsor should just go ahead and sign.
Now if we, meaning all of us CFOs sign that paper or someone on our benefits team signs the paper. Fun fact, our company just spent 30 to 40% over market for our pharmacy benefits. That contract we just signed contains all kinds of expensive little buried treasures. Treasures accruing to the PBM and other parties to be clear and coming at our expense.
There's 17 ish very common treasures in your typical PBM contract, and none of us will ever spot them unless we know what we are looking for. But let's dig into this for a sec, especially for all of us newly minted CFOs, because the real ones already did this math. Say our company spends whatever. We're a big, bigger company And we spend a hundred million a year on our drugs.
That's a minimum of $30 million that we got taken for 30 large a year. That is a metric as load of our cold hard cash that got dumped out, back and burned. 'cause of the huge dollars at stake, 30 to 40% of drug spend. It's certainly the advice of almost anybody that you talk to who's an expert in PBM contracts to have a third party, not your EBC, which we'll get into in a sec, but somebody else, a third party review.
Every PBM contract, EBC stands for employee benefit consultants. I mean, what's the worst that can happen for anybody considering having an independent third party review their PBM contract? It costs a couple grand in lawyer fees And they give it a stamp of approval. Knowledge is power and now we know.
But let's just say this third party review doesn't happen. We all go with a devil may care about this whole PBM overcharging us by 30 to 40% possibility. And let's say the PBM contract is in fact a ride on the hot mess express, but we don't know it. Here's two pretty bad downsides, especially now this year since the passage of the CAA, the Consolidated Appropriations Act at the beginning of 2022.
Number one, bad thing, plan sponsors may get sued as per the CAA for ERISA violations. It's not just the company paying that extra 30 million or 30 to 40%, right? It's also employees. This is risk exposure. Bigley just like it was on the 401k side of the house, which Paul Holmes, my guest today, mentions later on in the interview, he talks about just how much those lawsuits cost and yeah, exposure as I mentioned three times already.
Today I am speaking with Paul Holmes about PBM contracts and all their stealthy glory. The one thing I came to appreciate is that these things are works of art. If you're into like those paintings of pretty flowers where if you look hard enough, you spot a skull tucked in the greenery. Paul is a longtime ERISA attorney.
He has dedicated his career to helping plan sponsors in their negotiations with PBMs and trying to help them reduce drug spend, especially drug spend that isn't actually paying for drugs.
Link in the show notes to an article we discuss about how a school district in Florida is suing their longtime EBC for taking $2 million a year in alleged secret payments.
We also mention and link in the show notes to the episode with AJ Ano. That's episode 3 7 9. Along similar lines, Jeff Hogan mentioned on LinkedIn the other day he wrote, it's pretty amazing that just in the course of the past few weeks, I'm reading, seeing, and hearing about big new CAA breach of fiduciary duty cases.
So Paul Holmes says this more eloquently, but if you're a plan sponsor, definitely get your PBM contract reviewed and maybe consider working with an EBC who's happy to sign the disclosure statement that your lawyer has provided without disclaimers. Oh, hey, one last thing and new topic. Here's a cool goings on right now.
The March Healthcare Classic is in full swing. Each spring, Josh Berlin's rule of three, team collaborates with other experts to predict which major trend will find itself at the top of the healthcare agenda over the next 12 months. This year, their selection committee includes Anisha sued. Danny Brozinsky, David Carus, MD Shahid, Corey md and Stephanie Mercado.
Link in the show notes. Check it out. My name is Stacey Richter. This podcast is sponsored by Aventria Health Group. Paul Holmes, welcome to Relentless Health Value.
[00:05:51] Paul Holmes: Hi Stacey, glad to be here.
[00:05:52] Stacey Richter: Today we are going to talk about PBM contracts between PBMs, the big ones, and self-insured employer plan sponsors.
You are an ERISA attorney who has specialized in these contracts for many years. When one of these contracts crosses your desk, just a typical contract, what are your usual suspect observations?
[00:06:12] Paul Holmes: The standard PBM contract is probably 50 or 60 pages. They're very dense. It's, it's something that took me a couple of years really to master.
The terminology that's used is almost like a foreign language. With AWPs and wax and discounts and rebates and minimum rebates, And the average person, there's no way they're going to be able to follow what is happening in one of these standard contracts. Even ERISA lawyers struggle with these contracts because they're so nuanced to the pharmacy industry, which is just unique.
The large PBMs, they build into their model contracts, all sorts of provisions, which favor them. Which allow them to make a lot of money. If you just sign, if you take one of their model contracts, if they offer that to you and you agree to sign it, you're probably gonna pay 30 to 40% above market on your drug spend just because of the way these contracts are structured.
[00:07:12] Stacey Richter: Well, I can definitely spot the problems here and it probably doesn't take a rocket scientist to do so. There's two factors at play. One is a legal factor. Obviously this is a contract, so you know you need a lawyer to go through and make sure that the terms of the contract are fair and sound. But then on the other side you also have the pharmacy benefit management expertise and experience.
Because what you see written down might be sound legally, but there's a chain of consequences that may happen. You'd need to be able to understand both aspects here, the legal and then the PBM speak to comprehend what the consequences of the language might be to the plan sponsor.
[00:08:00] Paul Holmes: Yeah, that's really the challenge with these contracts because historically the contracts have been reviewed by the consultants and have not really been reviewed by lawyers.
If they're reviewed by lawyers, it's a superficial review, maybe a review of the boilerplate provisions that all lawyers understand, but in terms of the detailed. Pricing provisions and rebate provisions and audit provisions, you really need to have PBM industry experience to, to be able to follow those.
So for a long time, even since I was a young baby ERISA lawyer, we didn't get PBM contracts to review plan sponsors. Didn't even send them to us. And then over time, we would start getting them. But the plan sponsor would tell us, look, we just want you to eyeball this, and whatever you do, don't review the pricing provisions.
We, the consultant has already negotiated the deal, so just look at the boilerplate. So for many years we, we were really not asked to do much with these contracts, and as a result, most ERISA lawyers have not seen them, have not seen many, and have never learned about pricing.
[00:09:08] Stacey Richter: First of all, you had mentioned that if you just take the PBM contract and put your John Hancock at the bottom of it, you're gonna pay as a plan sponsor 30 to 40% above market, which could be millions of dollars.
[00:09:22] Paul Holmes: That's right. For a small employer with a million dollars of drug spend, it might be $300,000, but for a major plan with a hundred million dollars of drug spend, you're talking 20 or $30 million. Yes. That's an annual amount that's repeated every year for as long as you have that bad time.
[00:09:37] Stacey Richter: Yeah. So. $30 million.
What's that? 300 teachers that's now going to A PBM because of a bad agreement. And basically what I'm understanding you just saying is that it's the consultants that are looking at the pricing. Lawyers are not looking at the pricing. Lawyers have not been asked to look at the pricing. So I'm kind of inferring that over the years.
If you don't have a request to do something, then you stop having the skill to do it. So at this juncture, we may have a situation on our hands where many ERISA lawyers don't necessarily have the background or the expertise to even review that pricing, even if they are asked.
[00:10:15] Paul Holmes: Yeah, I think that's, I mean, for a long time, I think that was absolutely correct.
I think over the last maybe three, four years, five years, as more and more negative attention has been given to drug prices and PBM shenanigans, I think some young ERISA lawyers have decided to try to get into the field, and so I, I think it'll change, but there's a, there's a long way to go, so. A lot of those, what I call 'em is PBM Lawyers Stacey, they're ERISA lawyers with A PBM expertise And the PBM lawyers, most of 'em are working for the PBMs.
[00:10:46] Stacey Richter: You've gotta find an ERISA lawyer who either used to work for A PBM or who bills themselves as an ERISA PBM attorney, like you need a specialist here,
[00:10:56] Paul Holmes: correct.
[00:10:56] Stacey Richter: But let's go back to something that you had pointed out earlier who was supposed to be looking at the pricing And the contract were the consultants.
So clearly if what we're considering a average contract that gets put in front of the plan sponsor, I'm assuming that you mean a average contract that's put in front of the plan sponsor that the employer benefit consultant has already reviewed.
[00:11:22] Paul Holmes: Correct. I mean, the consultants have always been, I, they, I, they're very careful about it.
They don't, generally speaking in their service agreements, they don't say, oh, one of the things that we're gonna do for you to earn our consulting fee is to review all of your legal documents. That's something that they really don't wanna say, but in reality, they're the ones who. Who handle the RFP process, which is the start of the contracting process.
Because during RFPs, you ask the PBM bidders a bunch of questions about how are they gonna handle this and how are they gonna handle that, and will they agree to this and will they agree to that? And so that's sort of the start of the contracting process because. Once you get PBM commitments, you then follow through, or at least you're supposed to follow through and make sure that those commitments are in the fi actual final PBM agreement.
[00:12:10] Stacey Richter: So you have the EBC that that conducts the RFP process. They pick a vendor, I guess. They review the contract that vendor PBM provides. They make sure that the agreed upon contract terms are in that contract, and then they're also responsible for holding the PBM to account and ensuring that the contract terms are met.
That all tends to fall on the ABCs. Shoulders, it sounds like.
[00:12:34] Paul Holmes: Correct. I think that's generally true. I think that's where the problems start happening. Some consultants are better at this than others. Many of the good consultants know these contracts pretty well, And they will go in And they will ask the PBM to make certain changes.
But there, there tends to be a limit on how far a consultant will push A PBM And they will. I guess one way to say it is that on the low hanging fruit And the issues where PBMs are making extra money, but everybody knows they're doing it. The consultants will make sure those provisions get taken out of the contract, but that still leaves a lot of profit centers in the contract that the consultants do not challenge.
And so if you don't have another set of eyes, go through the contract, those provisions stay in the contract, and that's where the problem starts.
[00:13:24] Stacey Richter: It sounds like there's enough profit centers that a typical contract that you get your hands on after the EBCs have looked at it is 30 to 40% over market.
Right. So like, again, we're not talking about a pre reviewed contract. We're talking about a contract that has gone through the gauntlet of consultant reviews and it still has 30 million of above market profit centers left. Uh, obviously assuming that's 30 to 40% or 30% of the total drug spend.
[00:13:55] Paul Holmes: Correct. I mean, some are different than others, but.
Pretty much every contract that once we get it And we review it, we find a long list of problematic contract provisions that if a, if a sponsor's hired us, that we sit down with them and go through. The sad part is we then ask them, did your consultant raise any of these provisions with you? Did you have conversations with them?
Are these things that you talked about and that you agreed to, or are these, is this a surprise to you that this is the way your contract's worded? So this gets us into the whole issue of CAA Consolidate Appropriations Act, and specifically Section 2 0 2, which talks about. Consultants having financial conflicts of interest.
If they accept indirect compensation from the PBMs, they have a tendency to, let's say, look the other way or let things slide, because the PBMs are actually then financial partners. That's really a major problem.
[00:14:55] Stacey Richter: Running through our sequence of events, what we have are employers who traditionally have relied on their benefit consultants to review these PBM contracts to the extent that they've told their attorneys not to review the pricing provisions.
However that happened, it has transpired the employer. Doesn't understand a WP and WAC prices and just kind of all the downstream consequences of some of this stuff, right? So the EBC then has a very powerful role in this whole thing. Meanwhile, the EBC is actually a business partner. I mean, I don't know how else to phrase it.
Of the PBM, because if they're getting indirect compensation, and listen to the show with AJ Ano on, on just how much money is passing back and forth between the PBMs And the EBCs. Like they're really working together. So now you have the business partner of the vendor who's evaluating the vendors contract and okay, so an employer wasted $30 million for the past however many years that could have gone to giving people raises or.
Doing other potentially more productive things with that money, but now the stakes are higher because of the Consolidated Appropriations Act. The CAA, as you mentioned, and you talked about section 2 0 2, just quoting you the lawyer, so the CAA section 2 0 2, it's not the EBC or the PBM that's on the hook for stuff like this.
The one who's got fiduciary responsibility to those employees. 'cause you could look at this as not just the employer that lost the 30 million, it's the employees themselves who are now overpaying. And the one with fiduciary responsibility is that employer. So the employer not having any idea what's going on in in those PBM contracts.
Winding up. Typically paying 30 to 40% over market, as you just said, is a problem for the employer on a number of levels. Okay, so, so. Say, I am an employer now, and I'm thinking, well, my EBC is not taking dollars because I asked my EBC if they were taking dollars And they said they were not. Now, can I, as a plan sponsor feel confident I have met my obligation, like is an oral.
Okay. Okay. I, I've heard several employers who have said that this is what they did and considered that box checked.
[00:17:16] Paul Holmes: Yeah, I've seen that as well. I don't think that would comply, the fiduciary would not be meeting their obligations if just making an oral inquiry. Especially, I mean, not only because it's oral and not in writing, but also because many of the consultants, if you're talking to a large consulting firm or regional consulting firm, they have a lot of employees And the day-to-day consultants who are actually doing the work, they might have no idea.
What compensation that their firm is receiving from A PBM. That's something that senior management of the consulting firms, they don't share that with all their employees. So you ask the consultant that's helping you, they may honestly believe that there's no such compensation stream because they don't know it.
[00:18:00] Stacey Richter: And here's another common threat that I hear. The EBC tells the employer that the EBC themselves is gonna handle all of these disclosures, right? So that you have the employee benefit consultant coming up with their own forms and things in order to disclose their own indirect compensation. How does that typically work out?
[00:18:21] Paul Holmes: You're right. That's very common and that's a big problem. I mean, there are some disclosures that are now required by the government in terms of sending in information about your drug spend and so forth, and it's okay for the consultants to help with those disclosures. But when it comes to the disclosure of their own compensation, especially indirect compensation that they're getting from another vendor, that's something that you can't leave up to them.
You need to have your lawyer draft the disclosure that the lawyer wants to see and submit that to them and ask them to sign it. And usually we do this in the form of what I call a disclaimer, uh, a full disclaimer. Where we essentially just ask the consultant to sign on the dotted line that they don't receive any money from the PBMs.
And unfortunately, most of the consulting firms are either ignoring those requests or many are coming back with what I call tainted disclaimers. They say, we don't receive any money from the PBMs, And if they'd stopped right there, you'd be in good shape. But they then add ca caveat language like we don't receive any money from the PBMs.
That is solely with respect to your plan. That's not a full disclaimer because that leaves open the door. Maybe they're getting money from the PBMs, but it's not calculated on a per plan basis.
[00:19:40] Stacey Richter: And what you mean by that is that it's like calculated on their total book of business?
[00:19:44] Paul Holmes: Correct. Section 2 0 2 of the CAA actually refers to book of business,
[00:19:50] Stacey Richter: Which is same difference.
It's just a different way to do the calculation.
[00:19:53] Paul Holmes: It's a big, PBMs figured this out in the early two thousands that the consultants were the ones that had the close relationships with the actual plan sponsors. And so they developed a way to compensate the consultants to, to not only steer those clients to the large PBMs, but I think with a wink and a nod, they probably didn't have to say it, and it's probably not written down anywhere.
The idea is if you wanna keep getting these payments, then you won't dig too deep.
[00:20:19] Stacey Richter: Certainly sounds like a first step here is to have a lawyer review or. Come up with the disclaimers or the disclosure forms, an ERISA attorney that the employer is asking everybody to sign, including the EBC themselves.
Would your typical ERISA attorney be able to write that CAA disclosure form?
[00:20:42] Paul Holmes: I think a good ERISA lawyer could take a good shot at it, but if they don't, the problem today is most ERISA lawyers don't know about this conflict of interest. If you ask most ERISA lawyers, Hey, do the consultants get paid by the PBMs?
I think 95% of them would say no. There's no such thing.
[00:21:00] Stacey Richter: So it sounds like a litmus test for everybody's. ERISA attorney is asked the ERISA attorney a couple of questions, like for example. Typically do EBCs take money from PBMs indirectly, like ask a couple of questions and assess the knowledge of the ERISA attorney because clearly if you're getting one who may be a fine attorney on in many respects, but unless they have expertise in this particular area.
It's again, it's gonna be the employer who's on the hook for this.
[00:21:29] Paul Holmes: The real problem there is that, not that an ERISA lawyer can't draft a decent disclaimer letter, it's will they be able to decipher the consultant's response? The consultant's counsel drafts a very well crafted disclaimer, that sounds like a disclosure, but contains caveats.
Will the average ERISA lawyer sense that. I can't answer that question. The
[00:21:51] Stacey Richter: thing is though, And this might be why a plan sponsor may want to be paying attention here, this is really wildly common, this whole EBC taking money from the big PBMs thing, from what I understand, and two big issues. The first one is all the money just being lost.
The second is the legal jeopardy that the planned fiduciary, the person who signs those plan documents just put themselves in. If somebody else figures out the COI, before they do, the employer CEO and CFO do, there's more than one lawsuit cropping up because of this, and it's pretty stark just how deep the COI goes.
If what is alleged is accurate. Link in the show notes to one. Of these where the EBC was allegedly snaking. 2 million, I think, under the table from at least one vendor while telling their client their RFPs were impartial, nothing to see here. They were allegedly making like 10 x under the table what they were making on the top of the table from what I recall here.
So this is a huge profit center for some of these. Employee benefit consultants, the not independent ones.
[00:22:57] Paul Holmes: All plan sponsors think they have a great contract, but until we look at it And we give 'em a long memo telling 'em, no, this is not so great. So once they, they realize that there's a, the con consultants are conflicted, then they tend to believe us and.
You then you don't necessarily fire everybody on the spot, but you bring in a second set of eyes. So again, you can bring in a either an independent consultant or an independent data analytics firm and get the claims data to them. You don't have to set the world on fire, but. It's pretty easy for a data expert to go back then and look at different aspects of the drug pricing and rebates and come back and basically verify the plan is overspending and that it could be corrected.
You then start the process of correction. Now, whether they end up replacing the consultant with an independent consultant, they may or may not go out to bid with a new, for a new PBM. That might happen at some point. It doesn't all happen instantaneously, but yeah, that's the direction that it starts going.
[00:23:55] Stacey Richter: I think we have to get to the fact that on the plan sponsor the employer side, there are different people with different jobs And if the benefits team who has a lot of great skill sets, but maybe doing PBM contract negotiation and review isn't one of them. It, it's, it's kind of not fair to put benefits managers in charge of what should it sounds like, be a legal or finance department operation.
I mean for the review And the contracting part of this at least.
[00:24:22] Paul Holmes: Yeah, I think there's a lot, there's probably a lot of different reasons. I'm starting to see the CFOs And the CEOs start to take some interest in this.
[00:24:30] Stacey Richter: If I'm A CFO, right? Like what's the average profit margin for a business? 20% to get $30 million in profit net income.
You need $150 million in gross revenue, right? So like if I'm a CFO or CEO, and here's my choice, do I take 30 million back from the PBM or do I go do a whole sales campaign or whatever you gotta do to figure out how to get an additional $150 million in gross revenue. Like that's really the choice for the CFO.
It may not be something that the benefits team is getting a bonus on, right? Like they sort of have other, what does good look like in job performance criteria. But I could really see from A-C-E-O-C-F-O perspective, it definitely feels like the dollar value here is enough to get involved. And we are not talking about diminishing anybody's benefits.
We're talking about cutting out all of the conflicts of interest and overpayments and kind of like somebody weaponizing trust and then taking advantage.
[00:25:28] Paul Holmes: And I think it might take a couple lawsuits. I mean, if lawsuits are filed And this becomes public, the extent of the conflict of interest And the dollars involved, then I would guess that a lot of CFOs and CEOs will, will call a meeting And the things will start.
Going in a different direction.
[00:25:44] Stacey Richter: Okay, so who sues who then? All right, so now I'm an attorney. I see that this contract was rife with conflict of interest. How do, what's the basis of this lawsuit?
[00:25:53] Paul Holmes: Plaintiff's firms could bring the same kind of cases that they brought against the fiduciaries of 401k plans on behalf of plan participants alleging that the health plan fiduciaries were not paying attention And they were spending way too much money on prescription drugs.
Portion of that was paid by the employees themselves in the form of copays and deductibles. So that's a possibility. I don't know if that's gonna happen or not, but I think the PBMs And the consultants could be sued because not only do the PBMs not have contract terms that generate profits for them, but they also engage in some practices where they basically just ignore their contract.
So even if you have a provision that tells 'em not to do something, they still ignore it And they do it anyway. And now the consultants, I think are gonna be, have some exposure because I think that's a problem. If you go to a plan sponsor and you say, Hey, we'd like to be your consultant and here's what our fee is.
And don't worry, we're gonna help you run your prescription drug plan, and we're gonna keep an eye on the PBM. We're gonna help you control your drug spend and so forth and so on. When in reality they're getting paid not to do that and they're accepting that money, I something tells me that's a legal issue.
[00:27:06] Stacey Richter: If you're just gonna sum up some advice here, you kind of alluded on a number of different occasions here to employers getting wise to what's going on here. If you were gonna give advice to employee benefit consultants right now, and maybe not the gigantic firms who may have enough banked.
[00:27:24] Paul Holmes: To offset any lawsuits.
I mean, it could be the plan there for the ones who are so inclined to just keep banking the cash
[00:27:31] Stacey Richter: until they get sued and then they'll stop, right? Like to milk the system for as long as they possibly can. I could see that being an excellent strategy for those who are again, inclined to do so. But if you are an employee benefit consultant, and maybe you're doing this and you don't have the millions in the bank to fund a lawsuit in the event that.
One of your clients decides to sue you? Like, what's your advice here?
[00:27:54] Paul Holmes: All of the, uh, benefits consultants who are out there, who are independent and they're not taking PBM money, I think their phone is gonna start ringing off the hook. I think they're gonna have a lot of plan sponsors interested in talking to them, which is a good thing.
I mean, I, I don't know what the larger consulting firms who have been taking the PBM money are gonna do. I'm, I could only speculate on what's gonna happen there, but I, I don't know if it's possible that they'll spin off their pharmacy unit. Most of them acquired their pharmacy expertise. They didn't develop it, they acquired it, and so they may just spin that back off and say, okay, we don't need you anymore.
You're on your own. The same thing might happen is what happened with 401k plans. Once all those fee cases happen And the fiduciaries talk to their lawyers. They, most of the brokers and consultants who were, who were taking all the 12 B one indirect revenues from mutual funds and taking all the money and not providing good advice to their plan sponsors, they got out of the business.
And what happened was only the high quality advisors. Who operate on a fee only basis survived. They now dominate that space.
[00:29:00] Stacey Richter: So it sounds like from an employer standpoint and a big reason, I, I hear why employers aren't asking, really digging in here and getting attorneys to review stuff, attorneys with.
The PBM experience for examples is that they're like, oh, these people are my friends. We go way back. We play golf together. Like they would never do that to me. But it sounds like despite a personal relationship, the stakes, as we just talked about, are getting higher and it might behoove everybody to prove that.
It sounds like.
[00:29:29] Paul Holmes: Yeah, I think so. I think, I mean, especially the people who went through those fee cases. I mean, those, when your fiduciaries get sued, you're looking at five or $10 million of legal fees just to defend the case. And if you lose, then you're looking at anywhere from 5 million to 50 million in settlement money.
So it can cost, you know, quite a bit of money.
[00:29:48] Stacey Richter: So it sounds like probably a prudent plan of action for large employers, mid-size employers, anybody with a self-insured plan really? Would be to carve out a couple of bucks, find a experienced ERISA PBM healthcare attorney to take a look at all of this stuff, and brokers who aren't taking any money or ABCs who aren't taking any money, this is becoming a competitive differentiator for them and those who are opposed, or who put all these disclaimers and caveats and exceptions on the.
Contracts that they give back. I mean, that's the first clue to the employer that this may be warranted even from an informational standpoint. Right? Like the more you know knowledge is power and it'll be a whole lot better to know that this is potentially going on in your plan than get taken by surprise by the lawsuit.
[00:30:38] Paul Holmes: Correct. The in the independent consultants, I think will start touting their independence and their marketing. Yeah, I think you're right. I think you don't have to spend a ton of money to start getting educated on this, And the pieces fall together pretty nicely and pretty quickly once you, you start putting the puzzle together.
[00:30:56] Stacey Richter: Yeah, and it sounds like this is something that, it's A-C-F-O-C-E-O.
[00:31:00] Paul Holmes: All companies are different, but yeah, I think the C-Suite needs to, needs to get involved and needs to take some sort of a leadership role. But yeah, I mean to just. Sweep this under the rug, I think would be a mistake.
[00:31:11] Stacey Richter: Paul, is there anything I neglected to ask you, you think is important to mention here?
[00:31:16] Paul Holmes: Just one other thing, the, I don't think we talked about this, but in a typical situation, and I'm just gonna use very round numbers, a plan sponsor might be playing, paying their consultant, let's say a hundred thousand dollars a year for consulting advice. And the consultant might be receiving 500,000 a year from the PBM or even a million a year from the PBM.
Now, some plans are smaller And the numbers are smaller, and some plans are larger, And the numbers are larger, but it gives you. Usually there's a very rough rule of thumb. It's like a five times or 10 times multiple. So it's not like the PBMs are paying the same amount as the plan sponsor. They're paying much more.
It's follow the money, and that sort of explains why the healthcare industry has gotten to where they are. Secondly. The PBMs are not paying for that out of their own pocket. The PBM underwriters figure out how much they're gonna have to pay the consultant, and then they just increase the drug prices to make up for that.
So the plan sponsor is paying both fees. In my example, the plan sponsor's paying a hundred thousand directly. And maybe another 500,000 to a million, they're actually paying this indirect compensation. They just don't know it. They're paying it in the form of higher drug prices,
[00:32:32] Stacey Richter: and that's exactly the same ratio as that lawsuit in Florida that I keep mentioning.
They were paying, I think it was 10 times more.
[00:32:39] Paul Holmes: I got lucky on that one,
[00:32:40] Stacey Richter: but I mean, it's like, where's your bread buttered as a, it's not a surprise what's going on here. When you hear those stats. Paul, where can people go for more information about what we just talked about today?
[00:32:52] Paul Holmes: Yes. My email address is PBH Paul, B as in boy, H at Williams Barber, B-A-R-B-E-R, Morrell, MORE l.com.
I'd be glad to speak with any of your listeners.
[00:33:06] Stacey Richter: Thank you so much for being on Relentless Health Value today, Paul Holmes.
[00:33:09] Paul Holmes: Thanks for having me. Stacy.
[00:33:11] Stacey Richter: Hey, could I ask you to do me a favor? If you are part of the relentless tribe working hard to transform healthcare in this country, I don't need to tell you that we need as many on our side as we can get.
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Thanks so much for listening.