Introduction and Episode Overview

[00:00:00] Stacey Richter: Episode 461. "Pick Only One, Plan Sponsors: Do You Want to Control GLP-1 Volume or Control GLP-1 Unit Cost?" Today, I am speaking with Chris Crawford.

The GLP-1 Conundrum for Plan Sponsors

[00:00:31] Stacey Richter: This episode is not about the when, why, or how of GLP-1s for weight loss or best practice prescribing, and we do not wade into anything about lifestyle changes or who is adherent or clinical considerations and needed support.

There are a plethora of shows on these topics and this is not one of them. This episode, very, very specifically, is about the how and why of the pickle plan sponsors get themselves into often enough where if they impose formulary restrictions to limit the volume of meds that they are paying for, then unit prices go up, which is a thing for GLP-1s.

To listen to the episode or read the show notes with mentioned links, visit the episode page.

And this is critical just given how the costs associated with GLP-1s for weight loss contribute to some pretty significant increases in pharmacy trend for plan sponsors who choose to cover the GLP-1s for weight loss.

Okay, so back to the conundrum topic of this podcast. Let us dig into the what is going on here portion of this episode.

Understanding the Cost Dynamics

[00:01:33] Stacey Richter: Keep in mind, total plan sponsor pharmacy trend or the total cost of drugs is going to be this equation, drug volume times the unit price of each drug. Thus, the pickle if you're trying to lower total cost because, as I just mentioned, as is often the case for plan sponsors, you can have an either or scenario on your hands.

You can either lower volume and pay a higher unit price or vice versa, but not both. So yeah, it's not easy to lower pharmacy trend when you're faced with this either or scenario.

So, we talk about this relative to GLP-1s today, and we also talk about how those new direct to consumer websites that some of the manufacturers like Lilly and Pfizer are standing up. The why these can matter to plan sponsors in interesting ways, which really, I had not thought about before this conversation with Chris Crawford.

Bottom line, there are some really impactful and not frequently delved into perverse incentives at play here. And we're going to talk about these today. And these are really key for anybody on or about the pharmacy supply chain in the U.S. to know about. This is very actionable insight.

So, again, there's an unfortunate tradeoff, as it stands right now, for many plan sponsors. Lower your volume and raise the unit price or vice versa.

Rebate Yields and Their Implications

[00:02:52] Stacey Richter: Here's the short version of the tangled web of the story for how this tradeoff comes to be.

Once upon a time, a plan sponsor does an RFP for PBMs to manage their branded drugs. And I keep saying branded drugs because there's a whole different story here, which is similar but not the same for generics and also so called specialty generics that I'm not going to talk about with Chris Crawford today, but I will talk with him about it next month. So stay tuned.

But in this case, there's an RFP sent out and part of that RFP is evaluating PBMs on their, “rebate yields”. So we, the plan sponsor, are going to evaluate PBMs and pick our RFP winner, not based on their lowest unit net prices. But on how big the kitty of rebates they can drag in is.

Pausing to reflect on that last part of our hypothetical play by play. We, this hypothetical plan sponsor and or our broker consultant, are evaluating PBMs based on the size of their rebates and we're going to pick the PBM with the biggest rebates, thus the biggest rebate yield.

A few issues here. What does this incent? I'll take higher list prices as my first guess, because obviously the higher the list, the bigger the rebate yield can be. But what it also incents is a little less, I'm going to say, brutally obvious.

Say I'm a PBM or whatever, a GPO. Say I go to a pharma manufacturer and I demand a ginormous rebate. What is pharma going to ask for in return in their negotiation with me, the PBM?

Oh right, pharma is going to say, well sure, I'll give you that bigger rebate, but only if you can guarantee me volume. Only if you do not restrict access to my pharmaceutical product. If you restrict access and limit the ability of any member to get access to my drug, and therefore lower my drug sales volume that's possible within this contract, then all bets are off and no rebates for you.

Okay, so the PBM is incented to maximize rebate yield. So the PBM is gonna angle to get the biggest rebates possible. And in this scenario, if the rebates go up, net unit prices will in fact go down for the plan sponsor.

However, the PBM's leverage to get those bigger rebates is to pull back restrictions. So the lower the unit cost, the higher the volume of patients are now going to be eligible to get that drug without restrictions because there can be no restrictions beyond maybe the usage restrictions indicated in the pharma package insert/label.

And now, here we are at the finale of our play by play, where plan sponsors are asked to choose the side of the balloon that they are going to squeeze. And they can only pick one side. Lower unit prices and volume goes up, or lower volume and unit prices go up.

For more on this whole dynamic and how it can go horribly wrong, read the article in the New York Times, link in the show notes, you are welcome, about how PBMs took secret payments for the free flow of opioids.

Direct-to-Consumer Options and Cash Marketplaces

[00:06:03] Stacey Richter: My guest, Chris Crawford, excitingly enough, gives us a sort of have your cake and eat it too option in the conversation that follows. And this third way is now available because of the growing cash marketplace that is emerging and getting bigger and bigger.

It's growing, this cash marketplace, because the more times a patient wanders into a pharmacy with a discount card or shops on Mark Cuban or Amazon or goes to a direct to consumer website, and discovers that they can get a drug, or an MRI, or other medical service, nothing for nothing, but if they discover that they can get whatever it is they're looking for, for less than they would pay if they used their insurance?

Yeah. Every time that happens, the cash marketplace grows, and this is happening a lot. Middlemen are taking such a chunk of overall healthcare spend that cutting them out has become a very fruitful endeavor.

Okay, so the solution Chris Crawford offers up today is for plan sponsors to leverage this cash marketplace. Members get a discount card with money put on it, potentially, by the plan sponsor. This lets employers get the frequently lower cash price and employees get dollars on their card to that end, potentially.

So a plan sponsor can restrict access to GLP-1s through their PBM for weight loss, but then choose to give some members who qualify based on whatever criteria the plan sponsor wants to set. They can give members money toward the purchase of the GLP-1s, and then they, the member can go buy them at a direct to consumer website.

This whole thing, by the way, has nothing to do with the PBM contract. It's not considered, I guess, a carve out. It's nothing that any PBM has to approve.

What's crazy to me is that the cash price for GLP-1s, the branded ones, can be better than the PBM negotiated net prices. That's just nuts to hear given all the talk about needing the muscle of a big PBM to negotiate those rebate yields, but I don't know, maybe not as surprising as it should be.

My name is Stacey Richter and this episode is sponsored by RxSaveCard and a big thanks for that. I really appreciate RxSaveCard for its financial support because this episode covers a really important topic that we probably would have covered anyway over here at Relentless Health Value.

And so RxSaveCard standing up and offering their financial support to cover it was a really nice thing to do. And I thank them for their generosity.

Chris Crawford, welcome to Relentless Health Value.

[00:08:26] Chris Crawford: Yeah, I'm excited to be here.

[00:08:27] Stacey Richter: Some pharma companies are setting up direct to consumer, websites where a patient, for example, Lily has one where they can go in and get Zepbound, which is one of their GLP-1 weight loss drugs. And the cash price there is $3.99 for a 28 day supply.

So, first of all, the WAC price, and this is a branded drug, the branded price there is $1,300, but I understand that there is a rebate, so would a plan sponsor, if I add up the WAC price and then I subtract the rebate, does it add up to less than $3.99.

[00:08:59] Chris Crawford: We're seeing. Eli Lilly going direct and offering cash prices to people without insurance for Zepbound, their GLP-1, at a cost that's 70 percent less than what you pay through the PBM. So, two pieces going on and they really matter. One is, you're right, it's $1,300 and you can usually get a rebate from your PBM.

That rebate from your PBM, though, comes with an asterisk. And that asterisk is, you are not going to restrict access to who can get this drug. The minute you try to restrict access. So, as an example. I want to place a higher body mass index or BMI threshold for somebody to be able to get this drug. If I do that, my rebate is gone.

What employers are really doing is saying, if you look at the FDA labels and the guidelines, they say, there could be like 40 percent of my employees that could potentially be on one of these drugs. And so let's say it's $1,300. And let's say you're getting a, $700 rebate. So that's $600, right? $600 every 28 days, by the way, these are 28-day fills. And 40 percent of your population can potentially be on one of these drugs.

Take 40 percent of your population times $600 times 13, what you have employers saying is, I can't afford this. This is a new expense that I cannot afford. What do I want to do? And that's where they get into, well, maybe I can restrict it to just, you know, my patients who just need it the most, or how can I afford to do this?

And so their employers are just caught in this, you know, they're kind of squeezing a balloon almost in one way, which is, well, if I try to restrict utilization, now I pay more in a unit cost. If I don't restrict utilization, I pay less, but now more people are going to be on it. When you do that math equation, you know, kind of X times Y, it still ends up to a really big number.

[00:10:47] Stacey Richter: So to recap what you said, even if I take the $1,300, which is the WAC price, like the list price of this branded med, and I subtract the typical rebate, which is $600-700, I still wind up with $600 a month.

So, still, it's higher. It's 200 bucks higher than the cash price. So, first, I just kind of want to underline, like, hey, we even have this going on with branded meds, that the cash price can sometimes be cheaper than even the net price after rebates from a PBM.

But I think the next point that you're making is that the label that what the PBM is saying is you can't do utilization management that deviates from the label. Is that what I'm hearing? And if you choose to do utilization management that deviates from the label, then like you're not, we're going to withhold the discount and you're going to pay the total.

Like if you, if you don't play by our rules and you decide that you're going to do a benefit design that is not our benefit design, then you lose the rebate. Like, that's the stick.

[00:11:52] Chris Crawford: Yes, and to be clear, I haven't been involved in any of these rebate contracts. I don't know exactly what the paper looks like. What we're hearing is from every consultant that I've spoken to in the marketplace, when they try to put some enhanced utilization management in place, the rebates disappear.

And so whatever that form takes, and we know this from other branded drugs too, right, that rebates are based on formulary placement. What other competition is in the market for this, right?

[00:12:19] Stacey Richter: Yeah, there was just that whole article in the New York Times about this with respect to opioids and like the title of that article is something like Some big PBMs took secret payments from opioid manufacturers to allow the free flow of opioids. I can link to an article in the show notes.

[00:12:37] Chris Crawford: Right, because if I'm a pharmaceutical manufacturer, I want people to have access. I want as little gates in place for the person to get the drug that they want. And so this kind of follows one of those things. If you're putting a higher hurdle on what can get access, we're no longer going to give you this rebate.

And that again is just balloon. Do I control utilization or I control unit costs? If you just skip the PBM system totally, you can do both because you're getting the lowest unit costs on the market direct through the self pay website. And you can decide which employees you want to help. You know, in their weight loss journey, contribute a portion here towards that if you so choose to do.

[00:13:15] Stacey Richter: Got it. Okay. So what you're saying, the PBM and the pharma company or the GPO and the pharma company had some kind of negotiation. And it was a bit of a tit for tat and the PBM wanted more and more rebates and the pharma company said, sure, fine, I will give you that level of rebate or fee or whatever it is you're looking for PBM. But in order for that to happen, you PBM, there can be no restrictions. That deviate from our label on the formularies that you put out to these plan sponsors. So like, that's how that came about.

And you know, I was talking to a plan sponsor, a big jumbo, and a person there told me they were trying to do some GLP-1, some innovative program with their members. And literally their PBM vendor called up and yelled at this person. I mean, what a dynamic.

[00:14:03] Chris Crawford: Well, in, so forget about who's to blame in that situation. The reality is exactly what you said, there has to be a rebate that comes through and to give, to kind of go on the side of the PBM, PBMs are evaluated on their rebate yield.

So they want to show the highest rebate back when they're going through a request for proposal or they're on a spreadsheet that a consultant's looking at them, right? So they want to show the maximum value. And so you show the maximum value by saying, okay, no restrictions, right? That's how we're going to negotiate the largest rebate from the manufacturer.

You put the restrictions in. That's a nuance that's tougher to spreadsheet. And so I think that's where the issue where it really seems like it has been this sort of all or nothing.

[00:14:42] Stacey Richter: Organizations do what we pay them to do. And if we're paying people for rebates, then what we get is a ballooning of rebates. Like that, that's just What is going to happen? And, you know, the balloon just gets bigger because if we want to maximize what's in the middle, you got to, yeah.

[00:14:57] Chris Crawford: You do that math, it's about $10,000 to $11,000 per person that is on these drugs in savings, but you're not going through the PBM and going direct to self pay when you look at it.

[00:15:09] Stacey Richter: That's striking.

[00:15:10] Chris Crawford: Those numbers are just, that's the challenge, I think. So if your jumbo employers I'm hearing are still covering them, high margin businesses maybe still covering them, they can afford them.

Most companies, most self funded employers, can't just take out a whole new $600 per person every 28 days expense that just gets lumped in while they're also dealing with other medical costs, rising specialty costs, cell gene therapies.

There's a lot of stuff coming at employers and plan sponsors. There's not a whole lot of room to add a net new expense, which by the way, generally people are on for a long time. You know, so it's like, I'm just adding this expense that may never go away. How can I sustain that and afford it? I think that's the really challenging position that employers are in.

RxSaveCard Solution

[00:15:55] Stacey Richter: Okay, so how does RxSaveCard fit in here? And this ties into those, direct to consumer sites or otherwise, where The GLP-1s for weight loss, I don't think diabetes, but for weight loss are available outside of the PBM.

[00:16:10] Chris Crawford: We're offered for cash outside of the PBM for $400.

[00:16:13] Stacey Richter: So having nothing to do with the PBM for this $400 price.

[00:16:17] Chris Crawford: How our RxSaveCard work, we're outside of that system? There is an emerging ecosystem of cash pay prices, right? So, Cost Plus Drugs is a great example.

Discount Cards, what our solution really does is allow employers to access those cash prices outside of their PBM. They don't have to change PBM, they can still keep their PBM. If they want the rebates, if they want, you know, coverage for other things, you stay with your PBM, but you're not locked into only paying those rates.

[00:16:49] Stacey Richter: Okay. So specifically for GLP-1s, how does this apply?

[00:16:53] Chris Crawford: I think really what employers are saying is, hey, as a formulary decision with my PBM, I can't afford to cover these through my PBM for weight loss. Now diabetes is a separate issue. They kind of run through there, but specifically for weight loss, that's a formulary decision that a plan sponsor can make.

And so now when the drug is not covered under your formulary, you still have employers going, but everybody's asking about it. Like, I'd love to provide this benefit. I'd love to help people who really need this drug, who want this drug. How can I get them access? Right. And now it's like, again, Why does RxSaveCard exist?

There's a cash price that exists out there. How can we help employers access that for their employees? And if they want to subsidize some portion of that purchase through wellness credits, incentives, you know, other kinds of things, we give them the vehicle to do that. And so it really helps employers say, All right, I can afford that on a unit cost basis and give a benefit that a lot of my employees are asking for.

[00:17:50] Stacey Richter: There's a lot of things that are going on with GLP-1s and just weight loss and obesity. Like there's a whole clinical side to that. There's a whole lifestyle side to that. There's a whole education side to that, right?

So like that's kind of a whole separate topic, but just relative to the cost of the drugs to begin with and a way to wisely procure drugs that are currently available and work a lot of times for appropriate patients, like, if we, all we're talking about right now is we're limiting this to if somebody has decided that they want and need a drug, how do we get it to them in a way that's not going to bankrupt the plan or in the most cost effective, prudent, reasonable way possible?

[00:18:29] Chris Crawford: When lower costs exist and the cash marketplace is out there and you decide that, you know, I want my folks to have access to this. Why overpay if you don't have to? There is a market now and there's this emerging market of cash and I think that's what we're most excited about.

[00:18:43] Stacey Richter: So as you said, you give employees the RxSaveCard and this card is bigger than just GLP-1s. We'll talk about that in an upcoming show, but relative to GLP-1s, specifically the point is employees can go on one of the telehealth sites run by Pharma or otherwise they can use the card to pay all or some portion of the cash price. And this is set by the plan sponsor. And this can be intertwined with wellness credits or whatever else the plan sponsor wants to do.

But bottom line, the plan is now not making a trade off between restricting volume and unit price because the unit price is, if I'm understanding this right, already as low or maybe lower than some PBM prices, net of rebates. And the plan can put whatever restrictions in place that the plan wants. Like the plan sponsor is in charge here, making a plan that members like, and which has an asked for benefit, but also there's controls in place and the price is still good.

[00:19:37] Chris Crawford: Absolutely.

[00:19:37] Stacey Richter: And is this considered like a carve, like do I have to get my PBMs permission to use RxSaveCard?

[00:19:43] Chris Crawford: You do not. No. So we, our solution specifically, we're not 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 or, hey Stacey, you can't use a discount card when you show up at your local pharmacy, same thing here. We are just accessing cash prices where they exist for employers and for their employees. So yeah, we're sitting outside of that PBM relationship.

[00:20:12] Stacey Richter: And how this would look would be, I would just send all of my employees this card. I mean, and I don't want to minimize what I'm sure is a ton of education and stuff that goes on. But at the end of the day, it kind of looks like, all the employees get this card, it's not like this is alien to most people at this time to like, pull out a discount card and see if it's cheaper. Like, people are doing that now as kind of the course of how they operate a lot of people. So, you're basically saying just send everybody this card and they can, they can price check.

[00:20:43] Chris Crawford: And that is what makes us feel so great about it too, is we aren't denying anybody's drug. We're not telling you have to switch a drug. We exist to save people money. And so when employers are rolling it out, they're rolling it out as, hey, here's a new benefit where you might be able to get a drug for free, or you might have an option to spend less than you were spending before.

So, we really have worked hard to create an everybody wins, employer saves, employee saves. You don't have to change your PBM. You don't have to go through that migration or anything else. This is just an added benefit that you'd be put on next to it. And so that's, what's so fun is just, it's all good news.

Like why would we not do that when lower costs exist and the cash marketplaces out there, and you decide that, you know, I want my folks to have access to this. Why overpay if you don't have to? There is a market now and there's this emerging market of cash.

Conclusion and Final Thoughts

[00:21:32] Stacey Richter: Yeah. I think that's very well put and I just want to state for the record, lest anyone be confused, this has nothing to do with those AFPs, those alternative funding plans where someone's trying to get charity dollars by not covering a drug. This is not that. Totally different.

Go back and listen to the episode with Brian Reid if you want to hear about that.

Chris, is there anything I neglected to ask you that you want to talk about right now?

[00:21:59] Chris Crawford: We could talk about this for hours and go in, you know, so many different directions and everything else.

So I just think what you are highlighting is really important and in preparation for this discussion, I went back and listed some older episodes that I hadn't listened to and it was just sort of fascinating. Ge Bai from almost three years ago now was talking about this emerging cash marketplace and so many of her predictions came through, you know, and you mentioned the Luke Slindee discussion. That was really fascinating. So I just think I'd say people go back and listen to those episodes. And it really just gives a nice kind of overlay of the land. Okay, now this is the market. And now what can I do as an informed buyer or an informed benefits leader knowing the market as exists and there is this whole new area that we can access and you don't have to only pay the prices dictated by your PBM.

[00:22:49] Stacey Richter: Chris Crawford, if someone is interested in learning more about the work that you're doing, about RxSaveCard, where would you direct them to find you?

[00:22:58] Chris Crawford: RxSafecard.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 to message me there as well.

[00:23:08] Stacey Richter: Chris Crawford, thank you so much for being on Relentless Health Value today.

[00:23:10] Chris Crawford: I loved it. Thanks, Stacey.

[00:23:12] Stacey Richter: So let's talk about going over to our website and typing your email address in the box to get the weekly email about the show that has come out. Sometimes people don't do that because they have subscribed on Apple Podcasts or Spotify and or we're friends on LinkedIn.

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