Transcript for EP422: Some Indie Pharmacy Upshots That Surprised Me—and I Thought I Was Pretty in the Know, With Benjamin Jolley, PharmD

Introduction and Overview

[00:00:00] Stacey Richter: Episode 422, “Some Indie Pharmacy Upshots That Surprised Me—and I Thought I Was Pretty in the Know.” Today, I speak with Benjamin Jolley, 

American Healthcare Entrepreneurs and Executives You Want To Know. Talking.

Relentlessly Seeking Value.  

The Profitability Paradox in Independent Pharmacies

[00:00:29] Stacey Richter: What would you do if you owned an independent pharmacy and you discovered that your profit was coming from dispensing 10 percent of prescriptions, that if you just stopped filling 90 percent of the drugs, fired all your staff except like one person and just filled the drugs that you made money on, if you did this, you would actually make more money in the pharmacy than you're currently making filling every single prescription. 

What would you do? This is the math that Benjamin Jolley, my guest today, and a multi-generational pharmacy leader and consultant to other pharmacies, discovered and wrestles with on the show today. And oh, by the way, a pharmacy is not going to make it up in extra toilet paper sales or chewing gum sales when patients come into the pharmacy to pick up their meds. 

I asked Benjamin this and he basically laughed at me. So turning our attention now to how to lose money in the pharmacy business. There's two ways to lose money, either outright losing money because the acquisition costs of the meds are actually more than the PBM mandates the indie pharmacy can charge its insured members. 

So that's one way to lose money.  

The Impact of Generic Drugs on Pharmacy Profitability

[00:01:32] Stacey Richter: A second way to lose money as an indie pharmacy is because generics are so cheap. The cost of providing the pill bottle might exceed the profits on a 47 cent generic, even if the profit margin is a hundred percent. Again, because the PBM sets the price.  

The Role of PBMs in Pharmacy Business

[00:01:48] Stacey Richter: Now, you might be thinking the same thing I was thinking when Benjamin Jolley talked about this, like, okay, well, maybe we want the patient to save money here. 

So question mark? Here's the really big point that Benjamin Jolley knows because he sees this every day, what the patient pays and what the pharmacy gets paid has no relationship to each other or to what an employer plan may or may not pay. So, if the patient slash member pays more and the independent community pharmacy gets paid less, that doesn't mean it will be a better deal for the employer. 

It doesn't mean it would be a better deal for the patient. Why? Because there's a PBM in the middle. Ge Bai talks about this in episode 419. For every $100 that is spent on generic drugs, $41 goes to the PBM. 79 percent of the time, if a plan member is in their deductible phase, it's cheaper to pay cash than to use the insurance that member is paying for. 

As someone said on LinkedIn the other day, talking about patients paying premiums and paying more for generics than if they'd just gone and paid cash, here's the quote. “You can pay more to pay more.” With so many deductibles as high as they are, and with so many people who never reach their deductibles, As Benjamin Jolley says during the show today, we're giving this third party a lot of control over a transaction that they literally have nothing to do with. 

Something like three out of four times that any given patient picks up their generic med. How did we get here as a society? It's weird. If you've listened to most of the shows that I've been doing lately, largely spiraling around the whole, what's going on with the prices that patients slash members are paying for generic drugs? 

You might be thinking the same thing I am.  

The Challenges of Pharmacy Business Models

[00:03:32] Stacey Richter: It's such an egregious situation. That it becomes an opportunity because the bar is so darn low and so many in the supply chain or the demand chain are getting royally screwed by the PBMs, not just patients. I mean, there's a lot of possible win-win collaborations, at least situationally. 

Potential Collaborations and Innovations in Pharmacy Business

[00:03:52] Stacey Richter: Local pharmacies and local businesses, for example, would seem to have a natural alliance. I'm reminded of the collaboration from a couple of years ago that Drew Leatherberry and Dan Strause talked about in episode 313, I'm super sure that you and the Relentless Health Value Tribe has or could come up with all kinds of innovative collaborations to help patients get affordable generic drugs, and I'd be super psyched to hear about them. 

Benjamin Jolley is a pharmacist by training. His pharmacy consulting company is Apex Pharmacy Consulting. Mentioned on the show today is Ge Bai; Mark Cuban; Kyle, “transparently kicking PBM ass” McCormick and his pharmacy; Blueberry Pharmacy in Pittsburgh, also CPESN. My name is Stacey Richter. This podcast is sponsored by Aventria Health Group. 

Guest Introduction: Benjamin Jolley

[00:04:38] Stacey Richter: Benjamin Jolley, welcome to Relentless Health Value.  

[00:04:40] Benjamin Jolley: Thank you so much. I'm excited. I really enjoyed listening to Ge's show.  

[00:04:45] Stacey Richter: Ge is amazing. We're talking about Ge Bai. You recently, you created a spreadsheet evaluating drugs, your pharmacy, and you know, you consult with other pharmacies as well.  

The Financial Realities of Pharmacy Operations

[00:04:56] Stacey Richter: You evaluated, I guess the financials on the back end of the drugs that were being dispensed. 

And I understand that you had an eye opening revelation.  

[00:05:06] Benjamin Jolley: I took all the prescriptions we filled for anybody in the pharmacy for the last year and just put them in order from most profitable to least profitable, then said, okay, now how much of our profit comes from this percentage of the prescriptions? 

Basically a Pareto Analysis.  

[00:05:21] Stacey Richter: And this is the 80/20 rule. This is the Pareto Principle, right?  

[00:05:24] Benjamin Jolley: Yeah, this was the 90/10 rule. 90 percent of the profitability of the pharmacy came from 10 percent of the prescriptions that we filled. It's crazy. Like it's so concentrated, the profitability of the pharmacy. That like, if I were to go and just be some profit maximizing ideal capitalist, what I would do is fire everybody in the pharmacy. 

We've got 22 employees, fire 21 of them, have one person fill 10 percent of the prescriptions that we currently do, and make more money. It's stupid.  

[00:05:54] Stacey Richter: Just restating, if you're dispensing a hundred prescriptions. 90 of them, you're either not making any money or potentially losing money and it is the 10 prescriptions that you fill that actually fund the operations of the whole pharmacy. 

[00:06:14] Benjamin Jolley: Exactly.  

[00:06:14] Stacey Richter: So talk about these 10 drugs then. What 10 are they? They're all drugs that anyone who has ever looked at a high cost claims report will be familiar with. It's like Truvada and Dimethyl Fumarate and oh, what else? Imatinib, I'm sure.  

[00:06:29] Benjamin Jolley: Imatinib, yeah. It's all of these drugs that are what the industry calls specialty drugs that have gone generic. 

That's where all of the money was. It's not the brand name specialty because we don't make any money on those. It's the generic drugs, of the specialty drugs that have, AWPs in the stratosphere, five figures. That's where all of the money was. It's wild.  

[00:06:51] Stacey Richter: Okay.  

The Impact of PBM Policies on Pharmacy Profitability

[00:06:52] Stacey Richter: So I'm definitely going to dig in on that because what a coincidence that these drugs are exactly the drugs, the PBMs and their narrow network specialty pharmacies that they've purchased are the only ones that can distribute. 

And I say that it's a coincidence in air quotes there, but what about these 90? Is it just pretty much everything else or is there drugs that are particularly troublesome?  

[00:07:19] Benjamin Jolley: We're a standard community pharmacy. We fill everything under the sun, right? We've got your blood pressure medicines, your diabetes medicines, your, you know, ridiculously cheap stuff to Eloquis. 

That's probably the most expensive item that we consistently dispense. And the general trend is that if the drug is a brand name drug, we tend to lose money on it. Like our cost of goods is say $500 bucks, we get paid $490 for it. And then there's all of the very commonly prescribed. the star rating drugs that Medicare cares a lot about, like atorvastatin, rosuvastatin, your statins, your ACE inhibitors, your ARBs, your oral diabetes products, where Medicare finds that like for every one percent increase in an adherence in the population to those drugs, overall health spending drops by about a tenth of a percent. 

You know, they control blood pressure, they control diabetes, which are the root causes of the really high cost claims that we see for heart attacks and strokes that are these huge hospitalization bills. And so those items are the ones where, just as an anecdote here, like lisinopril costs us about 49 cents and a prescription that I won't forget, we got paid 89 cents on it in total. 

That's it. Like, go take care of this person and make sure that they don't have angioedema and make sure that their blood pressure is controlled. Here's your 89 cents to do that. It's just incredible.  

[00:08:44] Stacey Richter: And we're not saying that the patient paid 89 cents, we're saying that's how much you got paid.  

[00:08:51] Benjamin Jolley: Correct. I think the patient in this case actually did pay all of it. 

The PBM reimbursed zero to the pharmacy and just said, hey, collect 89 cents from the patient. It's like, okay, cool. And everyone pays with credit cards, so I guess we're incurring a swipe fee for 89 cents. It's so low on a lot of these drugs that it's to the point of just being laughable for 89 cents. To get a pharmacist's professional time. 

And medication that like literally prevents heart attacks.  

[00:09:21] Stacey Richter: So what I'm understanding is of that 90, you're either losing money, as you said, that it's frequent for these branded drugs that you're actually losing money. Patient comes in and they get Eloquis or they get any of these brands and despite the fact that it would seem that there's a lot of money 500 or whatnot. 

Because this is not like a cost plus model here, where you have the acquisition cost and then you add some money and that's what you're charging the patient or that's what you're getting paid. In this particular case, the PBM is controlling the reimbursement, which is completely, this is just so weird, which is completely has nothing to do with the cost of goods. 

So that's why you wind up with this weird situation where your acquisition costs can actually be higher than what the PBM says you can charge for it. And then the pharmacy winds up losing money. So, let's just say that's the situation with all or most branded drugs. Then you've got this other situation with generics where you could not be losing money, but because it's so cheap, you know, if you're making 13 cents, it's just, it's tough to sustain a big staff or do counseling or whatever, because you're still, if you add in the labor, you're probably losing money still.  

[00:10:40] Benjamin Jolley: Right. Even if we don't account for labor, there are fixed costs in repackaging a prescription, right? 

If I'm taking some thousand count bottle. And I'm pouring 30 pills into a bottle for someone, I'm giving them a bottle, I'm giving them a cap, I'm putting a label on it. The cost of that right there is probably about 20 cents. And so we don't even need to get into the labor cost to say, yeah, the pharmacy is losing money even if they're supposedly making 13 cents. 

So when we talk about like cost analysis of or cost of dispensing in pharmacies, there's an average cost of dispensing that like builds in all of the costs of operating pharmacy, the rent, the lights, software, and the labor costs. And then there's the dead net marginal cost of filling a prescription because if I'm operating a pharmacy, the rent is the rent, the labor is probably the labor. 

If I have a technician, technicians on staff, whether we fill 100 prescriptions or refill 500 prescriptions or refill one prescription today, that person's still on staff. It's not an Uber model where they get paid per prescription that we fill. And so those costs are built into the cost structure of the pharmacy. 

But just the bare minimum marginal cost to fill one additional prescription is probably about a buck fifty. And so if I'm getting paid my cost of goods plus $1.50, then I'm not paying for any of the overhead, any of the labor at all. I'm just paying for like the plastic that I'm using and the transactional fees that everybody in the system seems to be able to charge. 

[00:12:06] Stacey Richter: This is what I'm wrestling with right now. We often talk about how it's so important that patients can afford their meds. And if we're talking about these generic meds, a lot of times the generic meds are, they're cheap, you know, you're talking about a 49 cent or a couple of bucks, you can buy on Amazon, I think you can pay five bucks and get as many generics as you can take a month for that. 

So like these are inexpensive products. On the other hand, obviously we have people in the supply chain, such as the pharmacy, that actually is providing some value here, right? And I don't know, necessarily know that we need to get into this, but you have oftentimes, especially in rural areas, that the pharmacist is the trusted medical profession for the community. 

Like, I think you probably know these stats better than me, but the health of the community diminishes when the pharmacy goes out.  

The Role of Employers in Pharmacy Business Models

[00:12:58] Stacey Richter: So you have this entity in the supply chain that is finding it very difficult to maintain a business model. I mean, there's other people who are making tons of money in this chain, but it makes me wonder whether there is a fundamental issue where you're trying to make it as cheap as possible for the patient for some of these generics while at the same time the operations of a pharmacy can't sustain those super cheap prices. Do you want to respond to that?  

[00:13:25] Benjamin Jolley: I think that if we want to have a world where people can have a pharmacist in their community that they can go in and talk to face-to-face, there is a minimum price that has to be paid. You can't have that service for free. 

And the way that the world has evolved since the eighties when PBMs first started to enter the pharmacy space, the price of medications has gone through the ceiling and we've taken the money that used to flow to the pharmacy and we've decided to overfeed our middlemen. Pharmacy operations might actually be losing money in a lot of cases. 

To me, it's a fundamental question of what do we want our society to look like? Do we want to have medications at the absolute dead net price and no pharmacists in the community and you get everything from mail order? Or do you want to have someone who's in your community that you can actually talk to face-to-face? 

And again, if we want to do that, that comes with a price tag. Training a pharmacist, just intuition costs for a typical pharmacist is like $150,000 has to be recouped somewhere. You can't expect people to go to pharmacy school for four years and not have a payment for the day that like, I got to eat, right? 

[00:14:42] Stacey Richter: Okay. So here's one way that this could work, there's 90 scripts out of 100 that are somewhere slightly below or slightly above the no profit line and then 10 of the scripts pay for the 100. It's not like a unit cost analysis. It's in the aggregate cost analysis and like maybe we're functional here. 

If you can basically afford to run a pharmacy on those 10 scripts, what's flawed about what I just said?  

[00:15:11] Benjamin Jolley: So the problem is that those 10 scripts are inconsistent and constantly channeled to PBM and specialty pharmacies. And constantly channeled away from the community pharmacy to a mail order or to a chain pharmacy. 

[00:15:27] Stacey Richter: And when you say constantly channeled away from what you mean is if a pharmacy, if a community pharmacy can manage to hold on to those scripts, it's probably because those scripts fell off somebody's radar. Like as soon as they come back on the PBM's radar. The patient is going to get a nasty gram that they have to get their drug through a mail-order. 

[00:15:47] Benjamin Jolley: Right. It's either A, there's some kind of regulation in place stopping PBM from taking all the business, which I'll be frank here. Most of those 10 prescriptions are Medicare prescriptions. That's not a mistake. There's a block in place, if it's an employer group plan, there's a block in place at the PBM level to say, this has to go through the mail order. 

[00:16:07] Stacey Richter: Is it cheaper for employers? Like, what's the difference between what's going on in Medicare and what's going on with the employer sponsored healthcare here?  

[00:16:17] Benjamin Jolley: CMS and their regulations does not allow the channeling of medications to a specific pharmacy. You can have preferred pharmacies. You can have cost sharing reductions to go to Walgreens or CVS or a credo specialty pharmacy, you can have cost sharing reductions for that. They have the preferred pharmacy thing, but you can't say you cannot get your medication at community pharmacy at Jolley's pharmacy. For example, you might pay 10 bucks instead of zero to get your medicine at Jolley's if it's a tier one generic, but the PBM is not allowed under Part D law to just say, Nope, this medicine has to be filled at our pharmacy. It's just not covered. Whereas in employer sponsored plans, I would wager that the majority of plans today that are managed certainly by the big three PBMs have blocks in place for the specialty generics at the very first fill, it'll say pharmacy not authorized to dispense. 

I bill a claim to express groups or CVS Caremark, OptumRx, and it'll come back with reject code, I think it's 4X, that says "pharmacy not authorized to dispense must go through specialty". And then I'm faced with, okay, I guess the doctor needs to send this prescription to a credo specialty pharmacy or CVS Specialty or Optum Specialty because the PBM will not pay for it at my pharmacy. Full stop. There's just no opportunity for me to even try to be a part of that competitive market.  

But this applies not just to the specialty generics, this applies to like the lisinoprils and the Lipitors. I will get messages frequently that come back with refills not covered. And then it'll have a message that says patient can get two fills at retail, then must go to CVS or then must go to Walgreens or something to that effect. 

Why that is, to be honest with you, I think that it's in part that employers aren't reading through their contracts. But like, I don't want to say that employers are not savvy. Some of them aren't. Some of them are very savvy. But I think it's largely, honestly, that some of the largest brokerages have preferred relationships with the largest PBMs and they receive a payment from the PBM as like a, an override or whatever that says that if you can get someone to agree to these terms, we will give you a dollar per prescription fee. Or whatever it is, they advise their clients to do so. And most folks trust their brokers. It's crazy to me when I look at the world and see how much money people are getting overcharged for these items.  

[00:18:50] Stacey Richter: There is a show with AJ Loiacono from 2022, I believe, where he talks about this exact same thing where you have employee benefit consultants and brokers who are taking overrides on every pharmacy script. 

And he wasn't talking a $1 override, he was talking 7$, $13, there was also just a big lawsuit in Florida, a school system sued their EBC who was taking millions of dollars a year in overrides because exactly what you just said there, Benjamin, was happening. I was gonna say, well, you know, maybe for the employer it's somehow less expensive to go this way, but it just sounds like there's, I mean, is it less expensive? 

[00:19:35] Benjamin Jolley: I don't know, I don't trust the big guys at all, so I don't think so, but if we take this from the perspective of, I'm a really large employer, I'm like Microsoft or something, and I use a big three PBM. Even if Jolley's were to fill those prescriptions, and the PBM pays me like 50 bucks or something, there's no guarantee in my contract that the 50 bucks is what Microsoft then gets charged. 

And so I might get paid $50 for an Imatinib where CVS Specialty might pay themselves $4,000 for the same item. But it's possible in the context of I'm going to stay with CVS Caremark as my PBM or I'm going to stay with ExpressScripts as my PBM that ExpressScripts gives a discount on the price that they charge Microsoft or whoever the large employer is if they allow me to force the business into my own pharmacy. 

Because they might pay me 50 bucks, but then they might turn around and charge Microsoft $4,500 through the PBM. But if they are able to fill it in house, they only charge them $4,000. So it's possible that it is cheaper to the employer to do this. But I think that smoke and mirrors, if you will.  

[00:20:47] Stacey Richter: Yeah, I was just gonna say it could very well be smoke and mirrors because if we're talking about imatinib, that's the example that, you know, that everybody uses. 

It's the classic example, right, because like they were charging employers $9,000 a month and saying that it was this huge discount because the branded drug was $27,000. So they're like, Oh, you're saving $18,000. Meanwhile, Imatinib, Mark Cuban made it available for $13, $13, one three.  

[00:21:13] Benjamin Jolley: $13,000, 13, like no zeros after that number, right? 

[00:21:17] Stacey Richter: Yeah, so you know, when you start playing the discount game, that's when things go horribly awry because it's like a discount off of what, like it's just, anytime, I've had multiple guests on the show basically say the same thing, like anyone, anyone who trots in and starts touting their discounts as opposed to talking about what the absolute price is of something like discounts are just a way that somebody in the middle is making money. 

[00:21:41] Benjamin Jolley: And like, again, in the context of a contract that I as large employer have with large PBM, my contract is a discount, right? And so maybe I get a better discount if I force people to go to mail order. In the context of that insane contract that does not make sense in a rational, like a homo economicus world. 

But in the context of that insane system, I do save money by making everyone go to mail order.  

[00:22:09] Stacey Richter: Well, you're making money because the middleman who stands to gain more when you use their vertically integrated downstream entity, right? Like their own pharmacies. So the middleman wants to incent its customers to choose the option where they maximize their revenue, right? 

So like, yeah, they're going to make it slightly cheaper because they give away 10 percent but make 90 percent more of the total sale or whatever, you know? That's what it sounds like it's happening there, right? We just talked about this kind of misalignment here, right? Like it's not in a PBM's best interest to share any of its profit with you, independent pharmacy or community pharmacy. And obviously because they're controlling the customer, they have, they're the ones with the direct relationship to the employer plans or Medicare, you know, whoever's ultimately paying the bill here.  

[00:23:00] Benjamin Jolley: One of the things PBMs and pharmacies don't often talk about is most generic medications. These cheap ones, they're a patient paid benefit. 

They're a member paid benefit. They're not actually like when you ask me to bill your insurance, they're not paying anything most of the time. Do you have a large deductible? They're not paying anything ever. You're never going to reach your deductible. And so, why should I give this PBM the authority to do all of this stuff if they're not paying anything anyways? 

Why do we societally do this? And like, this is why GoodRx exists. People realize, you know, they're not actually giving me the best price. If I pay out of pocket, even if I'm paying this other middleman, I actually still end up paying less money for my medicines.  

[00:23:44] Stacey Richter: Yeah, which Ge Bai, did talk about. And then the other thing that I, I think bears mention here is that HSAs are potentially a way to still have the employer pay so that the employees aren't on the hook for, I mean, if somebody's taking a number of these drugs, it can add up, but if there's a relatively simple way to do an HSA, then there could be these direct contracts and the employee still can get reimbursed.  

[00:24:13] Benjamin Jolley: It's actually funny you mentioned that. A good friend of mine is Kyle McCormick who owns Blueberry Pharmacy in Pittsburgh. He's like the guy that started the whole cost plus concept. Mark Cuban gets a lot of the credit for it. 

They're doing the same thing, but he posts all of his prices online. So If you want to know how much this drug costs, you go to and it'll say this is the price. He only operates in the Pittsburgh market though, but he has received a whole bunch of phone calls from various people saying: “Hey, my employer told me to call you and get my Imatinib from you or to get my dimethyl fumarate from you or to get my whatever specialty drug from you.” 

And then they would pay me back because the price he has listed is that $13. to like $50 price. And so the funniest thing was he actually got a call from someone that's a mile away from me here in Salt Lake City saying: “Hey, the Utah public employees health plan told me to get my Imatinib from you. And he's like, well, I'm not licensed in Utah, but you know, if you go to Jolley's, they can probably get you hooked up.” 

So we went and filled this prescription for this guy for the same price that Kyle was offering. Cause we can buy it at the same price as he does. And then they submitted a receipt to the public employees health plan this is not coming from their PBM. This is coming from the health plan who's looking at the claims and saying we are paying an enormous amount for this drug when we buy it through our PBM. But if we send it to an out of network pharmacy and then just do a direct member reimbursement on it, we actually saved, like, a couple thousand bucks every fill. 

Anyway, it was just a really bizarre moment for me of realizing, you know, the whole PBM system, like, it becomes really efficient for claims administration, but it's really inefficient in terms of the price of the products. This is the public employees plan, so this is like taxes that I am paying to my state are paying for that PBM to make like that specialty pharmacy to make that thousands of dollars. 

So it's a moment of, oh, that doesn't feel great.  

[00:26:18] Stacey Richter: Okay. Well, that's one thing an employer plan can do. Find members taking these specialty generics and tell them to go to Jolley's or Blueberry Pharmacy or another local pharmacy in that club and save thousands. It's just a little ad hoc and slightly labor intensive, but also, yeah, you can start now and not have to do any new contracts. 

What else can you do? How else might you suggest creating a win-win so patients are not getting overcharged? You know, patients are paying a fair price, their employers or Medicare taxpayers are paying a fair price. But at the same time, community pharmacies keep the money locally in the community, be a part of the community, also don't wind up getting squeezed out of the picture here through all kinds of financial maneuvering and incentives that drain money from the pharmacies. 

[00:27:04] Benjamin Jolley: I think the real solution here is to make the question of the employer saving money in the context of that PBM relationship irrelevant. That, to me, is the real answer here. From an employer's perspective, there's value in having a PBM when we're talking about your ridiculously expensive hepatitis C drugs because they can then play with the formulary and play the cure-a-pack against Harvoni. 

And get the net price dramatically down. And the reason there, there's value there is that, you know, these drugs cost $100,000 per course of therapy without any kind of negotiation. Whereas when we're talking about all these drugs that I'm talking about, you know, Imatinib that is $13 from Mark Cuban, there's really not much room to negotiate that down. 

Exploring Alternative Pharmacy Business Models

[00:27:48] Benjamin Jolley: And so the question becomes to me, like, how do I make the PBMs irrelevant to my practice? Because, I know that just the way the world is, I'm never going to be able to mess with those ridiculously high cost therapies in my day to day practice. And so if I set them aside and just say, okay, that's the PBMs’ world. 

They can play with those really high cost drugs. And then I start looking at the low cost stuff. I start to think, okay, well, if I'm a pharmacy and this drug literally costs me, you know, a buck 50 for a year's supply of medicine. Why am I charging someone on a transactional basis to receive this every 30 days? 

By doing so, I am adding cost to the system. Maybe there's some value there in terms of like, I can make sure that they're actually taking it. Maybe there's some value in terms of I can make sure that they're not going to have side effects. But if I'm participating in the PBM system and I'm getting paid 15 cents, to do that, then in reality, all of that like, you know, pharmacy school, ethical stuff that like, yeah, we pharmacists are great because we do this and this. 

All of that gets pushed to the side if I'm getting paid 13 cents a prescription and it's just how do I get as many prescriptions out the door as fast as I can and where can I cut corners?  

The Potential of Direct Pharmacy Care

[00:29:04] Benjamin Jolley: So I started to think about this and say, you know, what if I moved to something like a direct primary care model? 

And I've written about this on my blog for the last three years. This concept of direct pharmacy care. And so if I'm Amazon and I charge you five bucks a month to get, you know, as many generics as you want, if Amazon can do that, I think I can do it. I think their price point is maybe just a little too low and their model doesn't make sense because the fixed cost of shipping a medication from Amazon's warehouse or pharmacy to you. 

It's probably more than five bucks a month. So there's no way they're actually making money on that process. But the cost of me getting the medication to someone who walks into my pharmacy, there's no shipping cost involved, right? And so I really think there's an opportunity to have a membership type of deal, like a Netflix price point to say, look, if you pay me 15 bucks a month, that 15 bucks a month, if I can get a large enough portion of my patient population to say, Hey, I'll pay a membership, then that covers all of those labor costs. And Rent costs and so forth and the medications themselves are really cheap and so I can say, look we're covering all of our costs on this price point like for the little employer in my town who currently doesn't offer health insurance because it's too expensive, but they want to offer something to their employees. I say, hey look, you've got 30 employees. If you pay me 15 bucks a month per employee, then I'll give them this whole list of drugs at no additional cost. I really think that there's something there.  

[00:30:34] Stacey Richter: So what I'm understanding you say is similarly to how direct primary care. What they're doing is charging us, it's like a capitated rate, really, pay a per member per month, and then you get effectively, here's the list of meds, whatever you're prescribed, if it's on that list, you get it for your subscription fee. 

I can see where you're headed there, because what's the value, really, of a pharmacy in the community? It's the idea that you can ask questions. It's the idea that the pharmacist can be consulted. It's the "let's talk about these side effects", right? This is the value that a trusted pharmacist that has a relationship with patient can provide. 

So if you do something like this payment model that you're talking about, what it enables the pharmacist to do is actually rise to the occasion and provide that support. Whereas, you know, trying to hard scrabble it 62 cents at a time. And at any given moment, the PBM can snatch away the scripts. It's an unpredictable revenue stream, which is difficult for almost any business. 

And it definitely also sounds like this is something that if an employer is in a local community and has some employees who would value this interaction because the different strokes for different folks, right? Some people really like to have things delivered to their house, but other people really like to go out and have that interaction. 

[00:32:09] Benjamin Jolley: Even to that point though, we can deliver to people's houses. We do, we have for 50 years. Every little small business pharmacy I've ever talked to has an employee delivery driver or a courier service that they will go and deliver to someone's house. If we're talking a small business employer, if I'm talking like Microsoft, there's no way I'm going to be able to deliver to everybody in that company. 

[00:32:32] Stacey Richter: Well, you know, the issue is with a lot of these larger employers, they've got people scattered around throughout the country. So you know, they may have 800 employees in a certain local market. I mean, the challenge for them is going to be it's inefficient because now we have to negotiate all these individual contracts and all these local communities. 

But you know, at the same time, it's kind of like healthcare is local. So trying to do things at the national level, you'll wind up with, Oh, hey, gigantic PBMs that are doing all the stuff that they're doing. So I guess it's kind of a choice. Do you get a little inefficient as far as your operations go in order to actually drive better outcomes for patients? 

Or do you get real efficient and then lower the opportunities for patients to potentially get the care that they need. You save some time, but it'll cost you a lot of money to do so.  

[00:33:25] Benjamin Jolley: That exact issue actually is one that the small business pharmacy community has been aware of. And I am a part of a so called clinically integrated network called the Community Pharmacy Enhanced Services Network that comprises 3,500 small business pharmacies located in 48 different states that can sign a single agreement with a large employer to provide this type of service. CPESN has provided during COVID vaccination services across large employers at a whole bunch of different sites. The difference here between this and an Express Scripts or a CBS or an Optum or any other PBM is that the network is owned, operated, and the board of directors are the pharmacists that run the pharmacies. 

[00:34:09] Stacey Richter: I think it just kind of goes back to, you know, healthcare is 30 percent of the national economy and often something similar within local markets. If you're paying that money toward a big consolidated entity, then that money is draining out of the community. So if you're working with an organization like CPESN, you also have the money staying local, which is especially in certain communities not to be an underestimated plus. 

Is there anything that you want to add?  

The Role of Regulation in Pharmacy Business

[00:34:36] Benjamin Jolley: The other potential solution here is honestly just competent regulation for departments of insurance, but that's really hard, and it goes state by state. So I don't think that the solution lies in asking Congress or my State Department of Insurance to solve my problems. 

It's to make the competition irrelevant by saying, look, you can go buy the giant PBM's services for the price tag that it comes with. Or you can pay 15 bucks PMPM and get 90 percent of the medications for no marginal cost. There's all of these regulations that exist in the market right now that make it difficult to make that value prop easy. 

But I think the way that makes sense to pay for medication is to pay the pharmacy directly and not have a giant middleman in the middle who takes most of the value and who apparently is able to pay a broker in override that is more than what they're paying the pharmacy per prescription. So a broker is receiving more per prescription than the pharmacy is. Even inclusive of cost of goods, which is insane.  

[00:35:45] Stacey Richter: That's one way to put it. Benjamin Jolley, where can people learn more about your work and what's the web address of your blog?  

[00:35:51] Benjamin Jolley: Sure. My blog, it's a substack, so it's just my name, I'm also available through my consulting company, I'm also on LinkedIn. Find me there. Benjamin Jolley.  

[00:36:06] Stacey Richter: Benjamin Jolley. Thank you so much for being on Relentless Health Value today.  

[00:36:09] Benjamin Jolley: Thank you so much. Good talking with you, Stacey.  

Conclusion and Call to Action

[00:36:11] 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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