EP306: A Deep Dive Into Amazon’s Pharmacy and the Amazon Pharmacy Model Some Employers Are Running With, With Ge Bai, PhD, CPA

Here’s a trigger warning: This show gets pretty deep into some of the nether regions of PBM (pharmacy benefit manager) contractual terms with pharmacies. If you are not, I’m gonna say, pretty familiar with PBM goings-on, I’d suggest you listen to EP241 with Vinay Patel first or skip the first third of this show.  

In this health care podcast, I am speaking with Ge Bai about Amazon’s pharmacy business. Ge Bai, PhD, CPA, is an associate professor of accounting at Johns Hopkins Carey School of Business. She is also associate professor of health policy and management at Johns Hopkins Bloomberg School of Public Health. Ge trained as an accounting researcher who originally started looking into chargemasters for her dissertation. From there, she started checking out health care pricing and contracting issues. Who knew chargemasters were like a gateway drug into health care?

I ask Ge questions such as, “Why the heck does Amazon need a PBM for cash pay patients?” and “What’s this Amazon Pharmacy model that some self-insured employers are talking about?” And then we get into rebates and the impact that Amazon will have on rebates.

Right up front, I want to just say flat out, I learned a mind-blowing detail from Ge. There’s a contracting term that PBMs put in their contracts with pharmacies. Basically, a pharmacy cannot sell a drug to a cash pay patient for an amount that is less than the price a PBM pays the pharmacy for the drug or the pharmacy charges the PBM for the drug—I guess it depends how you perceive that relationship.

So, the pharmacy’s list price paid by cash pay patients can’t be less than the contracted price that it has with any third-party payer. The PBMs will always have to get the better price than cash pay patients. There’s one exception, though: unless the cash pay patient wanders in with a coupon (like a GoodRx coupon, for example). There are a whole lot of implications to this if you start to think about it.

Spoiler alert: There will be an “Ask an Expert” with Ge Bai coming out after the show, where Ge and I get deeply into GoodRx’s business model. So, stay tuned for that if you are interested.

You might be subscribed to the show on iTunes, but I’d also encourage you to sign up for our newsletter on relentlesshealthvalue.com. Every week, you get a transcript of the introduction to the show that’s coming out that week, so you can prioritize your listening accordingly.  

You can connect with Ge on LinkedIn and Twitter. You can also learn more on her Web site at Johns Hopkins University.

Ge Bai, PhD, CPA, is an associate professor of accounting at the Johns Hopkins Carey Business School and associate professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health. She is an expert on health care pricing, policy, and management. Dr. Bai has testified before the House Ways and Means Committee, written for the Wall Street Journal, and published her studies in leading academic journals such as the New England Journal of Medicine, JAMA, JAMA Internal Medicine, Annals of Internal Medicine, and Health Affairs. Her work has been widely featured on ABC, CBS, NBC, Fox News, CNN, and NPR and in the Los Angeles Times, New York Times, Wall Street Journal, Washington Post, and other media outlets and used in government regulations and congressional testimonies.

03:27 Why is Amazon in the pharmacy space a big deal?
04:03 “I view Amazon Pharmacy as a combination of GoodRx and mail-order pharmacy.”
05:07 What’s the difference between Amazon and other pharmacies?
06:14 Why does the third-party payer health care system keep Amazon from cutting out the PBM?
07:49 “We don’t have insurance companies, we don’t have PBMs.”
09:21 “Who’s really using prescription drugs? The majority is Medicare patients.”
11:46 Is Amazon doing anything innovative in the pharmacy space?
12:37 What options do self-insured employers have now with Amazon?
14:42 Why employees and employers might choose to use Amazon Pharmacy over other mail-order pharmacies.
21:27 Will Amazon affect pharmacy rebates?
25:28 “Fundamentally, employers want to have more power in the whole process.”
27:41 What should you be doing as a self-insured employer?
28:58 “If we do not put out effort to make the private market work, then the next option would be single payer.”

You can connect with Ge on LinkedIn and Twitter. You can also learn more on her Web site at Johns Hopkins University.