EP435: Optimized Pharmacy Benefits Are Required if You Want to Do or Buy Value-Based Care, With Dan Mendelson
Relentless Health Value™May 02, 2024
35:2532.42 MB

EP435: Optimized Pharmacy Benefits Are Required if You Want to Do or Buy Value-Based Care, With Dan Mendelson

For a full transcript of this episode, click here.

This conversation I am having with Dan Mendelson, my guest today, all started with a post that he had written on LinkedIn considering how pharmacy benefits can or should be optimized within the broader context of value-based care. Total cost of care, value-based medical care, and pharmacy benefits—these worlds have to collide. There is just so much intertwined into all of this, which is why I pretty much immediately invited him to come back on the pod to discuss in greater detail.

A few years ago, I heard a doctor say that practicing medicine without considering pharmacy is like getting to the 90 yard line, putting down the ball, and walking off the field. And, yeah … when a patient gets to a certain point in a whole lot of disease progressions, optimal medical therapy includes pharmacy. It’s a thing. Adherence is a thing.

In fact, I saw a stat the other day that patients not taking their meds costs an estimated $3874 PEPY (per employee per year). Also, half of all hospital admits are caused by nonadherence. Those two stats, by the way, are from a post on LinkedIn by Brian Bellware, who was recapping a video from Eric Bricker, MD.

But also, as Barbara Wachsman (EP430) said on the show, half, I think she said, of all ER visits are due to patients not taking their meds right. Olivia Webb (EP337) was on the pod, if you want to go back and listen to that one, talking about how she spends hours every month trying to figure out how to navigate access issues to manage to get her Crohn’s disease drug.

So, yeah … one underlying reason why a lot of this stuff happens is that pharmacy benefits are purchased and siloed a lot of times. In fact, I have yet to see, really, any mainstream contract wherein a PBM (pharmacy benefit manager) is held accountable in any way for downstream medical costs, which may be incurred because of suboptimal pharmacy benefit design, right? And there are so many examples of bad downstream medical impacts.

I really like how Mark Fendrick, MD, put it in episode 308. He said benefits, including pharmacy benefits, are like peanut butter and jelly relative to enabling high-quality care. You gotta have both working in concert, like CMS or a plan sponsor just paid a ton of money to get a patient an organ transplant, and then the patient can’t afford their transplant meds, which aren’t on formulary and are really expensive, and therefore there’s organ rejection. This happens.

Or a patient with uncontrolled diabetes with a huge co-pay for insulin. Doctor says, “Hey, you gotta take your insulin.” Patient says, “Can’t afford it.” Right? This makes no sense, and it’s shockingly common. I’m thinking right now of that young man who died in the Midwest because he could not get his asthma inhaler. It wasn’t on formulary.

So, here’s the game plan. I talk with Dan about the five kind of vital considerations he had brought up in that aforementioned LinkedIn post when considering how pharmacy benefits can or should be optimized within the broader context of value-based care. Dan’s advice for the pharma industry is woven in here as much as his advice for EBCs (employee benefit consultants) and employers.

I am sure that most of our listeners are going to be very familiar with Dan Mendelson, my guest today, and his work; but the quick background here is that he runs Morgan Health. The mission over there at Morgan Health is to drive innovation in employer-sponsored healthcare, and they do that by investing and working with their portfolio companies in the context of the 300,000 or so employees over at JPMorgan Chase. At the same time, Morgan Health also engages in policy discussions because, as Dan says, no one employer is going to control public policy.

As a footnote here, I just will say that I actively seek out opportunities to listen to Dan Mendelson’s thoughts. He has spoken a lot and really eloquently and with great insight about setting up the economic models for healthcare, not sick care. Recently, actually, he was on a panel at the Milken conference along with Natalie Davis; Yele Aluko, MD, MBA; and Henry Ting, MD. There are definitely insights to be gleaned.

You can learn more at the Morgan Health Web site and follow Dan on LinkedIn.


Dan Mendelson is the chief executive officer of Morgan Health at JPMorgan Chase & Co. He oversees a business unit at JPMorgan Chase focused on accelerating the delivery of new care models that improve the quality, equity, and affordability of employer-sponsored healthcare.

Mendelson was previously founder and CEO of Avalere Health, a healthcare advisory company based in Washington, DC. He also served as operating partner at Welsh Carson, a private equity firm.

Before founding Avalere, Mendelson served as associate director for health at the Office of Management and Budget in the Clinton White House.

Mendelson currently serves on the boards of Vera Whole Health and Champions Oncology (CSBR). He is also an adjunct professor at the Georgetown University McDonough School of Business. He previously served on the boards of Coventry Healthcare, HMS Holdings, Pharmerica, Partners in Primary Care, Centrexion, and Audacious Inquiry.

Mendelson holds a Bachelor of Arts degree from Oberlin College and a Master of Public Policy (MPP) from the Kennedy School of Government at Harvard University.


04:50 How do we connect the dots between value-based care and pharmacy benefits?

07:43 Where do things need to go for employers in terms of drug spend integration?

08:42 How do we think about having a value-based component in the decision-making process?

09:44 How do we enable the necessary information to make proper decisions?

10:56 EP206 with Ashok Subramanian.

11:21 “Many payviders just haven’t gotten to pharmacy yet; they need to.”

14:14 Why do pharmaceutical companies need to be prepared to contract on the basis of value?

16:46 EP426 with Nina Lathia, RPh, MSc, PhD.

17:36 EP431 with Kenny Cole, MD.

18:07 Why is it important to “let the market work”?

21:04 Why do we have cost sharing, and when does it not make sense to have that as a co-pay?

23:59 Why are evidence requirements good for everyone?

28:45 Why is pooling of risk important?

29:49 How do you pool risk without going to an insurance company?

32:03 What is Dan’s advice to hospitals?

33:30 “In a value-based world, buy and bill does not make sense.”

33:36 What is Dan’s advice to primary care doctors?

33:54 What is Dan’s advice to entrepreneurs and innovators?


You can learn more at the Morgan Health Web site and follow Dan on LinkedIn.


@dnmendelson discusses #pharmacybenefits on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcareleadership #healthcaretransformation #healthcareinnovation


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