EP439: Fixing the Generic Drug Pricing Problem, Where Patients Pay More When They Use Their Insurance, With Luke Slindee, PharmD

For a full transcript of this episode, click here.

In the Ge Bai show (EP420), one solve was offered for helping patients pay the lowest possible price for generic drugs. In this healthcare podcast, Luke Slindee, PharmD, offers another solve. That’s where this conversation is going, but now let’s start from the beginning.

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It’s a thing that traditional PBMs (pharmacy benefit managers) make billions of dollars on generic drugs these days when patients pay more at the pharmacy than what the PBM reimbursed the pharmacy for the drug for. And then the PBM and its shareholders clean up the difference there. PBMs have a unique opportunity to buy low and sell high, and they are certainly not averse to fully taking advantage of that opportunity. So, patients pay more, pharmacies get reimbursed less, and PBMs smile all the way to the bank by sucking out the cash that’s sloshing around in the middle there.

This can have serious patient and self-insured employer and plan sponsor implications, this whole thing. It’s a big reason why (as Ge Bai, PhD, CPA, talked about in episode 420) 79% of the time, if a patient is in their deductible phase, using GoodRx, a GoodRx coupon, or buying the drug on Mark Cuban or Amazon or from Blueberry or Freedom will be cheaper than using their insurance. Seventy-nine percent of the time is a lot of the time.

More than three out of four patients will pay less not using their insurance for a generic drug if they haven’t reached their deductible. And keep in mind, most don’t reach their deductible.

Benjamin Jolley, PharmD, in episode 422 put it that patients pay more to pay more, right? They pay for their insurance. And then they pay more at the pharmacy counter for a generic drug than they would if they, again, wandered in, not copping to having insurance and using a GoodRx card or going to one of the cash pay pharmacies.

I say all this to say, don’t forget, we have a weird, weird situation in this country where PBMs tell the pharmacist how much to charge the patient; but they also tell the pharmacy how much they’ll pay the pharmacy for the transaction. So, now let’s talk about how to fix this, I’m gonna call it, spread problem, generic spread problem.

In the Ge Bai episode, she talks about not letting PBMs get their mitts on generic drugs. I mean, why pool risk—which is kind of what insurance is—why pool risk on a generic that costs, like, 47 cents is how she put it? Pooling risk is an administrative burden, and it costs more to administer the pooling of risk than it costs to pay 47 cents for the drug.

They’re sort of two schools of thought that we talked about earlier in that earlier show. One is to just not cover generic drugs, which can get dicey because even if a generic drug, one of them costs 47 cents, sometimes people take a lot of these generic drugs, especially if they’re polychronic; and it can add up in ways that are not good for patient outcomes.

Another idea is to give patients HSAs (health savings accounts) or a wallet of some kind or a prepaid credit card and put money in that wallet or on that prepaid credit card, and then the patient can use that to go buy their generic drugs. So again, it’s not pooling the risk; but it’s giving them a way to purchase the drugs that is outside of the purview of a PBM.

There’s much more to that story, which you can hear all about in episode 420 with Ge Bai at your leisure, because today I am talking with Luke Slindee about another solve to the generic spread pricing problem. And this one involves making, I’m gonna say, a fairly minor adjustment relative to the so-called usual and customary prices for generic medications.

If you do not know what a usual and customary price is, never fear. That is the whole first part of this conversation with Luke Slindee today. We talk about what the usual and customary price is as a construct. We talk about the logical, behavioral, economic reasons behind how this usual and customary price has gotten wildly inflated and how that winds up getting us into the pickle that we are in now.

After you listen to this show, do go back and listen to the other episode with Luke Slindee (EP429), where we follow the dollar through the pharmacy supply chain, because that will fill in probably a few remaining gaps in your knowledge. Or the show with Steven Quimby, MD (EP344) for even more details about the profit machine that is a traditional PBM when it comes to generic drugs.

My guest today, Luke Slindee, is a second-generation pharmacist. His family owned a pharmacy in Minnesota when he was growing up. Now he is a senior pharmacy consultant for Myers and Stauffer, which is the firm that calculates the NADAC (National Average Drug Acquisition Cost) Price Benchmark, on behalf of CMS (Centers for Medicare & Medicaid Services) and the federal government.

Before we kick into the episode, I just want to thank VBC warrior for the super nice review. VBC warrior wrote, “A must listen to for VBC warriors … for anyone interested in transforming the delivery of healthcare in America. [Every guest] outlines a clear path forward that we only need the courage to start down. I can’t wait each week for the next episode, and I only wish there were more.”

Thank you so much. If you would like to support this show, please do leave us a review. I read them. They make me happy. And they also help other listeners find the show.

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Also, I have a new thought. I’m seeking someone else, besides me, to record something along the lines of what I just said about leaving a review and/or signing up for the email list because, you know, I get tired of hearing my own voice at the ends of episodes.

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On another note, I’m just ticking off housekeeping. People have asked me what the next conference I’m going to is, and, therefore, I am reporting that I’ll be at the Health RosettaFest in DC in September. I am looking forward to that.

Oh, lastly, lastly, we are hiring for a few roles over at my day job—the day job actually that pays to produce Relentless Health Value. I probably should mention this because it seems that many assume that RHV (Relentless Health Value) is some kind of profit-making endeavor. And I am here to tell you that no, it is not. It is an expensive endeavor, actually, which is funded by my aforementioned day job here at Relentless Health Value corporate headquarters. We haven’t even managed a nonprofit status or a negative-profit operation, which is why it always strikes me as somewhat jarring, I have to say, when people pitch us to come on the show not to talk about fixing healthcare, but they are kinda hell-bent to shamelessly pitch their for-profit entity.

Uh, no? Buy me lunch at least? This is probably TMI. Thanks for listening.

Anyway, I do have a day job that pays the bills. If you are a project manager who is familiar with data, tech, and consulting or a medical copywriter who knows how to reference your work when you make a medical claim, click here for more info.

You can learn more by following Luke on LinkedIn.

Luke Slindee, PharmD, is a second-generation pharmacist with a background in independent pharmacy, chain pharmacy, data analytics, and prescription drug pricing. He currently supports public drug pricing transparency benchmarks and is an advocate for pharmacy reimbursement reform and antitrust enforcement in healthcare.

08:12 Where do cash prices fall when pharmacies have contracts with PBMs?

08:39 What is a usual and customary price?

12:14 How is the usual and customary price affected by PBMs?

16:49 Should pharmacies be allowed to have two sets of cash prices?

17:14 Where does GoodRx fit into this because of the pharmacy/PBM dilemma?

19:06 What’s happening with Amazon and the anticompetitive contract lawsuit, and how does it relate back to pharmacy contracts with PBMs?

20:38 EP395 with Brennan Bilberry.

21:05 EP420 with Ge Bai, PhD, CPA.

23:27 Why is there a new wave of cash-only pharmacies?

24:02 EP418 with Mark Cuban and Ferrin Williams, PharmD, MBA, from Scripta.

25:41 What would allow the generic market to return to normal competitive pricing?

26:39 How does this dysfunction create a negative downstream effect?

You can learn more by following Luke on LinkedIn.

Luke Slindee, PharmD, discusses fixing #genericdrugpricing on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcareleadership #healthcaretransformation #healthcareinnovation

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