EP456: Advice to Pharma at the Intersection of Product Value, Reputation, and Patient Affordability, With Brian Reid

[00:00:00] Episode 456, Advice to Pharma at the Intersection of Product Value, Reputation, and Patient Affordability. Today I speak with Brian Reid.

[00:00:20] Brian Reid- American healthcare entrepreneurs and executives you want to know. Talking. Relentlessly seeking value.

[00:00:28] This show is going to be a little bit different because what we're going to do today is offer some advice to those who may work at a pharma company.

[00:00:38] But before we get into this advice portion of the discussion, let's start here.

[00:00:45] Probably we're going to have people listening to this episode who maybe are not in our normal tribe of Relentless Health Value listeners.

[00:00:53] While there are for sure regular listeners who work at pharma companies, there might be some newbies on the scene here.

[00:00:59] And to you, I say welcome. I hope that you feel right at home here.

[00:01:03] You know what though? Many of us, including myself often enough, are slightly uncomfortable.

[00:01:09] Because this is the place where we all kind of look at ourselves in the mirror.

[00:01:15] We all live in glass houses. After all, everyone in the healthcare industry, there is no devils and no angels here.

[00:01:22] And the trick is maximizing the good and minimizing the not so good so that we all wind up with the highest net positive possible for patients.

[00:01:32] So around here, we do not shy away from saying what needs to be said so that we all can find a way forward to serve the patient.

[00:01:40] We cannot solve problems after all that we have not taken a cold, hard look at.

[00:01:45] Yeah. So today I am speaking with Brian Reed.

[00:01:49] I have been very much looking forward to speaking with Brian Reed, who many may know from his really great newsletter and really insightful LinkedIn posts.

[00:01:57] All links for everything I talk about are in the show notes, including Brian's amazing newsletter.

[00:02:03] And by the way, I am not going to say links in the show notes after the rest of the stuff I mentioned, because everything I mentioned that may seem to require a link, trust me, will be in the show notes.

[00:02:14] Brian Reed's advice, which he delivers in the episode that follows in some spoiler alert here.

[00:02:22] But I also will say that he is much more eloquent than me and the nuances are a thing.

[00:02:27] So please do listen to the whole show.

[00:02:28] But Brian's piece of advice, number one for pharma and really any product or service, frankly, but piece of advice.

[00:02:35] Number one is this. Get a really solid bead on what value means, not just to PBMs or contract pharmacies or wholesalers who are middlemen, but to the ultimate purchasers, the ones whose wallets the money is actually coming out of to pay the bill.

[00:02:55] Meaning plan sponsors such as self-insured employers or unions, patients themselves or members and taxpayers.

[00:03:02] Again, how does value accrue to the ultimate purchasers like plan sponsors, patients slash members or taxpayers?

[00:03:10] Everybody else in the drug supply chain, let's be clear, is in the middle pushing money around that came out of somebody else's wallet.

[00:03:19] These middlemen have their own interests that may for sure may or may not be aligned with the interests of the ultimate purchasers.

[00:03:27] Getting value realized by patients will depend on understanding what the value is to these ultimate purchasers and then not getting derailed by any middleman who may not be so aligned.

[00:03:38] As a sidebar on this number one piece of advice, the whole what's your value and influence coloring this value equation made by ultimate purchasers is the prevailing beliefs of these ultimate purchasers relative to pharma, how they perceive the pharma industry.

[00:03:56] Whether it's earned or not, and this is not what we're going to discuss today, but earned or not, pharma does not have a great reputation with these folks right now.

[00:04:05] And this matters.

[00:04:06] Brian has a lot to say on this topic, which is fascinating.

[00:04:08] So you should listen.

[00:04:10] Number two piece of advice that Brian Reed delivers in the podcast that follows that we talk about.

[00:04:16] Consider inching into the fray around benefit design.

[00:04:21] Rightfully so, there's always a lot of talk about patient affordability at pharma companies.

[00:04:26] But if I was going to point to one thing that impacts affordability more than anything else, it'd be benefit design.

[00:04:34] There's only a small underfunded cadre right now of folks out there.

[00:04:38] Mark Cuban aside, actually.

[00:04:40] But there's only a really small number of folks who never have any money who are really helping plan sponsors understand the impact on patients of some of the choices that they are making.

[00:04:49] I mean, personally, I could think of 10 things to do right off the top of my head that could help plan sponsors not get inadvertently screwed in this realm alone.

[00:04:59] Just thinking they're saving money when in reality they are harming patients and not saving money.

[00:05:03] There's probably a lot of opportunities to communicate these kinds of things that are really win-win collaborations.

[00:05:10] Number three piece of advice that we talk about in the conversation that follows with Brian Reed.

[00:05:16] Keep an eye on hospital consolidation and vertical integration in the payer space.

[00:05:22] Consolidation raises prices and impedes patient affordability.

[00:05:27] This is as per study after study after study.

[00:05:31] Consolidation raises prices and sometimes considerably.

[00:05:35] Here's a part B to this third piece of advice about consolidation.

[00:05:38] There's sometimes wild swings in prices at different large consolidated health systems in the exact same geography.

[00:05:46] Listen to the show with Cora Upsall for more about how their health plan, as just one example, saved $30 million a year.

[00:05:54] Just pushing a huge expensive health system consolidated one out of their network and navigating patients to more affordable sites of care.

[00:06:02] This matters to pharma companies because A, hospital system prices are currently crushing in many areas of the country, really impacting patient affordability.

[00:06:13] But there are better or worse options from an affordability standpoint in some of these geographies.

[00:06:19] To state the obvious, if an infusion of the same drug costs 10 times more,

[00:06:25] if a patient shows up in one care setting versus another, that latter place, not affordable for patients.

[00:06:32] And by the way, that is not hyperbole of any kind.

[00:06:35] There are plenty of examples where literally an infusion of the same drug, same dosage will cost 10 times more if a patient goes one place versus another.

[00:06:44] But again, it's not affordable.

[00:06:46] The patient cost share might be 10 times higher if it's coinsurance, if the patient goes to that latter place.

[00:06:52] And that latter 10x more of the cost place also just added 10x the cost to the PEP program or the foundation debit column.

[00:06:59] All of this is really relevant to pharma.

[00:07:01] And just to pile on here because now I'm on a roll.

[00:07:04] Another reason why this matters.

[00:07:06] These striking price variations between care settings, if we're talking about product value,

[00:07:11] and if the price the patient or the plan sponsor is paying is 10x the cost of the ingredients,

[00:07:16] nobody's doing that math and separating out the cost of ingredients from the total cost of the infusion.

[00:07:21] It is one lump sum number.

[00:07:23] So if we're defining value as outcomes divided by cost,

[00:07:27] and now the cost to the plan sponsor is 10x,

[00:07:31] product value just got reduced by 10x.

[00:07:34] Just in case anyone is confused here, and you probably know this,

[00:07:37] but many forget that the whole ASP plus 6% provider reimbursement,

[00:07:41] so if that's what you're thinking and you're wondering how the 10x transpires,

[00:07:44] that ASP plus 6% provider reimbursement is only for Medicare kinds of plans.

[00:07:50] Hospitals can and do negotiate much higher reimbursements for commercial plans,

[00:07:55] and those carriers that have commercial lines of business and also MA,

[00:07:59] Medicare Advantage Books of Business,

[00:08:01] even allegedly actually negotiate higher commercial reimbursements

[00:08:05] so that they can get lower Medicare Advantage rates.

[00:08:08] Right, and you can see why.

[00:08:09] Because the MA, the Medicare Advantage dollars,

[00:08:11] are coming out of their own capitated pockets,

[00:08:13] whereas the commercial rates are being paid for by the ultimate purchasers,

[00:08:18] the plan sponsors.

[00:08:20] My name is Stacey Richter.

[00:08:21] This podcast is sponsored by Aventria Health Group.

[00:08:24] And with that, here is Brian Reed.

[00:08:25] Brian Reed, welcome to Relentless Health Value.

[00:08:28] I'm thrilled to be here.

[00:08:29] So let's talk about this slippery term.

[00:08:31] Yes.

[00:08:31] Value, right?

[00:08:33] You know, value-based care.

[00:08:36] I value mindset.

[00:08:37] The value of a pharma.

[00:08:39] Like, ask 10 people what it means and you're going to get 11 definitions.

[00:08:42] But if we're talking about the value of medicines,

[00:08:44] why is it so critical that everybody understands this value term?

[00:08:48] Oftentimes, you know, this is debated fiercely within very, very narrow communities.

[00:08:55] If they're not in it together, they're at least speaking the same language.

[00:08:59] But when folks within industry talk to their business partners for better or for worse about

[00:09:03] these topics, we leave a lot of voices out that probably otherwise would need to get heard.

[00:09:08] I think it's important to bring that discussion more broadly.

[00:09:11] How does value apply to the patient?

[00:09:13] How does value apply to society, to the payer, to the policymaker?

[00:09:17] So if I'm defining folks here, so you're saying folks talking to their business partners,

[00:09:22] do you mean pharma talking to PBMs?

[00:09:25] Pharma's talking to PBMs.

[00:09:26] So, you know, we've all seen the chart of, oh, here's how money flows through the system.

[00:09:29] You've got, you know, your GPOs and your pharmacies.

[00:09:32] And that's all, the mechanics are all very, very important.

[00:09:35] And that's where the $5 trillion sloshes around.

[00:09:37] But at the end of the day, there is a patient or there is a physician or there is a policymaker

[00:09:43] trying to make sense of it all.

[00:09:45] And those are the folks who I think are often

[00:09:48] not considered when we have some of these value discussions.

[00:09:51] So again, I think that pharma and PBMs, they might not necessarily like communicating with

[00:09:56] each other, but there's no question that there's kind of a shared language and a shared

[00:09:59] understanding of what's going on.

[00:10:01] I'm not sure that's the case when you start opening the aperture and looking at other audiences.

[00:10:06] So the point that you're making, if I'm thinking about pharmas, what they're hyper

[00:10:10] focused on is what are we going to tell the PBM?

[00:10:12] And if we're thinking about this in the construct of value, they're thinking about value relative

[00:10:18] to how does my customer, i.e. the pharmacy benefit manager, and I'm using that as a broad

[00:10:23] stroke for generally speaking, the big three.

[00:10:25] I don't want to lump everybody into the same bucket, but like value means how is a pharmacy

[00:10:30] benefit manager perceiving value to their own organization mostly?

[00:10:36] I think that's right.

[00:10:37] And I don't want to claim that pharma companies don't think about value in any other way.

[00:10:41] But if you look at kind of the amount of time and attention that's invested in quote unquote

[00:10:44] value, a lot more of that time and effort and energy and human capital goes towards creating

[00:10:51] the dossiers and negotiating with the PBMs than it does.

[00:10:55] How are we going to explain this to patients, advocates, investors, policymakers?

[00:11:00] And I will also probably throw plan sponsors into that mix, like self-insured employers,

[00:11:05] for example.

[00:11:06] Like there are some folks at pharma companies who are actually concerned about these ultimate

[00:11:11] purchasers, which is what plan sponsors actually are.

[00:11:16] These are the ones who are hiring the PBMs ultimately and whose wallet the dollars are

[00:11:21] coming out of.

[00:11:22] I think the point that you're making is by this kind of like single-minded focus on thinking

[00:11:27] through like, how am I going to get this contract and get the best negotiated rate?

[00:11:31] Or, you know, how are we both maximizing our business opportunities here?

[00:11:35] PBMs are middle people, right?

[00:11:38] And if you're thinking about the PBMs that are contracted and working for a Medicare plan,

[00:11:42] then taxpayers are the ultimate purchaser here.

[00:11:47] And then in both cases, obviously, you've got the patients slash members themselves as an

[00:11:52] ultimate purchaser, you know, the ones who are actually paying the bills.

[00:11:56] Again, PBM is a middleman and their priorities may or may not be aligned with the ultimate

[00:12:02] purchaser.

[00:12:03] I think, you know, you mentioned employers.

[00:12:06] Those are folks who don't necessarily wake up every day ready to grapple with complicated

[00:12:11] issues of value, but it's incredibly important to them.

[00:12:13] And so I think when we talk about, you know, opening the aperture and speaking to larger

[00:12:17] audiences, that's one of those that probably could stand a little bit more love and care.

[00:12:23] And, you know, everyone saw the Kaiser Employer Health Benefits Survey that came out.

[00:12:28] And the most striking finding of that, to me, large employers right now are paying $26,000

[00:12:34] a year for family coverage.

[00:12:36] And yet a huge portion of the people who responded to the survey said they have no idea what percentage

[00:12:43] of their rebates from PBMs get passed back.

[00:12:45] So there's this kind of educational gulf.

[00:12:49] And whether that's, you know, a gulf of the executives or a gulf of HR, there's no question

[00:12:54] that there's a need for education here that is critical to, I think, the operation of the

[00:13:00] healthcare system.

[00:13:01] And quite frankly, you know, to pharma getting their ideas of value out there.

[00:13:04] So why does it matter?

[00:13:07] Like, let's just say that those plan sponsors and just like this whole rebate thing is a

[00:13:13] whole can of worms, just a shell game of the highest order.

[00:13:16] But like what is really important that plan sponsors, i.e. the ultimate purchasers, understand

[00:13:22] here so that plan sponsors appreciate the value of medicines and maybe that these medicines

[00:13:29] are worth it.

[00:13:29] Like it's amazing sometimes just the vitriol.

[00:13:32] For example, as just one example, I was telling a story to someone about my dad's friend who

[00:13:39] got cancer.

[00:13:39] He's like, you know what?

[00:13:41] There's this drug and it saved my life.

[00:13:43] I would have died and I'm going to survive for four additional years because of this drug.

[00:13:47] So I'm just repeating this story.

[00:13:49] And somebody comes out of the woodwork, right out of the woodwork and accuses me of being

[00:13:53] somehow, I don't know, the enemy of plan sponsors or something.

[00:13:57] It was very unclear what the logic of the argument actually was, but the sentiment and the

[00:14:02] degree of just the visceral nasty was really on full display.

[00:14:06] And that's the, I mean, that's the fundamental challenge.

[00:14:09] You know, people, you know, I think within the industry, there's a real sense of, I don't,

[00:14:13] why do we have a reputational issue?

[00:14:15] You look at the last five years, we have seen higher rates of FDA approvals than we've ever

[00:14:20] seen historically.

[00:14:21] And these aren't just like me too drugs.

[00:14:23] We're seeing gene therapies approved.

[00:14:24] And, you know, we've got the new modality in schizophrenia for the first time in 30

[00:14:28] years.

[00:14:28] And oh, by the way, remember we solved that whole global pandemic thing and net prices

[00:14:34] of drugs have been falling for six straight, like objectively, it feels like we should be

[00:14:38] in a good place.

[00:14:39] If you look at polls, overwhelming Americans, percentages of Americans say, oh yeah, my life

[00:14:44] is better for the pharmaceutical industry.

[00:14:47] And then you ask them, what do you think about the business practices?

[00:14:50] Oh yeah, that's a big problem.

[00:14:52] And so we need to spend a little more time, I think, thinking about how those commercial

[00:14:58] decisions have kind of broader implications reputationally, because I think those reputational

[00:15:04] issues boomerang into access issues.

[00:15:07] The classic example here, right, you turn the clock back 10 years, you look at the introduction

[00:15:11] of the next generation hepatitis C medicines.

[00:15:15] And that's a place where you had, holy moly, you know, what an incredible, you know, what an

[00:15:19] incredible innovation.

[00:15:21] You've got medicines that virtually in a very short period of time cure a massive public

[00:15:26] health issue.

[00:15:27] Hep C, by the way, hepatitis C we're talking about.

[00:15:30] Yeah.

[00:15:30] Now, 10 years later, there are still access issues.

[00:15:34] There are still states that go out of their way to restrict access to these drugs, even

[00:15:39] though prices have fallen 70, 80 percent.

[00:15:42] We have an access problem that I think probably arose from reputational damage that happened

[00:15:48] early on.

[00:15:49] And I think that's really where the rubber hits the road.

[00:15:51] It's not, you know, it's not simply about they're being mean to us, how difficult it is

[00:15:55] to be pharma.

[00:15:56] At the end of the day, there are people that probably aren't getting what they could get

[00:15:59] because there's this reputational overhang.

[00:16:01] So that's the why this matters, I think, is the point that you're making.

[00:16:05] And to layer onto that, one of the challenges for a lot of these plans was the time horizon

[00:16:11] that, you know, for sure drugs are a cure and are amazing, but required plans and prisons,

[00:16:18] sadly, to pay for what would have been like 10 years of treatment costs in year one.

[00:16:24] And literally plans were getting bankrupted by patients who then went out and caught hep C

[00:16:29] like again. So lots of stuff going on.

[00:16:32] And I could go on a sidebar tangent about how pharma, I don't know, maybe could have been

[00:16:37] a collaborative partner or maybe still could and figuring out how payment might have worked

[00:16:43] doing stuff like the Netflix model or some of the other options that I talked about actually

[00:16:48] with Dr. Bruce Rector on episode 300.

[00:16:50] But when pharma doesn't engage with these ultimate purchasers and relies on PBMs and other middle

[00:16:56] people to, you know, be their agents of communication, right?

[00:17:00] Like this is a perfect example of here we are with unresolved issues 10 years later.

[00:17:06] But I also want to make one really, really important point here.

[00:17:09] I think these are I don't want to treat anything like it's homogenous or it's average when we're

[00:17:16] talking about different drugs.

[00:17:18] Like there are some drugs that are excellent.

[00:17:20] There are some drugs that barely if they do exceed the standard of care.

[00:17:24] So let's just for the sake of this conversation, let's just assume that we're talking about good

[00:17:29] drugs for appropriate patients, right?

[00:17:31] Like so we've identified a patient who is going to benefit.

[00:17:34] Let's just say that.

[00:17:34] The point that you're making is why this really matters is if patients for whatever reason

[00:17:39] not being able to access drugs that they should be accessing at the end of the day,

[00:17:43] the patient's losing.

[00:17:44] Again, there is no reason why your patient should struggle to get access to cost effective

[00:17:50] medicines, whether that's there shouldn't be formula games, you shouldn't have utilization

[00:17:54] management.

[00:17:55] And the reality is every day patients have to jump through hoops to get medicines that are

[00:18:01] effective and cost effective because we have a system that doesn't necessarily focus on

[00:18:06] to get back to that word, focus on value.

[00:18:09] There are other priorities in the system and it's very easy for reputation and things like

[00:18:14] that to kind of conflate things and make it harder to tease out.

[00:18:17] Well, this is actually important and valuable.

[00:18:20] Policymakers are starting to understand high list price, low net price enables arbitrage in

[00:18:29] the middle.

[00:18:29] You can buy low, you can sell high, right?

[00:18:33] And what is the PBM doing to distribute the dollars that are in the middle?

[00:18:38] Same rules apply to 340B hospitals.

[00:18:41] Listen to the show with Sean Gremminger.

[00:18:43] So here's the question.

[00:18:44] I would love your opinion.

[00:18:46] PBMs figured out decades ago, there's 160 million Americans that have commercial insurance.

[00:18:51] So if you want to get those commercially insured lives, you have to make, you have to have an

[00:18:56] in with plan sponsors.

[00:18:58] They figured out that brokers have that in.

[00:18:59] Brokers have deep relationships with plan sponsors.

[00:19:01] So PBMs leverage that relationship and there's any number of lawsuits, which put some sunshine

[00:19:08] on the fact just how much some brokers are actually getting paid.

[00:19:11] Some, not all, right?

[00:19:13] But like there's a lot of money that's going back and forth between brokers who go into

[00:19:16] plan sponsors and say, you should get this PBM, this or that.

[00:19:20] So you wind up with this scenario where the PBMs have a connectivity to the plan sponsors and

[00:19:28] they have the ear of the plan sponsors.

[00:19:30] And at this juncture, those rebates are used to pay down premiums.

[00:19:33] The dollars that a plan sponsor gets back from a pharma company are used.

[00:19:40] You had mentioned that the KFF study, 26 grand premium, you know, like that would be 29 if

[00:19:47] you didn't or whatever it would be.

[00:19:48] I just made that number up.

[00:19:49] If they weren't buying down the premiums, this is why Mark Cuban is running around saying

[00:19:54] like, hello, employers.

[00:19:55] Do you realize that your sickest patients are paying, you know, are keeping the plan afloat

[00:20:01] because they're buying down premiums, et cetera.

[00:20:04] So there are a lot of reasons why the PBMs are so entrenched in this high rebate list,

[00:20:10] low net is really locked in.

[00:20:13] What's your advice?

[00:20:14] Like how is pharma really showcasing what their value, like what do they need to do right

[00:20:18] now?

[00:20:18] I think you start with an interesting place to say, hey, a lot of the, a lot of the real

[00:20:22] decision-making, a lot of the rubber hits the road when it comes to employers.

[00:20:26] They're the ones who are, you know, in health plans.

[00:20:28] They're the ones who are ultimately buying the drugs.

[00:20:31] They have brokers in their ears.

[00:20:33] They have, you know, relationships with PBMs.

[00:20:36] And oftentimes, and this is what I think Mark Cuban has done just an incredible job at.

[00:20:41] And granted, he's got a great platform.

[00:20:43] He's a billionaire.

[00:20:44] He's got the plain spoken Midwestern thing down, just chef's kiss in terms of the way

[00:20:49] he communicates.

[00:20:49] But he's also able to make these topics, I think, really approachable for the people for

[00:20:55] whom it matters.

[00:20:56] So when you're talking about, geez, what do PBMs do?

[00:20:58] Maybe you're having one put over on you.

[00:21:01] Maybe you're not prioritizing this in the right way.

[00:21:03] And so I think there's a model there that can be kind of more broadly accepted, which is

[00:21:07] can we start talking about the best way of getting the best prices and the best medicine

[00:21:12] to folks in a way that there's not that leakage in the middle?

[00:21:17] You know, again, whether that comes from the PBM supply chain, whether that comes from bad

[00:21:22] information from brokers, what can we do?

[00:21:25] And that's a starting point.

[00:21:26] And there's probably a whole broader discussion about value that I think are so important.

[00:21:30] But can we just get to the point where employers can understand what it is they're buying and

[00:21:36] adjust accordingly to make sure that they're getting value and that their employees, beneficiaries

[00:21:42] are gaining from that?

[00:21:44] If I'm thinking about this as how is pharma actually a collaborative participant in advancing

[00:21:53] patients getting the right med for an affordable price at the right time, right?

[00:21:58] Like if we're thinking about that as the end goal here, number one thing pharma is going

[00:22:02] to have to do is have actually meds that are of value to this particular marketplace and

[00:22:09] really understanding what that value means to those who are purchasing the meds.

[00:22:14] I think that's that's the other universe truth.

[00:22:17] Everyone in the system wants to see interventions that have value.

[00:22:22] And again, we're going to have a great debate over what value means and value to whom.

[00:22:26] But I think that there's a central belief now.

[00:22:29] And I think this is different from what it was 10 years ago or 20 years ago, that prices

[00:22:33] should be related to value.

[00:22:35] And once you accept that as a premise, then you've got a responsibility then to communicate

[00:22:40] how it is that you think about that, how it is you define that to your different audiences.

[00:22:44] And so I think, you know, the pharmaceutical industry has a communications challenge or an

[00:22:49] opportunity, depending on how you look at things, to really talk a lot more about this than they

[00:22:54] have in the past to make sure that everyone understands that this is what their priority is.

[00:23:00] And again, you want to argue about, you know, the definition of value.

[00:23:03] That's great.

[00:23:04] The moment you can focus on a value-based discussion, you're immediately having a more thoughtful

[00:23:10] conversation.

[00:23:11] And there are actually some pharma companies who cited ICER when they priced the product,

[00:23:16] right?

[00:23:17] Like, I mean, that is starting to happen.

[00:23:19] And I think that is a thoughtful way to approach it, to be looking toward the market and thinking

[00:23:25] about cost effectiveness in that way.

[00:23:27] I mean, I'm certainly celebrating any company that goes and puts the price of their new product in

[00:23:32] the press release and hums a bar or two about why it's priced the way it's priced.

[00:23:36] Those are the baby steps that get people thinking that, okay, this price has a basis in reality.

[00:23:42] And we can talk about that.

[00:23:43] We can debate it.

[00:23:44] But that's the debate that industry should want to have.

[00:23:47] And again, I feel like they're increasingly comfortable doing that.

[00:23:51] And that is to everyone's advantage.

[00:23:53] Because again, these are some of the things that I think are beliefs that are universally held.

[00:23:57] You know, not only in the healthcare system, but probably the American populace at large.

[00:24:01] At the same time, let's say the pharma prices, the product as per ICER guidelines are based

[00:24:08] on a value equation of some kind.

[00:24:10] Is that gross or net?

[00:24:12] And that matters.

[00:24:13] I was talking to a colleague the other day who was telling me, and this is about the 80th

[00:24:17] time I've heard the same story.

[00:24:18] So this is not some weird outlier.

[00:24:19] But my colleague worked for a pharma company on a brand that they priced reasonably.

[00:24:26] They went to the PBM and the PBM said, yeah, you know, your list isn't high enough.

[00:24:30] So you can't give us the rebates we and our plan sponsors are looking for.

[00:24:34] So come back next year after you raise your prices.

[00:24:37] Also, you know, without the high list, PBM and plan sponsors cannot maximize plan member

[00:24:43] out of pockets and can't maximize premium offsets.

[00:24:47] Therefore, so, you know, I think pharma also has an obligation to get people to understand

[00:24:52] benefit design better.

[00:24:55] And if the paradigm that I just talked about above, which, you know, maximizes the ability

[00:25:00] to cost shift to plan members is kind of status quo.

[00:25:03] You know, like who's talking about that?

[00:25:06] Is that optimal?

[00:25:07] Like, I don't know the answer to that question, but it's worth discussing.

[00:25:11] I think pharma also has an obligation to get people to understand benefit design better.

[00:25:16] And it's like, oh, wow, that's an easy task.

[00:25:18] Everyone loves talking about benefit design.

[00:25:20] But I mean, at the end of the day, like that's part of it, you know, and we can start by some

[00:25:26] things that everyone agrees on.

[00:25:28] Patients should not be exposed to list prices, period, ever.

[00:25:31] I spent my 400 years in Washington, D.C., and they played a commercial on the radio every

[00:25:36] 10 minutes for the decade plus I lived there.

[00:25:38] It was from a diamond company.

[00:25:40] This no one pays retail anymore.

[00:25:42] Why should you?

[00:25:43] And that's really, you know, that that that's like the motto here for what it's not just

[00:25:49] pharma.

[00:25:49] But I think pharma has a role to say, look, all of these folks in the supply chain are not

[00:25:54] paying based on the list price.

[00:25:55] You shouldn't either.

[00:25:56] And that seems like a simple and non-controversial thing.

[00:25:59] Now you can talk about, hey, there's all sorts of rebates and discounts in the supply chain,

[00:26:03] and we should apply those all to patients.

[00:26:04] Point of care, like that's probably a little more controversial.

[00:26:07] But we can start with something really basic and say pharma has an interest in benefit

[00:26:12] design.

[00:26:13] And one of the first principles is patients shouldn't be exposed to this kind of list price.

[00:26:19] You know, if that's just the starting point for a giant machine, there's no reason why

[00:26:23] patients alone should have to suffer.

[00:26:25] So your first point was get a bead on the value of the product for real, the value the

[00:26:31] marketplace is ascribing to your product.

[00:26:32] The second thing is, where's pharma in the benefit design conversation?

[00:26:38] You are assuming the doctors are prescribing this for the right reason, right?

[00:26:42] So they need the med.

[00:26:43] It's been determined that they need the med and now they can't get it.

[00:26:45] So make sure that some of these plan sponsors are really aware of some of the choices that

[00:26:50] they're making.

[00:26:51] Maybe pharma does have an interest to really understand how these benefit designs are impacting

[00:26:56] patients' ability to get their meds, to have access to meds.

[00:26:59] And by the way, maximizers are included in that.

[00:27:02] Like I think sometimes people think about these maximizers and accumulators and that's a whole

[00:27:06] other topic that we're not going to talk about.

[00:27:08] But like they are actually part of benefit design.

[00:27:10] They're absolutely part of benefit design.

[00:27:12] And again, if you sit down at Average American and explain how these work, maximizers, accumulators,

[00:27:20] alternative funding programs, like, oh, we're going to make you functionally uninsured.

[00:27:23] And then we're going to have you go out there and seek charity care, even though you're a

[00:27:27] well-paid executive.

[00:27:28] And so I think there needs to be this understanding that when you start playing these games and

[00:27:33] the people who get hurt from bad benefit design are the patients.

[00:27:37] And whatever savings you think that you're getting, you know, again, is going to come on the

[00:27:41] backs of these people.

[00:27:42] The horror stories are terrible here.

[00:27:45] Like, oh, I can't get my chemotherapy because it's gone through this incredibly Byzantine

[00:27:49] process that is designed to kind of trick the system.

[00:27:53] And so again, you know, just understanding all of those intricacies of benefit design.

[00:27:58] No one really wants to talk about this.

[00:28:00] But in a world in which the average family costs $26,000 a year to insure,

[00:28:06] we probably need to be turning over those rocks.

[00:28:09] A lot of the benefit teams, they're between a rock and a hard place a lot of times where

[00:28:14] they're like, I, we have to, our benefit just like it just went up 15%.

[00:28:18] We got to figure out how to get 15% savings.

[00:28:20] And then all of a sudden somebody comes in with this magic maximizer program or some other

[00:28:25] program.

[00:28:25] And if nobody, no member goes in and really complains to HR about how they got stuck with

[00:28:32] like a $6,000 drug copay, co-insurance bill in June and stopped taking their med and wound up in

[00:28:38] the ICU for three days avoidably, or they're formerly under control disease is now out of

[00:28:44] control and they had to take a leave of absence, right?

[00:28:46] Like unless there's actual complaining, in all fairness, how is HR going to connect the

[00:28:51] dots when all of a sudden a patient has tens of thousands of dollars in some acute medical

[00:28:56] event, which was avoidable, but the data is siloed, right?

[00:29:00] Or how do you even know that that was avoidable and the patient was aware that there was a problem?

[00:29:05] Now, under no circumstances, is this some kind of apologia for like high list prices.

[00:29:09] But when things start to tip into the place where patients are not able to afford essential

[00:29:17] medications because their plan design is doing something weird, then like now this is a

[00:29:23] conversation relative to like, how are we going to fix this collaboratively?

[00:29:28] Not let's start pointing fingers and the patient's the one that's stuck in the middle.

[00:29:32] Yeah.

[00:29:33] And this just gets to, you know, I don't think that there's any magic bullet solution.

[00:29:37] I think that once people understand what the options are, what the trade-offs are,

[00:29:41] we can at least be more thoughtful about these conversations.

[00:29:45] Because right now it becomes really easy to escape responsibility because the system is just

[00:29:51] too complicated.

[00:29:52] We don't have a base level of understanding.

[00:29:55] Can we get to the point where, you know, employers understand so that they can really think

[00:29:59] about, you know, again, maybe they need to make that decision that they're going to have

[00:30:04] fewer benefits.

[00:30:05] And that's just what they have to do from a fiscal standpoint.

[00:30:07] But at least they understand what those trade-offs are in the same way that, you know, I think

[00:30:12] industry understands that if they have a hard time selling on the value of a medicine, they

[00:30:16] may have a harder time getting that access.

[00:30:19] You know, these things are not unrelated.

[00:30:21] The second piece of advice that I'm hearing you say, Brian, is messaging against programs

[00:30:28] and benefit designs that negatively impact patients.

[00:30:34] Right?

[00:30:34] There's all these sales pitches talking about the amazing way that we can save all this money

[00:30:40] by, you know, cutting.

[00:30:43] And there's a lot of equity.

[00:30:45] Like, you know, there's a lot of problems with having patients functionally uninsured to

[00:30:50] see if you can throw them on a patient PAP program from the delays to the non-equitable

[00:30:54] nature of that to the rate like I could go on.

[00:30:58] I am not going to.

[00:30:59] Sales pitches kind of, you know, from some of these maximizers or some of these alternative

[00:31:03] funding programs or whatever, they kind of go unanswered.

[00:31:06] And again, if you go in with your eyes wide open and your employees go in with their eyes

[00:31:11] wide open and you understand that you're in a place with an accumulator and, oh yeah,

[00:31:15] I'm sorry, all this patient assistance, we're just going to take from you and force you to

[00:31:19] pay your deductible.

[00:31:21] If everyone goes in with their eyes wide open and is okay with that, that's one thing.

[00:31:25] But every story you read about these programs, the element of surprise features largely.

[00:31:31] And that doesn't help anyone whatsoever.

[00:31:34] So, you know, I don't want to be dismissive of the idea that, hey, healthcare costs a lot

[00:31:39] in this country and we need to be creative about thinking about ways of fixing it.

[00:31:42] I think the idea that there are all these magic bullets out here that are going to solve the

[00:31:47] problem, you know, there's a lot of that hope peddled.

[00:31:50] And at the end of the day, it's pretty clear who those bolts are hitting.

[00:31:53] That for sure.

[00:31:55] So we've got number one, really crystallizing what is the value for the various segments and

[00:32:02] stakeholders who are relevant in the patient journey.

[00:32:05] And that's not limited to a PBM or a hospital contract pharmacy.

[00:32:10] It's about talking in the language of the ultimate purchasers of healthcare, as opposed

[00:32:16] to just kind of taking the L, which I think a lot of what a lot of pharma, you know, you

[00:32:19] talk to them about employers, they're like, oh, they're so beholden to the PBMs.

[00:32:22] They have no agency, which I don't know.

[00:32:24] Maybe that's true.

[00:32:24] But I guess you kind of can't say that if you're not trying.

[00:32:30] That's the point, right, is we have an obligation.

[00:32:32] Again, from a communication standpoint, we have an obligation to try to explain this stuff.

[00:32:36] If not us, who?

[00:32:38] Who's going to really talk about this?

[00:32:40] And so it's easy to have a very pessimistic take on it.

[00:32:43] But ultimately, you got to be in the arena here because...

[00:32:46] Yeah.

[00:32:47] Well, I mean, you can't say it doesn't work if you didn't try.

[00:32:49] True.

[00:32:50] Well, I think maybe it's going to take, you know, three years or five years or eight years

[00:32:53] to get people to wrap their head around 340B or ultimate funding programs.

[00:32:57] But that doesn't mean you can't start now, right?

[00:33:00] The journey of a thousand miles starts with a single step.

[00:33:03] You pick your cliche.

[00:33:04] And then I think the second point that you're making here is to really make sure that people

[00:33:09] are aware of the negative patient impact of some of these cost containment endeavors.

[00:33:17] I had a conversation with Nina Lathea about this.

[00:33:19] The title of that show was value-based isn't the same as cost containment or something like

[00:33:24] that.

[00:33:25] Like cost containment, actually, if you drive to cost containment, you actually can wind

[00:33:29] up ultimately spending more money because now you're preventing people from getting meds

[00:33:32] that they need.

[00:33:32] Like that was the whole point of that show.

[00:33:34] So maybe refer back to that.

[00:33:35] Is there a third piece of advice that you may have?

[00:33:37] The third point here is we need to keep a real close eye on monopoly and monopsony behavior.

[00:33:43] And now I know a lot of people's eyes are rolling back here and Jesus, is it really

[00:33:48] pharma's problem if hospitals are consolidating and vertical integration in the payer space?

[00:33:53] But ultimately, all of this stuff helps drive these trends that raise prices for employers

[00:34:00] and patients at the end of the day.

[00:34:02] You know, I think your show with Sean Gremminger really laid out that 340B is not just about hospitals

[00:34:09] in the pharmaceutical industry trying to punch each other in the throat, that at the end

[00:34:12] of the day, there's an impact from consolidation that's actually harming patients.

[00:34:19] From a policy standpoint, from a communication standpoint, people should know that, hey, when

[00:34:23] your friendly oncology practice gets snapped up by a 340B entity, that's probably bad news

[00:34:28] for you as a patient.

[00:34:29] You know, when PBMs get into the drug distribution game, that's probably going to mean bad news

[00:34:36] from whoever it is that's giving up dollars for that kind of access.

[00:34:40] And are we making those choices thoughtfully?

[00:34:43] And so again, these things at their philosophic nature shouldn't be controversial.

[00:34:49] Execution is always a bear.

[00:34:51] The devil is always in the details.

[00:34:52] But these are the sorts of things where if we want to talk about what the communications

[00:34:55] priorities are, these are places where there ought to be at least a foundation of agreement

[00:34:59] before we even get into the details.

[00:35:02] Yeah, and just kind of parsing out the number three key points to ponder relative to how

[00:35:07] we're talking about this stuff and how we're talking about value and how we're being collaborative

[00:35:11] across the marketplace to advance better patient care.

[00:35:15] The consolidation in the marketplace has led to higher prices.

[00:35:20] And that is undeniable at this point.

[00:35:22] There are studies that show that once consolidation happens in a geography, prices go up five as

[00:35:28] high as 23% more, I think I saw in one study, right?

[00:35:32] But also there can be significant price differences between different care settings.

[00:35:37] There was a Keytruda infusion.

[00:35:39] If that patient went one place, the infusion costs $10,000.

[00:35:43] And when I say it will cost the patient, I mean, it will cost the patient and their plan,

[00:35:46] right?

[00:35:47] 10 grand.

[00:35:47] Same exact everything.

[00:35:49] If that patient showed up in a different hospital, $127,000.

[00:35:55] There was a show with Autumn Youngchoo and Eric Davis from USI who said there are health

[00:36:01] systems that are marking up the cost of infusions multiple times the ingredient cost there.

[00:36:10] There's no limit on what a commercial plan can have a drug markup.

[00:36:15] So like they say the average is four to six times ingredient cost.

[00:36:19] Buy low, sell high.

[00:36:21] That's the name of the game here.

[00:36:23] But it is kind of interesting that like, let's just say somebody went and got that infusion

[00:36:27] and it costs $127,000.

[00:36:29] It would be really easy to blame pharma and say that that drug costs $127,000.

[00:36:34] And again, no comment, right?

[00:36:37] On whether the drug is overpriced or not overpriced.

[00:36:39] Like that's not the point here.

[00:36:40] The point is, and if the problem is mislabeled, then it will never be solved for at the detriment

[00:36:47] of plan sponsors and patients.

[00:36:50] And that's my main concern.

[00:36:52] And you know, if you hate a drug that's priced at X, you're going to hate it seven times worse

[00:36:57] when the hospital marks it up 800%.

[00:36:59] But that's the reality we're in.

[00:37:01] And again, these issues don't come from nowhere.

[00:37:05] They're not totally surprising.

[00:37:06] There are policy elements.

[00:37:09] There are commercial decisions that make these better or worse.

[00:37:13] And I think we just need to be aware of them so that we can make better decisions as consumers,

[00:37:19] but also better decisions in terms of voters and policymakers in terms of what kind of incentives

[00:37:24] do we want to set in the system?

[00:37:26] Because right now everyone is acting, you know, the business entities anyway are acting rationally.

[00:37:32] The problem is that at the end of the day, there's a patient who's or an employer or a

[00:37:36] taxpayer who's getting soaked.

[00:37:39] Brian Reed, is there anything I neglected to ask you that you want to make sure gets mentioned here?

[00:37:44] I think the most important thing that I want to leave folks with is the idea that there's

[00:37:50] no one in the healthcare system that can afford to believe that we can't talk about these issues,

[00:37:55] that until we get a really informed populace, we're going to continue to have misperceptions.

[00:37:59] We're going to continue to have finger pointing and we're going to continue to have forces that drive us

[00:38:04] in misleading directions.

[00:38:06] And so this is just the pledge.

[00:38:09] It doesn't have to be pharma.

[00:38:10] It doesn't matter where you sit.

[00:38:11] You've got an obligation to talk as transparently and loudly as possible to everyone so that we can

[00:38:18] really get the kind of understanding that's going to take to make better decisions.

[00:38:21] I love that.

[00:38:22] That was really well said.

[00:38:23] Everybody's a frenemy, right?

[00:38:25] It's just like how this industry works.

[00:38:29] So align where there's points of alignment.

[00:38:32] That doesn't mean you overlook everything else that they're doing.

[00:38:35] You can still go nuts trying to halt bad behavior elsewhere.

[00:38:40] But when there is alignment, it's really capitalizing and collaborate.

[00:38:44] Yeah.

[00:38:44] And what does that alignment need to be around?

[00:38:46] The patient.

[00:38:47] A hundred percent.

[00:38:47] Brian Reed, besides subscribing to your amazing newsletter, which I could not recommend more

[00:38:54] highly, and we will link to it in the show notes.

[00:38:56] Is there anywhere else that you would direct people who are interested in learning more about

[00:39:00] your work?

[00:39:01] I am more than happy to have people argue with me on LinkedIn where I'm Brian B. Reed,

[00:39:07] but certainly I appreciate the plug for the newsletter, which gives a slightly longer

[00:39:12] form to explore some of these ideas.

[00:39:14] Brian Reed, thank you so much for being on Relentless Health Value today.

[00:39:17] What a blast.

[00:39:18] Hey guys, it's Marty McCary.

[00:39:20] I want to let you know that I love Relentless Health Value.

[00:39:24] I follow it and get the newsletter and it's great stuff.