EP465: The Not Super Effective Contracting Industry Norm, Where Jumbo Plans and Others Wind Up Paying $10,000 for $50 Drugs, With Chris Crawford

First of all, everybody listening here has probably heard of the lawsuit in which J&J—and talking about J&J as a large employer here now, not as a drug company—but J&J is (or maybe was, there’s action afoot) being sued by a plan member because, here’s the short version, allegedly, the J&J pharmacy benefits plan, through their large PBM (pharmacy benefit manager), was paying over $10,000 a month for a drug that can be purchased for something like 50 bucks on Mark Cuban and other “pay cash, get the drug” types of places. Right?  

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A giant PBM was charging $10,000 a month to the plan sponsor and member, and a rando individual with a crumpled Jefferson in their pocket could pick up that same drug for around 50 bucks. Five zero dollars. I don’t know, for every excess $9950 a month, I mean, how many members could get prepaid advanced primary care or other high-value care or meds, assuming that the plan can capture those “wasted” dollars?

And this is just one example with J&J. J&J is not an outlier here. I mean, talk to anybody in pharmacy benefits and you will get a rundown of plan sponsors who are paying way too much for the “specialty” generic drugs in the same exact way. It’s word on the street.

And when I say word on the street, I don’t mean some kind of, like, wonky street. I mean Main Street. It is becoming pretty common knowledge how often if you go to a cash-pay Web site, especially for some of these specialty generics, it’s cheaper than if you go through your insurance.

Now might be a great time to bring up the Aggregate Discount Guarantee, because the Aggregate Discount Guarantee is the mechanism, the contracting mechanism, by which a lot of plan sponsors hope to control spread pricing, which is what jacks up the cost to $10,000 for a drug that can cost $50. Right?

That’s spread. The PBM is taking the balance and putting it in their pocket. It’s what many consultants recommend, this Aggregate Discount Guarantee, to plan sponsors when they do PBM RFPs (requests for proposals) also. And, not sure if it’s working out great, obviously, for the plan sponsor and member, but let’s talk quickly about why it’s not working out great and results in $50 drugs costing $10,000.

We’ll just do this quickly because I’m gonna let my guest today, Chris Crawford, do the heavy lifting in terms of digging into the why the Aggregate Discount Guarantee doesn’t actually control spread so well and also what you can do about it, which, I don’t know, doesn’t seem to be all that terribly hard and might be what employees are doing anyway, all by themselves.

So, here’s my dramatic reinterpretation of what Chris Crawford says during the interview about the Aggregate Discount Guarantees.

Who remembers that kids’ book Briar Rabbit? Briar Rabbit, a rabbit, ate a carrot, I think, out of a field and got caught by the farmer. The farmer wanted to punish Briar Rabbit and was sitting there contemplating the best way to do that when Briar Rabbit started wailing. Whatever you do, farmer, don’t throw me in that briar patch.

The farmer is obviously not connecting the dots between Briar Rabbit and briar patch, so, yeah, he believed the tricky rabbit. And the farmer throws Briar Rabbit into the briar patch as the punishment, and, yeah, happy scampering ensues.

So, here’s my reinterpretation of any PBM either suggesting or getting confronted with an Aggregate Discount Guarantee by a plan sponsor looking to control spread pricing on generic meds.

Oh, no! Whatever you do, don’t throw me in that Aggregate Discount Guarantee briar patch.

And in the PBMs’, I don’t know, maybe defense, if plan sponsors or their consultants insist on including Aggregate Discount Guarantees in their RFPs and will select PBMs on their ability to haul in the biggest discount, yeah, it’s just like the selecting PBMs based on rebate yields for branded drugs.

Both are great examples of how something that might seem intuitive actually is a perverse incentive.

Chris Crawford, my guest today and CEO over at RxSaveCard, who is also our sponsor of the show today. Thank you very much to RxSaveCard.

RxSaveCard clients are typically seeing about 50% of total retail generic spend being reduced just by having access to cash prices. And generic drugs, by the way, are the most utilized benefit for most employees—92% of all prescriptions are generic. And this matters for not only financial reasons; it also has huge perception consequences.

For example, I was talking to someone recently—because apparently, I am a magnet for people who want to talk about their drug benefits—but this person said, “Oh, hey, this generic med I’ve been taking for a long time, five years ago, my co-pay was like seven bucks. Then it became $15. It was $25 last year. And in January, last month, when I went to fill it, they told me that, through my employer’s insurance, it would be $34 co-pay. I went on Mark Cuban Cost Plus Drugs because I heard you talk about it, and the total cost was $7.”

And then this person said, “I feel like an idiot, you know, having paid more than $7 for more than five years. And I’m not sure what to make of my employer, you know, are they unaware? Do they not care?”

I mean, we all talk about pharmacy trend going up, and then you see stuff like this going on. I do scratch my head, and I do think to myself, “Well, if we got rid of these thousands and millions, maybe billions of dollars across the country in spread, could we actually have a decrease in pharmacy trend, even as more patients took some of the branded drugs?”

I don’t know. But I will say in the wild, the impact of the Aggregate Discount Guarantee not guaranteeing much is becoming very obvious to plan members at this time.

This episode of Relentless Health Value, as I mentioned, is sponsored by RxSaveCard and thanks so much to them for doing so. I loved this conversation with Chris Crawford, and I think that you will, too.

And listen to episode 461, also with Chris Crawford, for more on the GLP-1 goings-on and the manufacturer Web sites where, if an individual goes on the manufacturer Web site, they can access a list price that is less than the price an employer with a big PBM contract will pay.

Also mentioned in this episode are RxSaveCard; Mark Cuban Cost Plus Drug Company; Scott Haas; Paul Holmes; Luke Slindee, PharmD; AJ Loiacono; Rob Andrews; GoodRx; Ge Bai, PhD, CPA; and Rob Marty, DBA, MHA.

You can learn more at RxSaveCard.com and on LinkedIn and by following Chris on LinkedIn.

Chris Crawford is CEO and founder of RxSaveCard, with a mission to make prescriptions more affordable for employers and their employees. He recognized the complexities and frustrations often associated with changing pharmacy benefit managers (PBMs) and sought a better way. He also recognized that in many cases, prescriptions cost more when someone uses their insurance than what is available through “cash” and discount card options. RxSaveCard is the solution: a simple way to unlock lower cash and discount card prices without requiring a PBM switch, all while ensuring compliance with ERISA fiduciary standards.

Chris has over 25 years of experience in employee benefits, including 9 years at Mercer, where he served in national leadership roles. He also founded a benefits consulting firm in 2009, CMC Advisory Group, that was sold to Cottingham & Butler in 2015. More recently, he has narrowed his focus to pharmacy benefits and the PBM industry. Prior to founding RxSaveCard, he served as chief growth officer for VIVIO, a specialty drug management solution. Prior to VIVIO, Chris served as chief growth officer for HealthStrategy, LLC, a leading pharmacy benefits consulting firm that manages over $150 billion in drug spend for many of the largest employers and health plans in the United States.

07:12 EP365 with Scott Haas.

07:17 EP397 with Paul Holmes.

07:19 EP439 with Luke Slindee, PharmD.

07:20 EP379 with AJ Loiacono.

07:44 What is the Aggregate Discount Guarantee?

13:49 Why do the divergent list prices and the perverse incentives prevent the Aggregate Discount Guarantee from really limiting cost spread?

17:55 Why is it important for plan sponsors to check these drug cost prices, and how can employers check them?

23:56 What drives cost lower, and why does it change everything?

25:09 How does RxSaveCard work?

25:44 EP461 with Chris Crawford.

30:01 Do you need a PBM’s permission to use RxSaveCard?

30:37 How does it look for employers/employees to use the RxSaveCard?

32:39 EP356 with Ge Bai, PhD, CPA. 

Recent past interviews:

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Al Lewis, Betsy Seals, Wendell Potter (Encore! EP384), Dr Scott Conard, Stacey Richter (INBW42), Chris Crawford (EP461), Dr Rushika Fernandopulle, Bill Sarraille, Stacey Richter (INBW41), Andreas Mang (Encore! EP419)