Episode 22 – Pharmacy Benefit Strategies with Mike Zucarelli of CBIZ

Mike Stull (0:09)

Hi everyone, this is Mike Stull and welcome to this month’s episode of the Employers Health HR Benecast, your source for expert commentary and insights on current health benefits-related news and strategies.

Before we get started with today’s guest, I’d like to again congratulate this year’s Excellence in Benefits Award recipient, Teresa O’Callaghan of Command Corporation. Since 2017, we’ve recognized individuals within our client base for their outstanding work in improving the quality, accessibility, and cost of healthcare benefits for their colleagues and organizations as a whole.

Under Teresa’s leadership, Command has, among other things, successfully managed benefit integrations for 16 of their acquisitions over the past eight years, ensuring a smooth, efficient, and timely transition for these acquired companies, all while welcoming the new employees to the Command family. I encourage you to visit the Excellence in Benefits page on the Employers Health website to learn more about Teresa’s accomplishments and be sure to tune in to hear from Teresa on a future episode of HR Benecast. Congrats again to Teresa and again, a big thanks to her colleagues at Command for the most worthy nomination of her for this award.

If you missed our 2020 annual meeting featuring Jim Kline and his take on what the recent presidential and congressional elections will mean for the employee benefits agenda, you can view the recording at employershealthco.com/webinar-recordings. Again, employershealthco.com/webinar-recordings. If you’ve never heard Jim speak, he always provides excellent non-biased insight, so I encourage you to check it out.

With that, let’s get started with today’s guest. A pharmacist by trade, Mike Zucarelli is the National Pharmacy Practice Leader in CBIZ’s Benefits and Insurance Group. In this role, he provides employers with clinical and financial guidance to optimize their pharmacy and overall benefit strategy.

His prior experience includes serving large, self-insured employers through the managed pharmacy practice at a large national consulting firm, leading clients through all aspects of the procurement process. Mike and I talk about specialty pharmacy and a whole wide range of topics pertaining to specialty, so I hope you enjoy the interview. All right, Mike, could you take a minute to introduce yourself to the audience, please?

Mike Zucarelli (3:00)

My name is Mike Zucarelli.

I am a licensed pharmacist here in Arizona. I serve as CBIZ’s pharmacy practice lead, and really our role as a team here within our organization is to serve our offices and ultimately our clients with all things pharmacy. Myself and my team are dedicated 100% to the pharmacy space and really try to bring that clinical contractual PBM expertise to our field folks and to our clients.

Mike Stull (3:27)

Great, and could you, I know in a lot of presentations you talk about kind of the key demographics of clients that CBIZ works with, and could you talk a little bit about that?

Mike Zucarelli (3:40)

Happy to. So, you know, I would say by number of clients that we serve, many of them are fully insured groups. You know, when we get into the pharmacy space, our team is really focused on self-funded clients.

I would say the typical size of the clients that we work on range anywhere, from about 200 employees up to 5,000 employees. We have a couple extremes on either end, but I would say that 200 to 5,000 range offices, literally from coast to coast. As far as demographic of clients, it really spans the gabbit.

I mean, public sector, private sector, school districts, manufacturers, there isn’t a particular vertical that we only serve.

Mike Stull (4:25)

So I would say that most of the clients are in that mid-market segment in terms of the self-

funded clients that you all work on.

Mike Zucarelli (4:36)

That’s correct.

Mike Stull (4:38)

Yep. Let’s start with specialty drugs. Great, great topic to start with.

Maybe the only topic we get to today, but I wanted to hear a little bit about what you’re hearing from clients and some of the local consultants that you all work with around specialty drugs and their impact on those mid-market employers.

Mike Zucarelli (5:05)

It’s interesting. I think, and I failed to mention too, prior to joining CBIZ, I worked at a much larger consulting firm where we dealt with clients that were in that 50,000-employee group.

And when you get down into the middle market, it’s a smattering of clients, a smattering of utilization patterns. So to answer your question bluntly, either clients have seen it, or they haven’t. So it’s interesting.

I’ll be on one client call where specialty doesn’t even come up in the conversation. And I’ll be on another call where we’re literally talking about one member and one drug. And that consumes the hour and a half phone call on a clinical conversation.

When you start to get into these mid-market groups, I mean, when we think of drug spend, these are probably $2 million a year to $5 million a year drug spend clients on the pharmacy side. And then we put that in perspective of what some of these drug therapies cost, $50,000, $80,000, $100,000 a year. All it takes is a couple of members and maybe even one or two drugs to skew a quarterly review or to skew an annual review.

So it’s interesting. I mean, obviously, in our consulting, we’re trying to be very proactive with our clients to bring these topics up. But I don’t think they fully appreciate until they actually see.

Mike Stull (6:28)

Yeah. Yeah. We’ve seen the same thing with our clients where, you know, someone will have a very low per member per month and then you dig into it.

You’re like, you have like no specialty. They’re like, oh, yeah. And like, well, prepare for it because once it hits, you’re going to know it.

And so it does. It makes it tough to prepare going forward because how do you know when you’re going to get that one patient that has a very rare condition that requires one of these high price drugs? So definitely a different challenge, I would say. Similar challenge, but a little different in nature to some of the larger employers that we work with.

Have you guys talked at all about stop loss? And you mentioned, you know, how do you prepare a mid-market client for specialty? Have you heard anything from the local consultants around challenges that any of the clients are having with stop loss as it relates to these specialty drugs?

Mike Zucarelli (7:35)

We have. And admittedly, our team doesn’t get too in the weeds of the shopping of stop loss and the contract review. I mean, really, the main recommendation that we give to a lot of our offices and clients is because these are smaller groups.

So from a risk tolerance standpoint and a financial viability standpoint, you know, we really encourage these groups to have coverage of pharmacy within their stop loss contracts for obvious reasons. The things that do come up from a client-by-client basis really has been around some of these extreme cost drugs and how they’re covered. And I do know anecdotally and hearing some of the conversations and seeing the email trails between our local teams and the vendors, the stop loss companies are having a really tough time trying to play actuary and try to guess what the risk is.

And again, when you get into the middle market, it’s so it’s so variable. You don’t know if you’re going to pick up one of these members on a small group that could be devastating to the plan and blow through those contracts. So, you know, usually our team is pinned with, you know, how do we get this member on a cheaper drug or how do we find this drug a cheaper way or how do we procure it in a different way that will help us? It’s just tough with specialty because a lot of these disease states and a lot of the medications aren’t like the traditional classes where you can find an alternative. Once that patient’s escalated to needing a drug like that, you’re kind of stuck. And now we’re we’re simply financing that risk.

Mike Stull (9:10)

So from from a pharmacist perspective, you know where are the opportunities out there or are there any that you’re seeing in terms of keeping individuals meet either from the biologics to start with or are there alternatives that exist? Because what I see out in the marketplace are a lot of groups, third party point solutions that are, you know, saying, hey, let us do the prior authorization.

We’re going to save you, you know, whatever percent. And I always look at the savings opportunities and I see, you know, they got there because they identified so many Humira claims or so many Embryo claims or so many, you know, there are alternatives that cost less. And I always wonder, well, how how are you going to get the patient from Humira or one of those one of those drugs over to one of these lower cost alternatives?

Mike Zucarelli (10:16)

Yeah, great question.

I always like to think of things in buckets when explaining these to clients. But when I think of specialty drugs, the first question to me is drug selection. And really, is this the right drug, the right patient and the right dose? And then the second bucket being what’s if we know we need it, what’s the best way to buy it? What’s the cheapest way to buy it? But I think where you were getting at is kind of that bucket one.

Once these members are on the drugs, it’s tough to get them off. And I think Pharma has really figured this out. I mean, this was the whole birth of free samples and getting members attract to their product, getting them on the product, whether it was free samples, coupon cards.

But once they’re there, I think it’s a tough sell to get them off. But there has been, I would say, a reemergence. I don’t think this is a new concept, but I would say a new push of.

Uncoupling that prior authorization function from your traditional pharmacy benefit manager. So right now, the pharmacy benefit manager, in many cases, serves the function of gatekeeper, the prior authorization. They’re also the adjudicator of the claim.

And they also, in many times, fulfill that claim. Oftentimes, you’ll hear the whole notion of Fox guarding the hen house. But if we can remove that gatekeeper function and get that within another entity, we now have kind of a checks and balance.

But where the rubber really meets the road are in the criteria. So sure, we got another company doing this. But if they’re simply following the same structured FDA guidelines, you’re likely going to have the same outcomes. There certainly are some diseases when where diagnosis is very black and white and treatment is very black and white. I tend to use HIV as an example.

Either you have it or you don’t. And if you have it, you need treatment. And these are the treatment options.

That P.A. criteria for those drugs, relatively straightforward. But we do have some drugs now that it is more gray. And I think rheumatoid arthritis is a good example of that.

Where. You know, how do we define moderate to severe rheumatoid arthritis? What does that look like? I’m not a rheumatologist, I don’t claim to be one, but I think, you know, if they were here commenting on it, I think they would agree that it’s gray. And if if there were prior authorization criteria that really tried to objectify a lot of the subjective nature of those diagnoses, perhaps you could have fewer people on the drug.

Again, we have to balance that with member disruption and whatnot. But I think when members are getting to that stage in their disease of needing a biologic, if you can have the pause point there, I think that’s where you’re most effective. And there have been some solutions that we’ve looked at on behalf of some of our clients that do a pretty good job at it.

And when you really look at the clinical criteria against some of the mainstream PBMs, you can see how it would be much more effective. But you never really know until you put it in. So if my 20 people that are trying to get Embril, you know, would big PBM approve 18 of them? And this outside firm’s only going to approve 13 of them.

You really don’t know until you plug that in.

Mike Stull (13:42)

Yeah. And then the other question that we we’ve had is, you know, how many of them get overturned on appeal? So if you’re only approving 13 and so that’s a difference of five, but those five individuals appeal the decision and it’s overturned, then what have you what have you necessarily accomplished? And so I think that that complicates it.

But but to your point about criteria, I’m fascinated by all of these drugs that get approved for one type, one one indication and then have those indications expanded over time. It’s it’s interesting to me that the criteria that a PBM may use for a particular drug for one condition may not be the same for another condition. So curious, curious your thoughts on expanding indications and how that makes criteria even more important.

Mike Zucarelli (14:40)

Yeah. And, you know, I should have checked my bias at the door at the outset of this call. But I mean, I’ll tell you that I’m a pharmacist that hates drugs.

I think they absolutely have a place in in mainstream society to cure and prevent disease. But I feel like we’ve gotten to a point where we really are an over-medicated society. And I think you kind of hit the nail on the head of where the pharmaceutical manufacturers have kind of gotten their tentacles out there, where you have drugs that have been studied and researched during the development process for a clear intended use.

The example I tend to use in some presentations is Humira. I mean, the proof for adult rheumatoid arthritis, you go on the website now and there’s last time I checked there were a dozen there could be more uses for that medication. And there’s even been examples of medications that were approved for something, got on the market, were then used for other things and ended up losing their original approval because they didn’t work.

I think that’s where as a pharmacist, when we talk about these external PA programs and when we’ve heard these organizations talk to it, it really strikes a chord with me as a clinician because it’s getting at the core of disease and treatment. It’s really asking the tough questions. Does this patient really need the medication? Sure, the mainstream narrative within that specific specialty would say this patient has it.

These are the steps that we go through and you’re moving from step three to step four. But these external firms really pull back and it’s a more patient centric approach of saying, does the patient really have this disease state? Are the drugs that were tried really effective? Are the drugs that you’re thinking of putting them on, is this the right time to put them on? Yes, or no? I’m thinking a little bit differently than just the typical kind of cookie cutter approach of dealing with something.

Mike Stull (16:37)

Yeah, it’s almost like a second opinion service versus a prior off that we were a pre-cert that we’re so used to on the insurance on the insurance front.

One of the things you talked about, I think the drug ACTHAR and not to pick on specific drugs, but I think that’s an easy one to pick on where you have a very old drug. They find that it can help treat infantile spasms, they jack the price up and then they try to expand those indications to what MSI exasperation. And so you’ve got a hundred thousand dollar drug that is for years being prescribed and filled to treat a condition that it really doesn’t provide a lot of value for.

And I know that the third-party solutions that are out there use that as an example at least five years ago. And now we see the big PBMs, you know, kind of catching up in terms of tightening down their criteria. I think the the key takeaway, at least for me, is that, you know, these organizations are are out on out in front in terms of the tightening criteria and they they have to be or else they wouldn’t be needed.

So it really becomes a case of trying to figure out, you know, is it are they too far out in front or is it is it really something that, you know, an employer wants to go down that road? And I think it gets back to, you know, what’s the risk tolerance of the employer to to get aggressive or not?

Mike Zucarelli (18:20)

Yeah. And I think that’s what we run into. So the two challenges that we have is really for there to be savings means a member is not getting a drug and clinically, I would argue, defensible.

I mean, the folks that have created these criteria are not business people. I mean, these are clinicians that are in there studying and creating the criteria from a clinical base. But ultimately, whether it’s P.A. or some of these programs even have outright exclusions, they’ve taken a very hard stance in saying that this drug provides no value.

Even though it’s FDA approved, we believe it provides no value. So we’re not going to cover it. That could put a member in a really precarious situation.

And is that somewhere that an employer wants to go? Maybe, maybe not. But ultimately, you have to think about those denials. That’s where that quote unquote savings is coming from to the plan.

Mike Stull (19:11)

So I think we we’ve covered kind of the first part of it or the first bucket in terms of is it the right right drug and the right patient and the right dosing. And second piece or second bucket you mentioned was, how do we how do we pay for it and what’s the best way to do that? And so from a dispensing perspective or a contracting perspective, one of the challenges I see in the marketplace is you’ve got, you know, four really big specialty pharmacies, three of which are owned by the three big PBMs. So at the end of the day, how do you how do you disrupt the marketplace when, you know, the big players are the big players in in each of the silos?

Mike Zucarelli (19:56)

It’s tough.

I mean, unless you were an employer, you know, large health system or hospital system that had your own pharmacy and could engage in the negotiations with pharma. But I think we’ve gotten to this point where the term limited distribution has gotten so vague that drugs that really should not be limited distribution have been tagged that for the sole purposes of allowing one or a handful of specialty pharmacies to have access to these drugs. So it’s really not a money grab.

I’d say it’s more of a power grab. If I can control that product, I’m the sole source to dispense it. And now I can enter into agreements with the manufacturer of what this price is going to be.

It’s a bit of a monopoly, if you ask me. Again, I’m kind of venting. I don’t really have a solution here.

But for a small employer, you’re really along for the ride.

Mike Stull (20:46)

Yeah, I think the, you know, the limited distribution piece, we see a lot of games going on in contracts around the definition or the lack of definition of limited distribution drugs and their exclusion from some of the financial guarantees. From a contracting perspective, I’m sure you’ve seen your share.

I know I have a really bad contracts that are out there. How big, I guess the question would be, how big of an opportunity is there for employers to save simply by tightening up their contract?

Mike Zucarelli (21:22)

I would say a huge opportunity. And again, we encounter clients across the board in this area that, you know, some of them have in their past engaged, you know, consultants that knew what they were doing and are sitting on decent contracts.

But I can’t tell you the number of new clients that we have at CBIZ where, you know, just the term PBM is new to them. And the thought that there may or may not be a contract around that drug spend is, you know, you kind of hear crickets when you ask the questions. But just picking up that contract and understanding how that agreement works between payer, plan sponsor and the pharmacy benefit manager is huge.

Just spending a couple hours and working with your consultant to review that is invaluable. You’ve got to do it.

Mike Stull (22:09)

And it’s it’s amazing to me how many how many employers don’t do that. And I think for those of us who are looking at contracts every day, I mean, usually I would say it takes about 10 minutes, maybe less, to make an opening or to get an opening impression of whether it’s a good contract or not.

Mike Zucarelli (22:36)

Yeah, I mean, I think for me, you and I and the folks that do this every day, you know, there’s certain sections of the contract you can jump right to. And it’s not the pricing.

Pricing is probably second, but just looking at some of the definitions and some of the exclusions, it’s just fascinating to watch, because if those exclusions are there or if the definitions are written in such a vague way, the pricing sheet means nothing, absolutely nothing. I really could care less if there’s something in there. And again, I hate to say this, but I can’t tell you the number of new clients that we pick up that don’t even have a contract.

It doesn’t exist. You know, either these are bundled carrier agreements where within the ASO master agreement, there’s really just no pharmacy section, or if there is, it’s half a page.

Mike Stull (23:23)

How about how about some of these co-pay programs? What are you guys seeing in terms of clients’ willingness to adopt, you know, a Prunar X, a Express Scripts has its Save on SP program, and then you have the third parties like a Paid Health Payer Matrix, et cetera, that are out there.

What are you seeing from your clients or hearing from your clients in terms of their willingness to take a look and then adopt those types of programs?

Mike Zucarelli (23:52)

So this topic, I mean, I’m glad you asked the question. This topic has been, I would say, the highlight of research and discernment for our team over the last year. These programs have been around for a while.

Even when I was practicing in pharmacy behind the counter up through 2016, I was on the receiving end. I saw the coupon cards come in. I had the patient assistance programs that we had to engage in and help members.

And I had always had the very naive assumption at the time that these were programs for the indigent. These were programs for patients that didn’t have insurance. You know, when you’re behind the pharmacy count and you’re trying to pound out 500 prescriptions a day, all you want to do is get a paid claim and you want to co-pay less than 50 bucks because then you’re usually not having an argument at the counter and you can get the patient on their way.

I think most retail pharmacists would agree that that’s that’s the end goal. We got to get them through. Let’s get it out here.

I want a paid claim on this side of the world. And now researching a lot of this, I’ve been astonished at, number one, how much money is out there that is earmarked towards members and number two, how relatively easy it is to get. And it really doesn’t matter if you’re employed or not.

It doesn’t matter if you make $10,000 a year or $400,000 a year. These monies are out there, and the intents of the money is for pharma member cost share, which is really a barrier for that member to get on to their medication. So these things have existed, but I would say not until recently we’ve seen them really pop up.

I will tell you that our firm and our team has taken a very educational approach to these because I’ve seen two extremes. I’ve seen one extreme where either the smaller consulting firms or the larger consulting firms choose to ignore this either because they don’t know or they’re completely against it and they just don’t bring it up to their clients or they meet it with a flip. It shouldn’t do this. Let’s move on to the next topic.

I’m also seeing the extreme of some of these consulting houses and even some of the PBMs now where this is like a go-to-date solution because the money is profound and the savings to the plan can be profound and they’re leading with it. And I think that concerns us also.

So when we engage our clients, we really try to make this an educational opportunity, so clients understand the risks, the benefits and really some of the heavy lifting they have to go through to put these in. But as far as adoption, we’ve had this conversation with every client this year, whether it’s part of a PBM RFP or whether it’s an annual strategy review, we bring it up, we get the reaction. To give you a sense of adoption, I would say maybe five percent of our clients have adopted some type of these programs and by these programs, the ones you mentioned, either the larger PBMs, I would say more heavy stick, the ones that are actually issuing a co-insurance on these specialty drugs.

So not just a couple hundred dollars co-pay, but you’re going to pay 30 percent of your eight-thousand-dollar drug, but we’re going to help you find the means to help you patient pay for it. Or even some of these external programs which go up to 100 percent. That’s really how they function.

The devils in the details of how they do it. But functionally, the drugs are no longer covered by the plan. And in many cases, these firms are able to secure payment and or drug to fulfill the member.

And then ultimately, the plan’s not paying for it. Probably 20 percent of the conversations we have, I would say our clients are intrigued, but a little unsure. I’m curious to see where this goes, though, because if I had a crystal ball, I see it going one of two ways.

Either there will be legislation that makes this go away, disappear or be harder to do. Or we see a lot more of this. I also think that this is something that we’re seeing a lot more in the middle market.

So as we defined, you know, the clients that we serve as CBIZ, that 200 to 5000 mark, you see a lot of this going on in the smaller clients. We’re not seeing it in the Jumbo plan sponsors, the Fortune 500 groups. Just to give you another idea of the demographic of where we’re seeing a lot of this pop up.

Mike Stull (28:18)

OK, the last the last topic that that I had on my list to talk about were these new gene therapies. I think I’ve I’ve said before that this is really, you know, for me, it’s it’s really exciting to see these therapies that are actually curing certain conditions that previously had no treatment available for them. And and so just really exciting science here from a plan management perspective.

They’re extremely frightening from a price perspective and their ability to to really sink plans budget if if you happen to get one of the patients who who need this medication. So curious kind of from your perspective as both a pharmacist and a consultant, what your thoughts are around these new innovative drugs?

Mike Zucarelli (29:19)

Yeah, it’s a great question. The positive and I think the scariest thing about this is one in the same.

It’s just the advancement of science I before going into pharmacy school. I actually was a chemist first So was raised in this more science-based mindset and I recall being in Some of those more advanced classes and just seeing where and again, this is back in the early 2000s where science was at the time and the things we could do and it was the bleeding edge stuff that hadn’t quite trickled down into the actual use of medicine or treatment of health But to see what we were capable of of doing and now to fast forward to today and it’s here Um, it’s fascinating and I love to see it But on the other end, you know, I think that that’s a bit scary Number one, I think in our world and as a consultant Just the sheer cost of these medications.

Um, or I shouldn’t say medications, but really therapies. Added on the fact as we were just talking about the rebate bubble drug price and the inflation around drug price I’m just going to come out and say it the current costs of new therapies whether they’re gene therapies or otherwise doesn’t make any sense. We’ve gotten to the point where we’re at orders of magnitude higher than what therapies were, you know, just a half a decade ago within the same drug class I’m not an economist but that type of inflation and that type of you know, again, I’ll just say a price gouging is not sustainable.

So I think this opens the door for some of these companies to come out with prices that are just extreme And I think we just saw that with a Novartis product of two million dollars That just doesn’t pass the sniff test and I think the other thing that concerns me and probably more even more so just given 2020 and the things that that we’re seeing evolve through viruses vaccines the advancement of science the advancement and the push towards getting things to market quicker. Are potentially some of the nefarious uses of some of these technologies. You hope everything’s being done with good integrity with good checks and balances and good peer review, but you really don’t know until some of this stuff has been released out into the market and now we’re dealing with not something like a drug you know, if we give somebody a bad drug our bodies are very very good at getting rid of that. That’s we have liver liver and kidney for it to help get rid of outside product but here we’re talking about, you know a viral vector that’s actually bringing in DNA for a specific protein for whatever was missing or needs to be replaced. And giving that to somebody in their body like do we know what the long-term effects of that are? And what does that look like for that person’s disease state? And what does some of the side effects look like?

From any error in that going on I mean the cellular machinery is fascinating and I would encourage anybody just to watch a little YouTube on how it works, but it is amazing how our bodies work and to think that now we’ve we’ve evolved as people to now be able to harness some of this stuffs. Some of the early concerns with gene therapy had to do around, you know misplacement of some of the genes or bad replication, I mean as soon as you think of misplacement and bad replication you think of oncologies and cancers I think they’ve gotten around that with some of the new generations of these adenoviruses that put in in these genes, but still It’s just scary to to think what it looks like.

I’m probably answering more from the clinical pharmacist standpoint, but you know from the planned sponsor and financial standpoint That one’s simple. I think it’s just the sheer cost of what these therapies look like.

Mike Stull (33:00)

Well, I think we’ve Covered it all right around specialty drugs.

Mike Zucarelli (33:06)

No, this was a really good conversation, Mike. Thanks for including me.

Mike Stull (33:10)

Thanks again to Mike for his time. It’s great to hear his perspective from someone who works so closely with many self-insured plan sponsors.

Before we close, I want to share the keyword for this month’s episode and congratulate last episode’s winner. Our winner from the last episode of the $50 Visa gift card is April Holt from Arcelor Middle. So, congratulations to April. She submitted the keyword innovation and we’ll get that visa gift card mailed out to you.

The keyword for this month’s episode is specialty so if you’d like to be considered for the gift card drawing. Please submit the keyword specialty along with your name and email address and any questions using the link on the landing page.

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That will conclude this month’s episode. Thanks again to Mike Zucarelli for sharing his insight and expertise and thank you for taking the time to listen, but more importantly, thank you for your continued membership continued interest in Employers Health. We wish you all a happy and safe holiday.

Be well, and we’ll see you soon.