Episode 37 – Diabetes Leadership Council

Mike Stull (0:09) 

Hey, everyone, and welcome. Thanks for joining us on HR Benecast, your source for expert commentary and insights on current health benefits-related news and strategies. This is your host, Mike Stahl. 

I can’t believe it. Summer is almost here, and as the summer starts, the benefits conference season starts to come to a close. Our team, we’ve been out in full force at several great conferences, including the Southwest Benefits Association Building Better Benefits Conference down in Dallas, and the Greater Philadelphia Business Coalition on Health’s annual conference over in Philadelphia. 

Our annual conferences, the Pharmacy Benefits Conference and the Innovations in Benefits Conference were in March and May, respectively. And if you missed them, the good news is we recorded the session, so you can check out the events page of our website to view webinars from the conferences. Topics include a legal and regulatory update on the latest in employee and pharmacy benefits, making the most of mental wellness benefits, and much more. 

We’re already working on next year’s conference, and we have some new ideas that we’re going to work on putting into action, so stay tuned for some exciting new changes. The latest issue of EH Connect is out, so keep an eye out for it to hit your mailbox, or if you want a mobile version, you can check it out on our website and read it there.  

All right, joining us today is George Huntley, and George is a repeat guest here on HR Benecast. 

George is the CEO of the Diabetes Leadership Council. We’re certainly excited to have him back to share the progress his organization has made in its mission to provide affordable healthcare in a discrimination-free environment for people living with diabetes. 

 I like to have a conversation with George. 

I think he provides a perspective that we don’t always hear when we’re looking at benefits strategies, and so I hope you enjoy the conversation that we have about everything that’s going on in the industry with the PBMs, and particularly some of the insulin changes that are happening out in the marketplace. So enjoy the conversation. George, welcome back to the podcast. 

To get us started, give the audience a little bit of an introduction of yourself and the Diabetes Leadership Council.  

George Huntly (2:51) 

Thanks, Mike. It’s a pleasure to be back, and again, my name is George Huntley. 

I’m the CEO of the Diabetes Leadership Council. We are a non-profit engaged in providing affordable and equitable access to care for patients with diabetes. In my other day job, I’m also the chief operating officer of a professional services firm based out of Indianapolis, Indiana, and in that role, I’ve been the plan administrator of a self-insured employer-based health plan for over 25 years. 

Mike Stull (3:19) 

Yeah, it’s one of the interesting role combos that we have where you’re serving as both an advocate and having the background as a plain sponsor, so certainly appreciate that today. For the audience, we’re going to talk today about, you know, the environment for, in particular, diabetes drugs, but certainly it goes beyond that, and we’re going to start with just talking about manufacturers’ rebates for drugs and the attention that those are getting, and so George, maybe start by giving us an overview of the issue from your perspective.  

George Huntley (4:01) 

Sure, you know, rebates are driving the price of drugs through the roof for patients. 

Drug prices have escalated to the point where they’re unaffordable to just too many people, and it’s beyond, as you mentioned, just diabetes. Patients dealing with any chronic disease or even acute disease, they’re rationing their drugs across the country, and most notably during their deductible period where they’re exposed to list prices, even though they’re insured, and we know that any time a prescription cost exceeds $250, more than half of the people abandon it at the cash register, so, and manufacturer rebates are on average 48% of the list price of a drug, so if a drug costs $250 at list, on average it should only cost $130 for a patient, but they’re paying the $250, so these rebates are being used by the pharmacy benefit manager as a negotiating tool to get a lower net cost of the drug for the health plan, but not for the plan participants who aren’t really getting the benefit of those lower prices, and, you know, the manufacturers pay those rebates in order to get access to the formularies, access to the marketplace, and in many cases it’s exclusive access, which blocks out all other drugs in the class or category and limits patient choice, and in large measure they’re working, you know, rebates are in fact dropping the cost of drugs. In the case of insulin, the net price of insulin is down 54% over the past decade, and it’s now dropping even more, but unfortunately the list price of insulin went up 143% during that same period to accommodate the growing rebate that they are providing the PBMs, and again, the patients aren’t getting access to it, and they’re not getting the benefit of it. 

Mike Stull (5:45) 

Yeah, it’s interesting, we were talking before we pressed record about the fact that, you know, the PBMs and the manufacturers are kind of playing a game of chicken, and I’ve seen it over the 18 years I’ve been here, and it’s the patients and the plan sponsors that get caught in the middle, and certainly in prepping for this conversation, I was looking back at the price of insulin over the years, and looking at it between 2001 and 2012, the annual growth rate was 11% per year, so the price was certainly well above inflation over the course of those years, and starting in 2012 through about 2016, the price basically, the annual price increase basically doubled, and it’s also the time that the PBMs introduced the formulary exclusions, so pushing the manufacturers to deliver higher rebates, and the alternative side of it was the manufacturers just increased the price more, I would say the public shaming began around 2016, and we started to see those annual price increases come down a good bit, so it’s an interesting dynamic from my perspective, where, you know, rebates have, they’re not necessarily the reason for price increases, we’ve seen that, you know, well before the big PBMs were the big PBMs, but certainly they’ve exasperated the issue, and making sure employers understand, you know, what the issue is, and what their options are to address it are really important. We know that the PBMs are getting some scrutiny, and certainly the headlines are out there from a regulatory perspective, both at the fed and state level, from the legislative perspective at both levels. What are you guys watching?  

George Huntley (8:06) 

Yeah, we’re watching it on all of those fronts, as you mentioned, and you’re right, I mean, the drug prices have been going up over the years before the PBMs kicked in. 

The PBMs actually kicked in with Medicare Part D in 2006, that’s when Congress enacted that, they effectively legalized the rebate practice, because they exempted it from the RICO Act, and allowed PBMs to provide those rebates back up to the federal government, and so it’s, when you started watching those list price increases, you’re watching the PBMs really understand and learn how to use rebates and leverage them through the process, and again, it works, you’re getting a lower net price, it’s just the patients were left behind when high deductible plans came into play in 2008, 2009 timeframe. But who’s looking at the federal and state level? Let’s talk about the federal level at the moment. So Congress is looking into it in both chambers. 

Recently this month, May the 10th, the Senate Health, Education, Labor, and Pension Committee held a hearing on insulin prices with both the manufacturers and the PBMs. The very next day after that hearing, they passed several bills providing oversight to PBMs, expanding access to generic medications, which we should talk about generic medications a little bit, and establishing an exemption process for step therapy protocols. Now these bills haven’t passed the full Senate, and they may never get there, but it’s an indication of what they’re looking at and what they’re focusing on. 

In April last month, the House Energy and Commerce Health Subcommittee held a hearing on lowering drug costs and increasing transparency and competition in healthcare, looking at PBM practices as part of that effort, hospitals as well. And the FTC, Federal Trade Commission, started a review of PBM practices last summer, and we are expecting their report at any time, but earlier this month, just a couple of weeks ago, they announced an expansion of their review into more PBMs and their affiliates, so it may take a little bit longer. The FTC received over 24,000 public comments encouraging them to take on this review. 

And, you know, PBM practices are putting small independent pharmacies out of business by giving those pharmacies a smaller payment for a drug than they pay to their own pharmacies, and it’s important to note that PBMs own pharmacies and specialty pharmacies and are then owned by insurance companies, so these are fully integrated conglomerates with, at the PBM level, very little regulatory oversight. There’s that level within that corporate family that is able to play, at least thus far, relatively unregulated.  

Mike Stull (10:52) 

Yeah, a lot going on, and I appreciated, you mentioned the FTC expanding its scope to the, quote, affiliates, end quote, of the PBMs, and so for the audience that aren’t paying attention, it’s really the GPOs that the big PBMs have started, and in particular Zinc that’s owned by CVS and the Ascent GPO that’s owned by Express Scripts. 

Optum also has one called MSR, but it’s, the GPOs are really there to do both retail network contracting in some cases, but really, they’re there for rebates, and so it’s provided another level within that conglomerate that George mentioned, that it’s another black box within a black box, so it’s opportunity for the FTC to take a look at what practices are going on there. You mentioned, or we mentioned, that states are also reviewing PBM practices. What are you guys looking at from a state perspective?  

George Huntley (12:07) 

Yeah, there’s a lot of activity. 

There’s more activity at the state level than the federal level, honestly, so in 2022, 135 bills concerning PBMs were introduced in state legislatures across the country. Twelve states in 2022, twelve states enacted 19 laws offering a variety of restrictions and requirements for PBMs. As of today, three states have passed laws requiring drug rebates to be passed through to consumers at point of sale, and those three states are West Virginia, Arkansas, and Indiana. 

Arkansas and Indiana got passed in 2023 just this session. Over 15 states reviewed rebate pass-through legislation this year, and we expect that number to grow as patient advocates. It usually takes a couple years to work your way through the legislative process, so this is really, those three are beginning of a wave. 

If you’ve got 15 states looking at it, this is going to continue to go. The Diabetes Patient Advocacy Coalition, which is a sister organization of the Diabetes Leadership Council, also focused on that, but DPAC is a 501c4, so we can do lobbying. They’re leading a coalition of around two dozen nonprofits in support of passing rebates through to patients at the state level. 

Several states are also looking to regulate PBM practices in other areas like protecting independent pharmacies, eliminating spread pricing, and other ways to level the playing field across, especially when you get into states that have rural communities that those independent pharmacies are really important to that population, and they’re getting pushed out of the marketplace. You’re also seeing attorney generals, and Ohio is the most notable right now, suing multiple PBMs for overcharging its state health plans and their Medicaid programs. There’s a lot of things going there that we’re watching and be interested to see how those play out. 

Mike Stull (14:06) 

Yeah, I think one thing just that bothers me from my perspective on the independent pharmacy piece is that if you looked at all independent pharmacies together, I think there’s about 15,000 of them in the country, and if they all work together, from a reimbursement perspective, they’d be the third largest player in the marketplace. And so, just from a free market perspective, it would be nice if they spent more time figuring out how to work together to influence the market versus running to state legislatures across the country, because from a self-insured ERISA plan perspective, I mean, we can’t administer a different plan in all 50 states. The other thing that I’ll say about the independent pharmacies is that, you know, a lot of them use the same PSAOs, which negotiate the reimbursement that’s run by the big wholesalers, and one in particular, and they also use that big wholesaler for a GPO. 

So, they’re using the same very large company that is right in the middle of the supply chain or right at the top of the supply chain to negotiate both reimbursements for them from the PBMs and then also to procure the drugs. And so, one of my just kind of thoughts that goes through my head is, if you’re not able to procure the drug at a level that allows you to be reimbursed at a rate that makes money, there’s one place that I would start, and again, it wouldn’t be at the state legislature. And so, that’s a very simple-minded maybe view of the marketplace, but certainly from the headaches that it causes self-insured employers, it seems that there’s other solutions that maybe haven’t been explored. 

Geroge Huntley (16:11) 

I think, you know, nobody starts at the legislature. I think the assumption here is this is a problem that has been brewing and festering within their P&Ls and within their businesses for many, many years. And so, they’re seeing an opportunity because there’s a spotlight on the PBMs right now, and they’re trying to do what they can. 

That’s how lobbying works. I’m here for the patient because I just don’t want the patient to have to, you know, why overcharge? Why double charge a patient for a drug? It makes no sense whatsoever for a health plan. Hopefully, we can touch on that. 

But, you know, it is where I’m a believer in a level playing field. You level the playing field and let the market do what it needs to do. And you want the least amount of regulation needed to get that to establish that level playing field. 

The more you get into it, the more sometimes you need to tweak things.  

Mike Stull (17:05) 

And I think last time, I think it was our conversation, you had mentioned, you’d compared it to the medical side of the house where, you know, you don’t hold back part of the discount at the local hospital when patients in the deductible phase. Maybe talk about that real quick. 

Geroge Huntley (17:24) 

Yeah, absolutely. So, you know, patients paid a premium to get into the health plan. It’s like you’ve paid Sam’s Club dues, but you’re not getting Sam’s Club pricing on the drug side. 

In the major medical side, you go to the doctor, you get lab work, you get MRI, go to the hospital, you get the benefit of that discount that the plan has negotiated. And even if you’re in your deductible period, you’re paying the net price after discount. But in drugs, that’s not getting passed through to you. 

So you’re paying list price at the cash register in January. The other very important point to bring out here is you don’t get the chance to finance it. So the patient in January at the pharmacy counter, they have to come up with the cash right then and there or they don’t walk home with the drug. 

If they go to the hospital and need emergency surgery or whatever it is, they get the bill three months later. The process of the hospital sending the bill through and getting adjudicated by the time it gets to the patient; they’re healed and gone through physical therapy and they’re fine. And now they’re paying that cost, again, the net cost. 

But very importantly, the service has already been rendered. The patient is healed, but on the drug side of the house, they’re not. And that’s a real problem because it costs plans more money if the patient doesn’t take their medications. 

They wind up in the ER, they wind up in the hospital, and that’s not good for a health plan. And we’ve got many, many studies that show that. But it’s the unintended consequence of this plan design and this process. 

Mike Stull (19:01) 

Yeah, I really obviously appreciated that example last time because it’s certainly stuck with me. So from an employer perspective, from your chair, what does this all mean for employers?  

Geroge Huntley (19:18) 

Well, as you indicated, it’s happening at the state plans and in the state houses. It’s also happening to employers. 

And the employers are dealing with the same PBMs. It’s the type of contract. And so first off, employers ought to be vigilant in reviewing their contracts with PBMs and ask questions that they perhaps aren’t asking today. 

Am I getting all rebates passed through to me? How much is the PBM keeping? Do you really know? Some of the larger employers have the great capacity to look into this. The medium-sized employers and the smaller ones perhaps don’t. My company is a medium and small. 

I only know it because of what I do on the other side of my life. We know from data that the PBMs are reporting to the state of Texas that they kept 13% of the rebates and discounts in 2021. So that’s not zero. 

You’re not getting all of it passed through. If the state of Texas, the average was 13% of PBMs retaining, that’s something for employers to bear in mind. Don’t assume that you’re getting all of it. 

Are rebates being passed through to my employees during their deductible period, as we just talked about? Does it make sense to double the cost to the employee and risk them not taking their medications? Are you covering generic drugs when they are released versus waiting a year or more to add them to your formulary? And you would assume that’s crazy. Of course, I’m covering a generic drug the minute it’s released. Thank goodness it’s there. 

I’ve got a low-cost option. But PBMs make more money on a higher-priced drug, a higher-priced rebated drug. So less than half of generics are actually being added to the formulary in the year of introduction. 

And that’s something that employers should be scrutinizing because it’s hurting their bottom line. And are generics being placed on the lowest cost tier of the formulary to encourage my people to take the least expensive drug? We know that actually is not happening. Less than half of generics are being placed on the generic tier by PBMs because the PBM makes more money if the patient takes the branded drug. 

So they’re not giving the patient an incentive to take that lower-cost drug. And so employers really ought to scrutinize that and look at their contracts and see what’s going on there.  

Mike Stull (21:42) 

Mm-hmm. 

Yeah, for the employers’ health clients that are listening, so one of the things we always talk about is when you see these stats around how much rebates are being passed through, and the big PBMs sometimes will report out, we’re passing through 95% of rebates, or we’re passing through X percent of rebates. And even within PBM contracts, they’ll say it’s 100% pass-through of rebates. The next logical question is, what defines a rebate? Because there are a lot of different sources of manufacturer revenues that get passed back to the PBMs and to the GPOs now. 

And so one of the things that we really focus on at the coalition in negotiating our contracts with the big PBM reports is, or on the PBM contracts, is that we want to make sure that we have solid definitions, that we understand what we’re getting and understand the trade-offs. So for example, for some generic drugs, particularly during the first 180 days, if there’s no other competition, the generic can be priced pretty close to the brand name drug. And then when you factor in the rebate, the brand is lower. 

And so that’s why we see that. I would say that most of our clients don’t like those programs. Certainly, it’s confusing to the participant. 

I would say the good news is that the participants do pay the generic price. So even in a high-deductible plan, the participants are paying the generic equivalent price for the medication and not paying the full brand. But it’s confusing. 

And again, there’s very little transparency around it. And so those programs end up being a, trust us, this is lower net cost. And without the transparency, you really don’t know. 

So we’ve also heard from our clients that they’ll utilize rebates to offset premium costs. And certainly, from employer to employer, based on turnover, based on their overall comp packages, who they’re trying to attract and retain, the value of benefit takes on a little bit different form from client to client. And so sometimes there’s concern about passing through those rebates. 

Talk to us a little bit about the studies you’ve done around what does it cost an employer to pass through those rebates?  

Geroge Huntley (24:36) 

Yeah. And the good news is that it does not cost much at all. It’s almost next to nothing. 

And I think one very important aspect of this, or underscore, is it’s only passing it through during the deductible period. So the bulk of the rebates still should come through to the employer when the patient’s passed their deductible, they’re on their copay. And those rebates should accumulate and lower the overall cost of the plan and lower everybody’s premiums, etc. 

But during the deductible period, you need to pass those rebates through to the patient to make sure that they’re adhering to the medications. And you don’t have a scenario where the sick are actually subsidizing the healthy, because that’s not really what a plan design is supposed to be doing. It’s actually increasing your risk.

Too many employers are inadvertently doing that today. But we’ve got an actuarial study that gone through this process and came out last year, calculated the overall cost to a health plan of passing through rebates at point of sale was 0.4% increase in total cost, which is a rounding error, it’s 0.4%. Important to note, nobody buys drug insurance, you’re buying health insurance. So you’ve got to look at the impact on the overall health plan. 

And that study, importantly, did not take into account the savings, any savings from having healthier people on the plan. You can find that study on our website, diabetesleadership.org under what we do employer solutions. Drugs, as we know, are 10 to 15% of most health plans, if it’s higher, it’s because of specialty drugs. 

The bulk of a health plan’s cost is driven by the major medical side, hospitalization, surgeries, etc. Rebates only happen on branded drugs, which are about 30% of drug costs in a given plan. Over half of a drug plan is the drug costs are specialty drugs and about 20% are generics. 

So you’re really talking about a fraction of the total drug plan, which is really now fractional of the whole plan itself. The piece of the math, though, that people miss is the false economics of inflating the price of a drug during the deductible. A chronic disease patient, like I’ve been living with diabetes for 40 years, a chronic disease patient, we’re going to meet our deductible pretty much all of the time. 

Inflating the cost of a drug means that we’re going to meet our deductible early. And the plan is going to pay a different claim that it otherwise wouldn’t have paid. It’s a wash, but it’s an unclean wash because the plan has increased its risk for an expensive claim, an ER visit or a hospitalization by driving employees to ration their meds. 

It’s bad health policy and it’s really bad health plan policy. We know from Express Scripts, one of the big PBMs came out with a study just last summer indicating overall costs from diabetes, overall costs from diabetes would drop 16.3% if all diabetes medications were capped at 25 bucks a month. OptumRx claimed in 2021 that they were going to stop offering employer plans that don’t pass through rebates to patients, but the reality is it’s not happening. 

But the cost to the employer, the overall cost of this is minuscule. And I would make a strong argument that it’s actually going to save health plans money over the long run.  

Mike Stull (28:03) 

Yeah, certainly adherence is something that employers are very concerned with. 

And so this is definitely something that they should be looking at in terms of what’s the average cost for a patient with diabetes to fill one of those medications. And what does adherence look like based on that? Anything else that an employer should consider doing from your perspective?  

Geroge Huntley (28:51) 

The other thing I think they should consider doing is treating diabetes management as preventive care and therefore exempting it from the deductible altogether. And this is specifically in high deductible health plans. 

A lot of questioning is, can I exempt chronic disease care from the deductible? There are questions around that, but the IRS has came out and said, yes, you can design your plan to exempt chronic disease management from the deductible period. And the patients should go directly to a co-pay versus being exposed to any unaffordable drug price. And that is beyond just insulin, beyond just rebates, go right to that co-pay, and you’re going to see adherence rise dramatically. 

And your overall costs, especially in chronic disease care, goes down. One of the most staggering stats when we give some of these presentations, there are 37 million Americans with diabetes, 37 million. Those 37 million people generate 16 million ER visits annually. 

And that’s an insane statistic. And so it means that what we’re doing in our system and our pricing and allowing them access to the management tools and the education that they need, it’s just not working yet. And so don’t underestimate the importance of making sure those patients with chronic diseases like diabetes are able to access their care. 

They’re going to be better employees, more productive, less absenteeism, et cetera, but they’re also going to cost you less on your health plan overall. 

Mike Stull (30:08) 

Absolutely.  

Well I know we covered a lot of information today and certainly I always appreciate the conversation. I think it’s valuable for employers as they are thinking about plan design for the upcoming year. To consider different viewpoints, different ideas in terms of how we can make the benefit stronger. And certainly, George, you provide a perspective that employers don’t always hear, and you do it from again that dual role of being a patient and advocate and also being on the business side of it. So, really value your opinions and your thoughts on how we make this a better system for patients and for employers.  

George Huntley (30:56) 

Well thank you, it’s a pleasure being here and appreciate the opportunity to share this with your audience and the dialogue that we have it’s always an engaging conversation. I really appreciate it as well. 

Mike Stull (31:05) 

Absolutely. 

And tell people one last time your web address if they want to learn more. 

George Huntly (31:11) 

Yeah. Absolutely. 

It’s www.diabetesleadership.org and there’s a whole section under What We Do under for Employers Solutions and a lot more details on things that if you want to read up on, plan design considerations. 

Mike Stull (31:26) 

Excellent. 

Thanks for joining us, George. 

Thanks again to George for a great conversation, it’s always again great to hear from him and about the great work that his team is doing over at the Diabetes Leadership Council.  

Before we go, I want to thank our sponsors for helping not only make this podcast possible but for supporting us and providing great employee benefits related content.  

Thanks to our annual supporters, CVS Health and Optum Rx. 

And our executive supporters, Delta Dental, The Diabetes Leadership Council, Hello Heart, and Pfizer.  

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So that will wrap it up for this month’s episode.  

If you have a suggestion for a future episode or a question you would like answered, please let me know. And thank you for taking the time to listen and for your continued membership, participation, and interest in Employers Health. 

I hope you have a great summer, and we look forward to connecting in the near future. 

Be well and we will see you soon.