Episode 45 – Ask Mike Anything – Your Pharmacy Benefit Questions Answered

Released August 27, 2024 

Mike Stull (0:08) 

Hello 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 Stull. 

At Employers Health, we always strive to provide useful content and resources you and your colleagues can use to stay informed on the latest in employee and pharmacy benefits. In the past few months, we have added a variety of on-demand webinars, blog posts and more on our site that I encourage you to check out at employershealthco.com forward slash resources. For our second installment of Ask Mike Anything, I’m joined by Eric Dublikar, vice president of business development here at Employers Health.  

We’ll be covering all your burning employee and pharmacy benefit questions. As always, if you have any other questions, don’t hesitate to reach out and I’d be happy to answer. With that, let’s get started.  

Welcome to Eric.  

Eric Dublikar (1:12) 

Hey Mike, great to be here and we’ve got some great questions from our listeners, so why don’t we get right to them. First one we have here is, is there anything really going on in the pharmacy benefits world right now? It seems pretty quiet out there. What do you think?  

Mike Stull (1:31) 

Yeah, quiet would not be the word to describe what’s happening out in the pharmacy landscape these days and I think that there are three primary things that we’re following. The first is that PBMs are certainly in the crosshairs of legislators and regulators, both at the federal and the state level. The second piece would be the widespread adoption of biosimilars, particularly on the pharmacy side with Humira.  

And then I would say the third thing is GLP-1s, so all of our clients want to talk about how to better manage GLP-1s, whether it’s for diabetes, or weight loss or both. Those medications are driving spend on the non-specialty drug side of the house and are certainly, our clients are taking note of them. So those are the three big ones. 

Eric Dublikar (2:39) 

So there’s a lot to unpack there. Let’s take those one at a time. So when it comes to federal and state legislation, what are the big themes there? 

Mike Stull (2:50) 

Well, I would say the biggest theme, as I look at it, is who in the supply chain is going to get more money in their pockets? So, if you look, if we just go down the list of stakeholders here, I mean, you have patient advocacy groups.  

For the most part, they want open access and know out-of-pocket costs. You have patients, and I distinguish between the two just because we don’t always know who’s funding certain patient advocacy groups. But patients in general, you know, in talking to our clients, they want affordability. They want easy-to-use benefits. Paying less out-of-pocket at the pharmacy counter or out of their paycheck for monthly premiums is always a goal for patients.  

From a pharmacy dispensing perspective, I think most retail pharmacies, particularly the independent pharmacies, are looking for more reimbursement. They’re looking for a fairer set of network terms in their contracts, looking to have no network restrictions. So, we see a lot of bills around not being able to limit networks to specific pharmacies. So, that’s what’s on their agenda. 

The drug companies, I would say less pressure on prices. So, you know, my question always is, if the big three were to go away, do you think that the prices are just going to come down, or will they give the same level of rebates to smaller PBMs? I mean, they don’t do that today. When we look back into the past that’s not been the case.  

You know, even before the big three were the big three, you can go back into the late 80s, early 90s and read articles about how brand drug prices are busting budgets. So, there’s nothing new here in terms of how drug companies typically behave. And the question is, by having the big three or not having the big three, are you more likely or less likely to be able to counter the pricing that the big drug companies would like to charge for their medications? Other PBMs, I think we would be remiss if not mentioning them.  

I mean, when I look at my LinkedIn feeds, the LinkedIn feed is primarily individuals who work for competitors of the big PBMs. And, you know, they all want more market share. So they’re going to take every opportunity that they can to bash the big three PBMs. 

Interestingly, for a lot of mid-market PBMs, they all utilize the big three for rebates, which are such a big part, whether right or wrong, they’re such a big part of the financial equation. And without having those big rebate aggregators that the CVS, Express Scripts and Optum all run, I mean, the mid-market deals would not be competitive.  

And then I guess finally, it’s just the big PBMs, right? So, you know, they’re not the victim here. 

Obviously, there is a lot of room for improvement. And obviously, they don’t want to lose any money. They’re a publicly traded company with shareholders.  

So, they’re looking out for those shareholders as well. So, you know, when I listen to the policies and the regulations that are being proposed, I’m not seeing a lot of ideas that are actually going to lower drug prices in the United States. It’s really about what portion of that price is going to get doled out to which stakeholder.  

And interestingly, in all of this, the employer voice is noticeably absent. And even listening to testimony in Congress or reading the reports put out, I mean, it’s clear they’re not talking to employers or any customers of the PBMs because there are things that they say in these reports that could be resolved with a quick Google search or one phone call or one email to an employer and they would understand how these programs work with the PBMs.  

But they don’t take the time because, you know, they’re not going to get any clicks. They’re not going to get any votes. They’re not going to get any. It goes against the current narrative. 

So, I mean, I think as we look at all of this, legislators, you know, they’re not differentiating between plan design decisions and PBM policy. So, employers really need to make sure that they’re paying attention and differentiating between the two.  

The questions out there about how’s ERISA going to hold up in all of this. At the end of the day, it’s going to have an impact on our clients. We know that. We know that the big PBMs won’t just absorb the cost. And so, you know, as the saying goes, you might pay differently, but you likely won’t pay less. And I think that sums up what’s going on in the policy and regulatory world today.  

Eric Dublikar (9:15) 

Okay. So, if there are legislative changes at the state level and others being proposed at the federal level, what are we doing to help clients manage through this?  

Mike Stull (9:30) 

Yeah, I think the first thing is just from an information perspective. So, Madison Connor on our team, she’s an attorney and she spends most of her time keeping track of what’s happening at both the state and federal level.  

And so, Madison works to make sure that our internal team is staying abreast of what’s happening and then also communicates that out to clients. So, just having accurate information is step one. The second piece would be really how do you put that information into action? So, the execution, making sure that you’re in compliance with new regulations or new laws.  

So, how do we actually do that? I mean, a big part of it is ensuring that our contract has the flexibility to adapt as these things come to market. So, for example, making sure that we have different pricing models in our contract so that if you’re on a traditional deal today and there’s some spread ban legislation that goes through that you can easily switch to a pass-through model. And so, those types of things are part of our contract today and will continue to be going forward.  

And then the third piece is from an advocacy perspective. So, instead of just reacting, how do we be more proactive? And I would say that the big ways that we’re being proactive is just by trying to educate legislators on how these policies affect our clients. And certainly, we are very much about preserving ERISA protections so that our clients can deliver uniform benefit plans across state lines.  

Because at the end of the day, while we have a lot of government clients that do have their employees and plan participants in one particular region, most of our clients are large multi-state organizations. And so, making sure that we can administer the benefit plan across state lines is really important to ensuring that we can continue to provide benefits in an efficient manner and also a cost-effective manner. I mean, if you look at the United States today where, you know, administrative costs for delivering health care is one of the biggest expenses. And so, to add on to that doesn’t make any sense at all. It will not bring prices down.  

Eric Dublikar (12:29) 

Very good.  

So, the Johnson & Johnson lawsuit was front and center and in the news. And I think plan sponsors were asking questions and thinking a lot about it over the last 6 to 12 months. So, what do you think that lawsuit means for consultant-led coalitions?  

Mike Stull (12:51) 

Well, now we have the Wells Fargo suit as well, which is almost identical to the J&J lawsuit. It’s the same plaintiff’s counsel. The Wells Fargo and J&J use the same PBM. They use the same consultants. So, it’s really interesting how these are shaping up really just as, you know, when you talk to Madison, this is what she predicted.  

So, I mean, I think there’s a lot of things within the J&J and Wells Fargo lawsuit that employers need to take a look at. This question was specifically around consultant-led coalitions. And I think it gets to the point that employers need to make sure that they have a prudent process for selecting their benefit providers. And that includes, obviously, the consultants as well. And I think it’s wise to keep apart the role of consultant and benefit services provider. 

And for some of these consultant-led collectives, what’s happened is you have a consultant that’s running a bid and then also bidding on the business as well through their own collectives. And quite frankly, I do not believe that that is a prudent way to select your benefit services provider. I’m obviously biased since we have a program that competes with those. But, I mean, just on their phase, they don’t seem like a prudent way to do business.  

So, I don’t know what the ultimate endgame will look like. I think, again, across the board, employers are going to take a closer look at how they are procuring their benefit services providers. And maybe this will shine a light on these types of potential conflicts that are out there in the marketplace.  

Erik Dublikar (15:25) 

Okay. So, let’s shift gears here over to biosimilars.  

You mentioned the switch to Humira biosimilars. What have you seen so far in the market?  

Mike Stull (15:37) 

Yeah. So, so far, again, most of our clients are with CVS. And so, CVS rolled out its biosimilar strategy on April 1st of this year. And we have heard very little noise as it relates to patients switching to the CVS biosimilar with Cordovus and Sandoz.  

The list prices have gone down. So, I believe the biosimilar with CVS is around 81% off the list price of Humira. The other important piece in this was making sure that patients, particularly those that were in a copay assistance program like PrudentRx or Save On with Express Scripts or the copay maximizer program with Optum, they’re all paying $0 today with Humira. And so, it was important that with the biosimilar that they would continue to pay $0 or else patients wouldn’t have an incentive to move over.  

So, that was really important. From an overall cost to the plan perspective, I mean, obviously, when you move to the biosimilar, you’re paying less upfront, but you’re getting less in rebates. And so, this is something that we’re tracking today. 

And in the grand scheme of things, even if it’s a net wash, meaning that the amount that you pay upfront, the lesser amount that you pay upfront is the same as the loss in rebate, even if it’s a net wash, the time value of money in getting that upfront discount versus waiting for the rebates on the back end is totally worth it. So, across our book of business, about 90% have converted to the Humira biosimilar. The other piece is you have to exclude Humira to make this financially worthwhile.  

So, a lot of PBMs are talking about their biosimilar strategies, but they still have Humira sitting there in a co-preferred position, and they’re not going to move utilization. I mean, I think the data point I’ve seen is right around 20% movement versus 90% to 95%, which has occurred when you exclude Humira. So, to really make it worthwhile, you have to exclude the originator product, and you got to push as much utilization as you can over to those biosimilars. 

Eric Dublikar (18:18) 

Great. And we have a Stelara biosimilar coming early next year as well. Is that correct?  

Mike Stull (18:28) 

That’s right. So, I expect that we’ll see some formulary changes once at least a few biosimilars get to the marketplace. We have the structure, I think, in place or the framework in place contractually now with the adoption of rebate credits to allow PBMs to make faster moves to the biosimilars. Because before, there’s a lot of factors, but one of the big ones was you have these rebate guarantees out in the marketplace with your clients.  

If you move to the biosimilar that’s 80% or less expensive, you have 80% or more less rebates on every trip, you’re not going to be able to hit those guarantees. So, you would either have to go back into your contracts and re-contract, adjust the guarantees. What the rebate credits allow is for PBMs to make those moves to the lower list price drugs and still have a way to reconcile back to those guarantees without having to re-contract.  

So, I think that there’s value in that. And I think at the end of the day, we’ll be able to see movement sooner than we did with Humira as it relates to getting to the biosimilar adoption.  

Eric Dublikar (19:51) 

Okay.  

Next question. The big three PBMs have created these group purchasing organizations or GPOs. Why do you think they did this? 

Mike Stull (20:06) 

Well, the stated reason was to help commercialize the biosimilar. So, a lot of the talk was around ensuring supply of the product. And I think that’s a worthy explanation. I mean, if you look at, for example, even GLP-1s, we had drug shortages because of the demand.  

And so, you want to make sure that if you drop an originator product and give up rebates when you do that and move all of your utilization of the biosimilar, that you’re going to have enough supply to be able to do that. And if other PBMs do it, obviously, it puts more strain on the system. And so, you want to make sure that you have supply.  

So, I totally get that. I think an unstated reason why they did it was PBMs, we know, make fees off of rebates, particularly these GPO fees because they all have rebate GPOs now. So, if you’re making 5% or 6% or 7% or whatever the number is off of the rebate yield, and you get rid of the rebates on a large product, similar to what happened with Humira, then you have to make it up somewhere. 

So, I think that’s the bigger play in terms of these entities like Cordavis with CVS. I mean, I think that ongoing, the pressure is going to be to ensure that the pricing on the co-branded versions of the biosimilars represents the best value in the market. So, while supply is certainly a concern, and we understand that the PBMs, again, are publicly traded companies, they have obligations that they’re supposed to meet. 

But at the end of the day, clients and patients care that they’re getting the best price and the best value. And so, at the end of the day, if we’re going to limit the biosimilar that a participant can get, then it better be the best value in the marketplace. And that’s both from a plan side and from a participant side.  

So, again, making sure that if there are copay dollars available to buy down the patient cost share to zero, that those are made available. And I think the big three PBMs, at least, I think they get this. But it’ll be interesting to see ongoing as new entrants come to the market, how the pricing on these drugs evolve. And that’ll certainly be something that we’re watching and measuring. 

Eric Dublikar (23:11) 

Great. And, hey, speaking of prices of certain drugs, how could we have a discussion without bringing up GLP-1s and the impact they’re having on total spend for plan sponsors? I’ve heard mixed messages about whether groups should cover weight loss or not cover weight loss medications.  

What’s your take on this topic? And second question, what’s Employers Health and what are their clients doing to manage these costs?  

Mike Stull (23:47) 

Yeah. So, in terms of whether to cover for weight loss, we see a mix of about 50-50 right now with our clients. And we can get into some of the ways that they’re managing those here in a minute.  

But just in general, when you talk about managing costs, I think there’s two big pieces to it. The first is making sure that you’re getting the best price. And then the second piece is ensuring appropriate utilization.  

So, if you’ve listened to one of my PBM 101 presentations, you hear me say that cost and price are obviously, or not obviously, oftentimes used interchangeably. And they’re not supposed to be. Price is a component of cost. 

But the other big piece is utilization. So, making sure that we’re not losing sight of there are two key elements to this, both price and managing the utilization. So, on the price side, first of all, these are heavily rebated drugs.  

And again, whether you like rebates or not, that’s the situation that we find ourselves in. So, you better be sure you have a good contract with your PBM. On the utilization side, I mean, the Diabetes Association, the American Academy of Physicians, all of these physician organizations, patient advocacy organizations, didn’t help budgets by recommending GLP-1s as first-line therapy options.  

So, historically, it’s always been metformin first. And so, to move the GLP-1s up in the therapy guidelines was a big deal in terms of how often we would see these drugs prescribed, particularly for new diabetes patients. So, I mean, we’re kind of at a, on the short end of the stick, per se, as it relates to that.  

And we’ll see how, you know, at the end of the day, how does greater use translate to lower risk in both the short and long-term medical spend of a patient. So, you have to be ready to track that on the medical benefit side as well. I think the other piece as it relates to utilization, particularly if you don’t cover weight loss, is just making sure that individuals aren’t using these products off-label.  

So, most PBMs have a specific utilization management program to ensure that if you’re getting Ozempic, for example, that you’re actually a patient with diabetes and not just someone who’s looking to lose, you know, 10 or 15 pounds.  

Eric Dublikar (26:52) 

And I think you mentioned this, the employer self-book of business, what’s the weight loss, what’s the coverage of weight loss, I should say?  

Mike Stull (26:58) 

Yeah, it’s about 50-50.  

Eric Dublikar (27:01) 

And are the PBMs doing anything in terms of layering in other programs for groups that are covering these products for weight loss?  

Mike Stull (27:13) 

Yeah, I think we’re seeing more utilization management options coming to the marketplace, particularly in 2025.  

I think it’s important to remember that these drugs were in a shortage situation. I think the Lilly products just came off of the shortage list, or they’re about to come off, and same with Novo Nordisk. But what that meant was there wasn’t a lot of opportunity to negotiate on these particular medications.  

But for 2025, I think you’ll see some more options in terms of the ability to limit who actually gets the medication and not have to lose all of your rebate potential. And so, you know, whether that’s setting a BMI threshold at 35 or maybe 40, other types of criteria that you can put in that are a little bit more stringent. On the continuation of coverage, remember that, you know, after seven months, typically, well, it depends on the product, but for some of these, you know, six, seven, eight months, they look for continuation criteria to make sure that the drug’s actually working for you before you get approved for another year of medication.  

And so, what does that criteria look like? Is it 5% of weight loss as the labels indicate, or can that go up? We have some custom criteria that looks for a 10% weight loss. So, those things are available as well. The last thing that I would mention is that all of the PBMs and health plans and third-party point solutions providers are really pushing their anti-obesity programs or weight loss programs now.  

And so, I know a lot of employers are interested in putting some sort of lifestyle modification program in place that participants on these medications can utilize while they’re on the medication, or maybe they have to utilize these programs first in order to qualify for coverage of the medication. So, a lot of different strategies taking place out in the marketplace. I think we’ve just started to, you know, we’re on the starting line still.  

So, I think there’ll be a lot more innovation in terms of how these drugs are managed going forward.  

Eric Dublikar (29:50) 

All right. Well, very good.  

Thanks, Mike, for the discussion, even though you and I see one another and speak every day. Thanks for this discussion in particular. Before we go, it’s crunch time in terms of the sales efforts at Employers Health being almost September here when we’re recording this.  

Maybe I should know this answer as the vice president of business development but how’s this year shaping up compared to the last few years?  

Mike Stull (30:18) 

Well, this is a question we get all the time, particularly from our board members and others who have been with us for a long time. They always want to know, last year was great, so how’s this year compared to last year? And I think we’re shaping up quite nicely.  

So, a lot of opportunities this year which are very much appreciated. We don’t take any of those for granted. I think it’s important to note that all of our wins come through competitive RFPS. So, we are out there working with consultants, working with clients, working with our PBM providers to make sure we’re putting ourselves in good positions to win and that we are really putting our deal out there to be evaluated and to be critiqued. I often say that we have to have one of the most scrutinized contracts out in the industry and so I think that accountability makes us better.  

Currently we are right in the mid four hundred, so certainly on track to eclipse the 500 million in new pharmacy spend mark which is kind of the bench mark we’ve had over the past couple years. I mean it’s just crazy to think back 10 to 15 years ago when we were really trying to bring on 30 million, 50 million dollars of new business. Today to be consistently bringing on half a billion dollars every year in new pharmacy spend from clients all over the country and doing it in a competitive RFP process is satisfying because it means that the hard work that we’ve put in and all the work we continue to do to improve to make sure we’re scaling appropriately, to make sure we’re in a good position to deliver on all the promises we make during these RFPS is something that people check the box and say yeah these guys can deliver.  

So, super proud of that, proud of the team and just very appreciative of everyone out there who helps us get to this point.  

Eric Dublikar (32:55) 

Okay, great. Last question. Are there any trends that you’re seeing in terms of where you’re winning and where maybe you’re not winning in those competitive RFP processes? 

Mike Stull (33:05) 

Well price continues to drive a lot of the decision making. We see this all the time and you know you’ll have an incumbent that hasn’t been doing a very good job. Maybe a client could save 20 percent by moving to us and the incumbent somehow finds this better pricing they can put out in front of a client and the client says oh okay we’ll stay where we are.  

I understand why they do it. I think it’s a really short-sighted view and I think it shows that you know the market didn’t move 20 percent in one year in terms of competitiveness. So, it means you were overpaying the previous year. So, you know what in terms of the pricing competitiveness where we’re winning, price definitely plays a part, but I think I’m seeing more and maybe this goes back to the J&J lawsuit question, but I think employers are starting to look for really a framework for a partner who can help better manage the plan over the long term while delivering on excellent experience.  

Both for them as administrators of the plan and for the participants. So, I think that’s really where we have prided ourselves as not just can we get you the best price right here today during your RFP process but how do we manage that contract moving forward to make sure that you’re always getting the best price, you always have the flexibility to put in the utilization management programs that you have an appetite for in terms of disruption versus savings? And then how do we continuously deliver an excellent experience for participants and for the plan?  

I think our ability to not just talk about it but actually show concrete examples of clients that have experienced our value makes a big difference. I heard just in a conversation yesterday about finalist meetings being really dog and pony shows. Of course everyone’s gonna come out and say they can do this and they can do that and oh look how great we are, but at the end of the day consultants know whether you can deliver or not. A big piece of our success has been our ability to deliver on our promises that we’re making and that’s going to continue to be a focus on us internally, making sure that we’re equipped and have the resources and never take for granted the trust that consultants and clients have put in us and make sure we’re always executing on what we say we’re going to.  

Eric Dublikar (36:16) 

Wonderful. Thank you, Mike.  

Mike Stull (36:19) 

Thank you to those who submitted questions. It’s always great to hear from our audience.  

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That’s it for this month’s episode. If you have suggestions for a future episode or a question that you’d like answered, please let us know. And thank you for taking the time to listen and for your continued support, participation and interest in Employers Health.  

Be well, and we’ll see you soon.