I want to share my thoughts regarding the growing discussion about drug pricing and all the players in the current pharmacy game. I have been working to solve real healthcare problems and fix the inefficiencies in the system for more than 23 years. So much so that I decided to leave corporate healthcare, where employees are incented to keep the current system going, and start my own company. Three years ago, I founded RemedyOne, to focus on that mission. I have convinced 28 of the most talented, passionate people in their healthcare disciplines to join me on that quest. Unlike people in Washington, the media or bloggers, we are working our tails off every day and actually fixing this broken system. So, I wanted to take a minute and give you my impression of the issues, what’s true and what can be done to fix things:
- Regulation has done nothing to fix healthcare. Any effort to do so has created more problems. Any of the current efforts by Washington will not impact commercial, employer-based healthcare drug pricing. I would be happy to be proven wrong, but all the press is vague, to try to get the market or others to be afraid this could happen.
- Anyone sitting on the sidelines throwing arrows at PBMs or pharma will never fix a problem.
- The information being shared today regarding the misaligned incentives is true. The big PBMs (Express, Caremark and Optum) all designate preferred drugs that should not be in a preferred status or even covered. At RemedyOne, we have identified 900+ drugs that we have removed from our formulary. These drugs have generic alternatives, Over-the-Counter alternatives or are not even approved by the FDA – but they all pay high rebates.
- There are more issues than just rebates. Too much money is being made on generic pricing. Plus, new pricing schemes are being developed, like Off-Invoice Discounts when they buy drugs direct for specialty products. Why is no one talking about generics, including the proprietary definitions of brands/generics and the spread that is made on generics? How many generic drugs cost less than $10 but are charged more than $150? We know there are many – and when you have 100,000 of these scripts, you have a big problem. There are many PBMs who are offering differentiated services and approaches but are challenged to implement similar programs and pricing strategies to compete with the larger PBMs.
- Pharma has increased the price of drugs too much. I am pretty sure every commercial payer would be happy to accept Medicaid “best price” for commercial members. PBMs are the only line of defense against these price increases. If pharma is so ready to help reduce costs, let every patient receive the full copay assistance program without jumping through so many hoops. That would be a great start!
- Transparency is an issue. The big PBMs are saying they pass along more than 95% of the rebates, but they are not being truthful. You have to look at the fine print. For example, they will be very specific to limit this to specific client types like health plans or they stand behind terms like “qualified claims” to justify some scripts getting paid $0 rebate even when rebates are collected.
Here’s what needs to be done:
- Fix the system we have. If we eliminate all the duplicate rebates paid, unqualified rebates for 340b scripts and payers that are not supported by rebate contracts, we would save 10%+ of the $150 billion paid in rebates. Simple math tells you that would save the system $15 billion. These savings could be reinvested immediately in lower drug cost for payers. We are working on this model today at RemedyOne, so we will be ready to do exactly this in 2020.
- Employers and health plans should require PBMs to disclose specifically the amount they receive on each script in rebates and to exclude any drug from a preferred position on the formulary if there is a cheaper net alternative. RemedyOne’s formulary does this, and we contract directly with the pharmaceutical companies to have the ability to disrupt the market. If your PBM will not do these two things, call us. WE WILL.
Every time a new statement is made in Washington about drug pricing and how bad the PBMs are, I spend the next 24 hours talking to everyone about my opinion. I would prefer if we stopped talking about it and did something about it. My team at RemedyOne is happy to fix the problems, disrupt the PBM status quo and talk about the real issues. Give us a call.
You won’t see blog updates from me very often because what I outlined in this email takes a lot of time, hard work and passion to make happen. The good news is that information is power and sharing this could lead us to significant improvements.
Mike Waterbury, RemedyOne Founder and CEO