Justin Venneri
On May 23, 2022, Capital Rx’s Chief Growth Officer, Kristin Begley, was joined by an exceptional panel of experts on stage at thINc360, including Jeffrey Hogan, President, Upside Health Advisors; Bridget Mulvenna, Director, Pharmacy Programs, Erickson Senior Living; Craig Domeracki, President of Markets, Friday Health Plans; and Sarah Biggs, Sr. Network Director, HR Initiatives, St. Luke’s University Health Network.
At Capital Rx, clients and members come first. We are grateful that these three clients were willing to share their real-world experience with our pharmacy benefit management and administration (PBA) solutions, as well as our team(s). As you’ll hear or read below, there’s more work to do, but with focus, an aligned business model, and a painless integration process, it is possible to rein in pharmacy program spend and reverse the double-digit pharmacy program cost inflation that plagues the industry. And we can do it without sacrificing client service or member experience!
Timestamps and Transcript
Edited lightly for length and clarity.
00:00 – Introduction: Jeff Hogan’s background, problems with the current environment and existing system/pharmacy supply chain, and an overview of a “new way” to operate with cost controls and improved outcomes, new fiduciary standards, and the importance of an aligned business partner.
03:45 – Craig Domeracki and Friday Health Plans
04:36 – Bridget Mulvenna and Erickson Sr. Living
05:08 – Sarah Biggs and St. Luke’s
05:44 – Kristin Begley and Capital Rx
- Kristin is a pharmacist that left the pharmacy/PBM business and only came back because Capital Rx may be able to change the industry: “we invested in our technology and are willing to go at-risk,” implementation satisfaction is 100%, and we have a 96 NPS, one modern system: JUDI™, and a Bronze Stevie for Customer Service (you can talk to a pharmacist in 5 seconds, etc.).
- Capital Rx’s Clearinghouse Model® and NADAC-based network allow us to provide PMPM guarantees. Other PBMs make more when their clients spend more; they own mail order facilities. Those are conflicts. At Capital Rx, it’s a single ledger, and everyone gets the same price for Lipitor, for example. Friday Health Plans can pick and choose the modules it needs.
14:43 – Change in healthcare is hard. Pharma used to be 6% of an employer’s total cost of care, and now it’s up to over 30%. It must take courage to look at pharma and say, “We’re going to do something different.” How did your organizations gain the courage to do something different, and what did the journey look like?
- Sarah B: Sometimes, you flip the switch on a new vendor and hope it goes well. We started the process with Capital Rx in early 2020 when the pandemic hit. Our pharmacy spend was ~46% of the overall medical spend on ~28,000 lives, and the trend was not something we were happy with. We are very focused on moving from fee-for-service to quality and risk-sharing enragements, direct to employer arrangements, and we needed to focus on pharmacy costs. We needed better transparency in our data. When we reached the end of the RFP with Capital Rx, we could not find a hole in the story. Moving to Capital Rx was one of the better decisions we’ve made. Everything about the partnerships between the health plan, pharmacies (specialty and retail), and Capital Rx is second to none. The discussions and decisions were challenging because of an existing relationship, but the transparency wasn’t there.
- Bridget M: Very similar story for us. When the pandemic hit, we trusted a consultant to run the RFP and were fortunate that Capital Rx emerged as a viable option. In our analysis, on top of everything else, it wasn’t hard to decide they were right for us. The thing that tipped the scales – we had requested more control over pharmacy costs, the ability to utilize my expertise in cost containment and utilization management, and asked for some drugs to be blocked (high-cost, low-value drugs); Capital Rx could do that. Because of COVID, there was hesitation from senior leadership. They feared a change would negatively impact employees during a public health emergency. The implementation was one of the easiest we’ve ever done over six years, and the main thing, aside from a fantastic financial offer – the guarantee of savings – was the people. We liked all the PBMs we saw, but the people at Capital Rx tipped the scale. We saw a 23% decrease in our pharmacy costs. We had seen those kinds of increases year-over-year.
- Kristin B: Our people are very nice, but it’s all about the technology. JUDI™ allows humans to be better. We have lots of former PBM people that knew their systems were broken. We can implement plan design changes in 3-5 minutes. Sara, you had a big increase in your on-site pharmacy usage because we weren’t conflicted with you.
- Sarah B: Yes. And, because we’re a provider and an employer, we look at data differently than an average employer does. If it takes longer to create more than 48-72 hours to create a custom report for us, it’s a long time. To your point, the technology component is absolutely a benefit. Nothing we’ve experienced with prior partners compares. It’s incredible.
23:04: A follow-up question. Were there any detractors in the process (payers, brokers/consultants)? Can you talk about that?
- Sarah B: We didn’t have any impediments. The integration setup was the easiest we’ve ever had with our medical TPA. The internal approvals were something to overcome because it was different. The numbers were there, so we had to give it a shot.
- Bridget M: We have a consultant, but I went out and hired a separate pharmacy benefits consulting company. I wanted a fresh lens. I didn’t want previous experience with carve-outs or preconceived notions of what it might look like. We paid a little extra for that, but it was worth it.
25:15: Can you talk about the value of a deflationary benchmark inside the plans? When you look at a PBM contract, it’s a word puzzle of opaque language. How important was the [NADAC] benchmark and getting rid of AWP and MAC?
- Sarah B: We had to explain who uses NADAC, what it is, and how it’d impact the financials of the plan, and once we explained how it could bring stability to the plan, the discussion was over. Once we balanced everything – the pharmacies and fiduciary responsibility on the plan, it went very smoothly.
- Bridget M: I agree.
- Kristin B: They have an unfair advantage because they can see drug costs (as providers).
- Bridget M: Yes. And being very well-versed in all this and responsible for auditing the plan, I could never figure out what price they/we were paying for any drug; I could only gauge out or underperformance. Now, I know what price is being paid.
- Sarah B: This whole model says to employers, “You have the ability to understand pricing better than you ever have before.” As the game is changing and there’s more direct contracting with providers and pharmacies, the data is out there; there’s proof that you can switch with little disruption. The time is now to say, “Enough is enough. We’re going to change the paradigm.”
28:55: That’s a perfect segue to the payer – Craig, give us some context for your existing plan and history. Given your experience with BUCA(H)s and that you’re operating a direct-to-consumer (D2C) plan, what have you seen for pharma solutions, and how did your organization get your head around moving to something more consumer-oriented and predictable?
- Craig D: We service over 300k members in seven states, covering all demographics. Our space differs from the group space because of the brokers we deal with (D2C is different). It impacts the overall business. I previously spent time at Aetna and Cigna, and I’ve seen the pharmacy side from self-funded, fully insured perspectives. Pre-COVID, we had ~35k members and were in two states with two different PBMs. We knew something had to change. We heard about Capital Rx and NADAC pricing – we didn’t know what that was – but we’re a low-cost, low premium, high-service business. Our NPS was 26, and health plans usually have negative NPS scores. When we were looking at PBMs, the last thing we wanted to risk was our customer service. We were skeptical about the service level, implementation, etc. We wanted transparency and predictability. Our biggest concern – did Capital Rx understand the business? We saw that the right people were at the table, and everything was aligned. When people started to get their prescriptions, it was great. It was the smoothest transition to a PBM I’ve ever been involved in. Even when I was inside those other organizations when we had a PBM, it could be like a different country. We’ve seen double-digit % cost savings. We needed a great partner through COVID, and that partnership continues to strengthen.
- Kristin B: We all live, eat, and breathe NADAC, but for people that don’t know it, it creates equity. A drug is the same price from California to New York, at Walgreens or an independent pharmacy. The only thing that varies, maybe by $2, is the dispensing fee.
35:48: When we look at individual plans, they are very competitive. It’s the threshold predictability as well. The question – how are you using JUDI™ and the analytics to formulate plans and strategies (financial or provider performance)? It’s a unique platform we haven’t seen with other PBMs in the marketplace.
- Bridget M: We’re unique in that we’re set up with a group of nurses in our corporate office to manage chronic conditions. They use it - JUDI™ - every day. They ensure patients are adherent; they log in and check the information regularly. We have an “Ask HR” hotline, and inquiries get sent to me; before Jan 1. 2021, I used to get 10-20 emails about pharmacy issues, things members couldn’t resolve, every month. I get 1-2, sometimes zero, per quarter because capital Rx fields most of it for us. When I do, I can log in. I can see what happened at the point of sale and explain it to the member (“You need a PA” or “You went to the wrong pharmacy”). We are looking forward to enhancements – the ability to download reports and things like that. Capital Rx’s clinical team and customer service team are great and work really, really fast.
- Craig D: If you’re familiar with Medicare Advantage etc., there’s this ugly term out there: “risk adjustment.” In our business, you must be an expert in that. Often, the first piece of clinical data we get is pharmacy data. It can be a signal that something is happening to the member. In the ACA, there’s a risk adjustment factor that’s critical. The medical data comes months later. So, this is critical to our business.
- Sarah B: Similarly, our clinicians are in JUDI™ all day. We customized our formulary a bit, which we could never do. With Flonase, for example, you can have five different generics, and they aren’t all the same price. You can manage that. We did some customization to make better decisions on the procurement and member sides.
40:10: For direct-to-employer businesses, they can use this logic. What has happened to rebates in your total cost?
- Sarah G: Rebates are amazing. You usually get your rebate check a quarter post the quarter, and it’s an aggregate sum amount. OK, great, there’s nothing actionable. You don’t know what drugs drove it, what utilization of those drugs was, etc. But now they are transparent, and we can see down to the NDC level, and we can make decisions around 340B, etc. The rebates are much improved over where they were with our prior PBM.
- Bridget M: The speed of getting rebates is dramatically improved. Plus, Capital Rx demonstrated a willingness to move toward an even more equitable form: point of sale rebates. We can encourage members to use HSAs vs. traditional PPOs. We don’t have in-house pharmacies, and we saw a 3% improvement on rebates only with our guarantee… more to come once we get the true-up. It’s been wonderful for us with many fewer drugs on the formulary.
- Craig D: The transparency allows us to better project costs moving forward. It’s all connected.
43:20: The Consolidated Appropriations Act (CAA) – there are new responsibilities/burdens for employers, brokers and consultants must disclose primary and secondary compensation, and provider groups must post and update prices. What’s your prediction for how this changes things and if it drives employers toward new solutions?
- Sarah B: The CAA will speed everything up. Health plans and employer-sponsored plans won’t have the option not to be transparent. Finding a partner that’ll help with compliance is really important.
- Bridget M: We are a lot better prepared for the pharmacy reporting as a Capital Rx customer. A lot of it has to do with the quality of reporting and overall ownership that Capital Rx takes. They are willing to step up and do the right thing to help.