The Business of Pharmacy Podcast™
March 13, 2023

The Complex Relationship Between PBMs, Pharmacies, and Plan Sponsors | Joey Dizenhouse, HealthTrust

The Complex Relationship Between PBMs, Pharmacies, and Plan Sponsors | Joey Dizenhouse, HealthTrust

  • Host Mike Koelzer speaks with Joey Dizenhouse, an actuary and PBM expert, about the intricate relationships between PBMs, pharmacies, and plan sponsors
  • Negotiation requires leverage, subject matter expertise, and tenacity Joey explains his role in negotiating master agreements between PBMs and the entity with their insurance plan, ensuring the incentives of the PBM align with the best interests of the plan and its members
  • Negative impact of choosing brand name drugs over cheaper generics on pharmacies Importance of preserving competition in the industry to ensure consumers receive the best value
  • Delays in launching generics and biosimilars can impact plan sponsors
  • Rising cost of pharmacy expenses and the need to stay ahead of the curve to protect against future increases
  • Factors that contribute to the rising cost trend in pharmacy, and how good contracts with PBMs can provide flexibility while educating prescribers and patients about the cheapest available drugs Importance of a medical exception process to ensure access to expensive medications
  • Communication between PBMs, patients, and healthcare providers is crucial
  • Role of pharmacists, brokers, and consultants in navigating the complex world of PBMs. 

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(Speech to Text)

Mike Koelzer, Host: [00:00:00] Joey, for those that haven't come across you online, introduce yourself and tell our listeners what we're talking about today.

Joey Dizenhouse: My name is Joey Dizenhouse. I am an actuary by background, so I went to school studying the math of probability and statistics, and that led me into the world of insurance, where many actuaries work and. And, and from there to the management of insurance plans, from the risk bearers perspective.

So , for example, you're a large employer, you are the one responsible for paying the cost, what they may be for your medical insurance and your pharmacy insurance and so forth. And so have spent many years, working in that side of the pharmacy environment, re representing buyers of pharmaceuticals, plan sponsors and and providers.


Joey Dizenhouse: Today, I thought we could talk about the relationships between the PBMs and the various constituents that they contract with, to, in particular, on one side you have the pharmacy. They want to be included in the PBMs network and are subject to the whims of the PBMs requirements and economics.

And on the other side, you have the consumers of those pharmaceuticals who wish to use their preferred pharmacy and are contracting, indirectly by way of the PBM who is contracting with the pharmacy to get access to that network. And the interesting dichotomies that come out of that, conversation and sort of where the industry has gone and is going,

Mike Koelzer, Host: What's interesting to me, Joey, is we both have relationships with the PBMs and let's say the big three PBMs, but just like in life where, somebody's got more power in a group, you got people talking and someone is the alpha male and someone's, you know the beta mail and all that kind of stuff. Independent pharmacies are kind of like kneeling down to the PBMs. But I imagine in your case with the more numbers, anytime you're a bigger customer, I don't know if the PBMs are bowing down to you, but you must have more pollution than some of us little guys. And I'd like to say that with the PSAO and stuff that we can do better, but I don't really think so because the PBMs still know we're gonna be a customer somehow.

So how does it feel to have the PBMs kissing your ring?

Joey Dizenhouse: I think you described it well. they're not bowing down, but when you have leverage as a customer of theirs, that competitive spirit will be sort of more influential in the offer, in the decision making.

And,as a large, if not the largest customer of a pbm, we have the influence to. Des describe, delineate and defend the areas that are most important to our members. The transparency of the costs, the ability to choose the lowest net cost product in a particular therapeutic class with, of course, efficacious results.

the ability to control things like the formulary, where appropriate and the level of clinical rigor that applies within the various, the various channels and the various classes. And without, without the size. I always like to say you need three things to be able to negotiate with a PBM effectively.

You need significant leverage. You need deep subject matter expertise, and you need a whole lot of tenacity because the industry has been built off of the control. It isn't a new theme that the big three PBMs have 80, 85% market share. That's been true for basically 20 years. If you look at the PBMs and their predecessor organizations, it's been true for the 20 years I've been doing this.

And so their control is not new. Fighting back, if you will, by leveraging scale subject matter expertise in some tenacity is something that we're very grateful to have the opportunity to do, and we can only do it because we have the leverage of our members, right? any one of those three things I said without the other two, or two without the other one is not bringing a full set of weaponry to the fight, so to speak.

And I do think of it as a battle. unfortunately, if I flip the coin to think about, your comment, the presence of the retail pharmacy unfortunately has gone in the other direction, right? the consolidation of the industry, the ac, the m and an activity, what you're left with is less.

Penetration of the independence and even banding together, to your point, via a PSAO, there's still a limit. Moreover, if you look at the assets of the, and I'm not gonna pick on anyone in particular, but if you look at the assets, PBMs are now part of ever growing conglomerates. Entities that have insurance companies, some of them have their own retail pharmacy chains, of course they have banks, they have health insurance companies and plans [00:05:00] and so on and so forth.

And what happens is, the ability to compete as an entity in one sub area of that conglomerate becomes harder. And the power of control becomes more and more present. I suspect that the biggest difference between me as a negotiator on behalf of risk-bearing entities and someone negotiating on behalf of a small medium size.

Group of independent pharmacies is the,the say in the contract. So the PBMs willingness to bend to, to, to your earlier comment. And it is a combination of, again, understanding where the proverbial bodies are buried, right? All of the economic manipulation that goes on in a typical contract relationship, where it is and how to stop it, which again, comes back to that combination of leverage and subject matter expertise.

Mike Koelzer, Host: When I think about the PBMs, in theory, the worst. PBMs treat pharmacies in theory that affect the customer. pharmacies close down and they don't have access to pharmacies, or they're waiting in line for a day and a half at some pharmacy that no longer has competition cuz people have closed and so on. , I don't think people take jobs anymore because of. what insurance the corporation's gonna give them, because I think people know that can change in two months when the new year comes up. And I don't know how much the corporation cares that, someone has to drive five miles instead of one mile and things like that.

And so it seems to me that you would typically say, well, the customer's gonna get bad service and then the corporations are gonna decide to go with someone else because our people are getting hurt and so on. Do you see any of that side? You are not really hearing it from the bottom up.

That's really the corporation's. Responsibility to listen to their employees

Joey Dizenhouse: Yes. That's true. Mike. Our service model is designed to make sure that our members are happy. 

Mike Koelzer, Host: Your members being the corporation that you're buying for.

Joey Dizenhouse: right. and their direct accountable person, right. Which might be the head of human resources, right. Could be a finance area person as well. But most HR leaders are particularly mindful of the types of things you're talking about. They do not want us to use the term disruption. They don't want disruption where a person has been going to this pharmacy and can't anymore.

and just to be clear, my earlier comment about PBMs and their various assets, if you will, they're not all created equal, right? For example, if one PBM has their own retail pharmacy network and another PBM has their own retail pharmacy, that's gonna create a different dynamic in contracting.

One would think, our methodology has always been to let the plan sponsor have the choice to do what they feel is best for them because they know their people. And most of the time that means keeping disruption right down to a minimum, which from the standpoint of the network means don't tell people they can't go to the pharmacy they were going to before.

I would say out of the 350 plans that use our PBM program, I can't think of more than one hand worth five entities, and it's probably less that actually really disrupted that pharmacy network. Now I'm talking about. Access to your acute meds, your routine meds, your first fills, right?

It gets different when you start talking about maintenance fills, which I know is critical for the independent pharmacy. But first, just talking about that 30 day acute or routine fill, almost all of our members use the broadest network, which is 70,000 pharmacies, which means it's almost everyone.

And so you're never driving more than a few miles or a couple of minutes, and you're never really having to change the pharmacy that you go to. So that's good news.

Mike Koelzer, Host:  I know you're not the PBM, and I know you're not the corporation. How do you fit in between the two? 

Joey Dizenhouse: Every entity that has their own insurance plan needs to have their own agreement with the pbm. So we are not creating the agreement without the plan, but we 

negotiate a master and it has all the terms and conditions that the PBM cannot change them.

Then individual plans take them, make them their own without changing any of the key provisions, and they have their direct agreement. So they're buying the drugs from the PBMs. Relationships and contracts, but subject to our rules on price, on utilization, on control, transparency,and [00:10:00] probably the most important part is the alignment of incentives.

What we want to make sure of is that the PBM is, and this could be network, could be formulary, could be clinical, could be anything. You never want a situation where the PBM makes more money when drug A is dispensed over drug B, because if drug B is a lot cheaper and equally efficacious, but the PBM makes more money on drug A, you're in trouble, right?

You're gonna, you're gonna have a lot of utilization of drug A, because the incentives are not aligned. The PBM may be earning money from the manufacturer in backend agreements, and so the only way to fix that is to remove all that hidden incentive. And expose the true nature of the deal. And to do that, you need enough scale to make it worthwhile for the PBM to be willing to do those sorts of things.

And even so, maybe not everyone will do that.

Mike Koelzer, Host: It seems to me, Joey, that. That is exactly how the PBMs are making their money, that they choose the one that gives them the best profit and so on. Is that the truth and your stuff is a goal, or am I seeing that wrong? Because in pharmacies, like our pharmacy doesn't sell brand name and we've got some of our local plans that they'll only pay for the brand name and not for the generic.

That's 20% of the cost on our shelf. That seems exactly what you're talking about that the PBMs are not doing, but it seems like they are doing it.

Joey Dizenhouse: Let me give you an example and this ties to your argument of, I call it brand over generic, right? At the pharmacy, you're being told that you can't dispense the generic, you're being told to dispense the brand. The brand is upside down for you or it's close to upside down for you.

And the reason it is the pharmacy it's upside down is because the PBM is getting, let's say, 70% of the whack back in compensation from the manufacturer,

 It's better for the pbm, but it's not better for the plan. That's the key, right? And so just to be clear, we do not accept brand over.

Formulary arrangements. So we have rejected them all. We have custom formularies, custom clinic. so , we do not accept those edits. So if you're operating a pharmacy in one of our 3.1 million covered lives, and you walk in to fill a prescription, that won't happen.

You won't have that issue.

Mike Koelzer, Host: Some of the PBMs might do that, but they have different agreements with different Joeys, different people like you across the nation, but just because it has a stamp of one of the big three, doesn't mean that they're all the same. You've made different agreements inside of that for the lives that are under your plans,

Joey Dizenhouse: Exactly right. Exactly right. And that's a challenge, right? Because it's easy to paint a brush of a PBM and say, this is how they operate

And I understand it. And even as the largest customer, they. I'm still only 3.1 million lives, right? That's only one and a half percent of the country's commercial population.

there's nothing that I can do. I mean, if you're an independent pharmacy operator, you might see one in every hundred or 75 patients is one of ours. But it's not enough to make a big difference in your life, unfortunately. But we are growing rapidly and our mission is to preserve the integrity of the model, minimize the waste, and help plan sponsors continue to offer benefits.

What worries me is the excessive cost increases that we see over time can make benefits unaffordable. Right? And at what point can plan sponsors no longer afford to provide these sorts of benefits that have existed since World War ii? Right? There's tax incentives and other reasons, while they'll probably continue, but.

it used to be I imposs now we're outside of retail pharmacy here, but it used to be impossible to have a drug that would cost $50,000 for a 30 day supply that used to be unheard of. And now they're everywhere. And I'm not even talking about immunotherapies. it can be a regular, single source product that has some predatory manufacturer pricing.

and another brush that sometimes gets painted where manufacturers get painted with that brush of doing lots of bad things where, I mean, there's lots of, for example, generic injectable manufacturers out there that continue to provide molecules to keep them from going short and have very little margin.

And to be clear, I am not an advocate for pharma in any way. I negotiate against them too. But it's very difficult in this industry to paint a portion of it with a.

Mike Koelzer, Host: One of the complaints of pharmacists, and I guess. Population would be spread pricing. Is that something, Joey, that you can control in your lane with a P B M? And are there some people like you not [00:15:00] at your company like you in different places that maybe aren't as sharp and don't realize that some of the PBMs are doing this to them?

I don't imagine you are really happy if a PBM charges you a hundred and only pays the pharmacy 10, but it happens. And I understand how you prevent that. How do others not prevent it? 

Joey Dizenhouse: Well, I mean, in all fairness, I mean, this is what we do. We have an amazing team of people here, and we work around the clock educating on these subject areas, right? So it's not about aptitude, it's about sort of depth and hours invested. And I still learn every day having done this over 20 years.

The bottom line is that there are things you can do, right? There are things you can do to go after the right answer. The challenge is going to be if you don't have the leverage as well. It's more difficult, not impossible. . But to your point about spread pricing, every one of our members has the opportunity to take what we call a transparent contract.

And what that does is it reimburses the pharmacy at a level that is the exact amount of money that the plan pays for the drug. So there isn't a spread anywhere in the price. Right. And that enables the alignment of incentives. Some plan sponsors don't like that as much. They prefer a fixed, PBM agreement off of AWP.

Mike March: I've 

Mike Koelzer, Host: talked to someone about that they'd rather have it kinda like a gas guarantee. You're not going up and down through the 

Joey Dizenhouse: Exactly.but in our agreement, we have both and we are indifferent. They are actually equal. So the story goes like this, if it bothers you that there's a spread price in there, like it bothers us, you can have the transparent agreement if it doesn't bother you and or you don't like your gas bill, varying.

Well, then that's fine. You take the, we call it the traditional deal, but rest assured that they're worth the same amount of money to you. So now your decision is not based on which deal you are getting hurt in. It's more about, it's more about which deal is philosophically more aligned. But also to be very clear, spread comes in lots of ways, and we're only talking about the spread on the pharmacy acquisition cost or the pharmacy contracted rate.

Most of the money actually comes somewhere else. Most of the money comes from what I call the backend. That's all the money that the manufacturers are paying,

right to the PBMs. And people use the term rebates to describe it. And what I do is I like to describe it as rebates with a big R and rebates with a small R, because rebates are just one.

Actual rebates are just one form of compensation that manufacturers pay PBMs. And if you put it all together and call it big R rebates, so to speak. It's a big number. For some drugs it can be 80% of the ingredient costs, it can be 60% of the ingredient costs and big numbers like that. Our agreement does not allow the PBM to keep any of that money.

Any of it. Not a little bit of it, none of it. And we fully audit it for our members and they can audit it as well. You should always wear a belt and suspenders to keep your pants up is like what we like to say.

Mike Koelzer, Host: You remember BC the comic strip? Nobody reads comics anymore because you don't get the newspaper anymore. But BC was, was

 A comic strip basically of,prehistoric cast, , they made jokes around prehistoric stuff, but that was one of the things he said, show me a guy that is, wearing belts in suspenders.

And I'll show you a guy who's not wearing any underwear or something like that. , cuz they're extra careful.

Joey Dizenhouse: Oh, it's funny. Well, as an aside, I've been a comic book collector for a long time, but not in the newspaper. I collect the old and I collect vintage, pre 1970. It's really like Superman, and I like DC characters, Justice League and stuff. Yeah,

Mike Koelzer, Host: One of our pharmacists who's no longer with us, but when he left us, he opened up a comic store in town. He does that like halftime with his pharmacy stuff. So

Joey Dizenhouse: fun. Yeah, that'd be a dream job.

Mike Koelzer, Host: Joey, a PBM comes to you and says, Joey, you don't have to use your strength with us to get all these things straight.

We don't do this spread, we don't do any of that stuff, so relax. Don't do it. You still like doing stuff with the big three, is that because they've got power in other areas that as long as you keep them in line, you're gonna benefit from their bigness? Is That right?

Joey Dizenhouse: That is really it. But to be clear, we test the market regularly. We don't just look at the big three, for example, we went out to 16 PBMs. Including some that we knew wouldn't be able to handle our size, but we wanted to be sure and give them the benefit of the doubt.

and then we would narrow the field. Narrow the field. And even when we narrowed it to our proverbial finalists, there were several in there, including non big three, that we evaluated. And you hit the nail on [00:20:00] the head. The bottom line is, while there could be some advantages, optically to work with a non-big three name, because there's a reputational issue, we found that the economics just weren't there.

We would be trading our dimes for someone else's nickels. and it wasn't logical. And instead we spend a lot of time educating our members and prospective organizations about why it's okay to work with an entity that you may think typically is not out for your best interest.

But in our case, . Now you can argue why. It's because the volume we bring them, it's because they wanna do the right thing. we can leave that. It's what you get that is all that matters to us. But we'll never just rest on our laurels. In fact, we talk about this all the time. As soon as you stop and say, you know what, let's breathe.

We've got a great deal. It's the best out there. Let's kick back and relax. As soon as you say that you've become stale. Cuz the market is changing every

Mike Koelzer, Host: And it's getting so transparent where years ago maybe you could have, the good old boy network, but now things will catch up to you sooner than before, I think.

Joey Dizenhouse: And I think that's a, I think that's a good thing. I think the advent of technology,and the social connections that we all have. it makes bad behavior a little bit less sort of easy to get away with. We can call it bad behavior. We can call it capitalism. The PBMs, the three big ones, have a lot of market share and they're public companies that have shareholders that they need to deliver value to.

So I don't worry about blaming bad behavior as much as I worry about it not happening to my constituents. Right. Which I guess is selfish, but at the end of the day, that's all I can control. I can't shift behavior for people who are not in my deal, but I, we can try to educate them. So we publish collateral to try to help,in, even in a David versus Goliath sort of way,

You know,there are other groups out there that get some value without the volume that we have.

I just think that, I just think that it's difficult without that leg of the stool, without that leg of the leverage. it's.

Mike Koelzer, Host: I can imagine this answer. But let's say somebody a 10th of your size comes to A P B M and doesn't have the experience and those things you mentioned, that keep them in line for you. Who's gonna start being the loser in that? Is it gonna be the company's gonna pay more and maybe the employees of this big company are gonna have problems?

what starts to happen if somebody like you wasn't looking, and I'll go against the big three, but let's say any P B M that's trying just to make a ton of money, what are the issues going to be?

Joey Dizenhouse: Well, in your example, if we're talking about a group that'sa 10th of our size, which would be several hundred thousand, they're also playing with a, with a, with some weaponry, right? They're not,they're not so small that they won't get attention.

So if they've got, if they've got, and most organizations rely on a third party to help them, right? They bring in expertise via an advisor or a consultant. Sometimes we use the term broker, insurance broker, and, many of these firms have deep expertise as well, 

and people who focus on only 

Mike Koelzer, Host: does someone your size have that, Joey, do you have a broker that comes in?

Joey Dizenhouse: We do use the support of an actuarial firm. It's a company called Milliman. And so we use them as a, as an objective 

party so that They can. That's right, that's right. That's right. Now we also, if you've probably noticed a little bit of a theme with me and our group here, we don't rely on that, right?

So we'll use their support, but we also have very deep, technical experience here. And so oftentimes we will ask for third party validation of things and then do it



Mike Koelzer, Host: an audit kind of thing.

Joey Dizenhouse: Exactly right. 

Mike Koelzer, Host: So a 10th of the size comes in, they can hire people that maybe have more expertise in this, negotiation kind of thing. At some point though, people are not gonna have that power. Does it go down on a linear graph?

Joey Dizenhouse: So we've done this a long time and so we have enough data to, to be relatively confident with this. it's, I'd say more than, more likely than linear. It's gonna be stair. So as you, there's milestones, 50,000 lives is considered a big group, so you get some more value. You drop below 50, it probably dips a little bit, and then maybe 20,000 dips again.

Then 5,000 lives dips again. Two, 2000 lives dips again. And then it's probably much lower. But to give you an order of magnitude, we've brought on groups of 200,000 lives into our program, and still we're able to save them meaningful money, less money than we might save a small group, but still enough money to make it worthwhile.

In other words, the incremental value of using the sup, the support we can offer was worth it. But if you compared what that group got and what [00:25:00] a 5,000 life group got, it would probably be twice as much savings that we could deliver. and just as an aside, one of the things we do, right or wrong is, We like to give the same value to everybody, right?

The methodology we have is that our leverage, which is because of our members, creates the rising tide that benefits all ships and therefore we don't give a better deal to that 200,000 life group than we would give to the 5,000 life group that joined us. It's essentially the same program for all.

It varies based on some things, but it doesn't vary. It doesn't really vary based on size, at least not more than, say, 1% or 2% value, which is negligible. and we do it that way. We do it that way for our philosophical reasons, and it's served us well. And I rarely get a member complaining saying, why do I get the same deal as a smaller group?

It really doesn't happen. I think everyone appreciates the benefit. but at the same time, that probably means, to answer your question, we probably saved that 200,000 life group, maybe a little less than we might have saved them if we did tier our benefits. Right. we gave you a bit better of a deal when you got bigger, but we're okay with that.

and you know that ultimately, ultimately our objective is to save our members money and to keep 'em happy. And so, as long as we're doing that, then I think we're doing it right and we're less concerned about trying to please everyone every time. 

Mike Koelzer, Host: If you look at like the theory of evolution, you know how life came along and then the asteroid, killed the dinosaurs, and if the dinosaurs didn't die, the bigger mammals wouldn't be living and all that kind of stuff in the industry of pharmacy benefit managers and pharmacies and so on. If it had to be repeated, would it? End up kind of the same as it is now, or were there times where there was a big thing that happened, like PBMs had a chance to have, great expansion because, this law wasn't in place.

or it happened because one guy or gal was quite innovative and did this or that. Or when you look at it, is it like how selling lemonade would've gone just slowly, supply and demand.

Joey Dizenhouse: That's a really interesting question. I don't, I'm not crying for the PBMs, clearly. I mean, they've done very well and they've been, they've built a business model around the expertise that they have and their ability to insert themselves as a middleman. Right. you can argue, one could argue that the PBM is performing an administrative service.

By definition, they're administering a program. They're not taking risks in a traditional sense. So why should they be earning spread? Well, I mean, that's our philosophy and that's why we don't allow it per se. But it's how it's evolved. One law that's probably preserved things from getting worse along that great expansion was the prohibition on PBMs and manufacturers being co-owned, 


If you think back to the days of, of, of Merck Medco

certainly circa 20 20 0 2 ish, around when it split up, and, so that, that would've perpetuated the conversation. The conversation today might have even been, if that had continued, I might be saying, I might be doing something else and saying, I can't get any value, because even with 3 million Lives Plus, it's not enough to do anything.

Who knows? But. . I think another, another key ingredient,and maybe only peripherally related to your question is whatever laws are promulgated, whatever industry changes occur, consolidation, what have you, I think what benefits us all is preservation at all costs of the ability to preserve competition, right?

the value of competition, survival of the fittest in fair markets. Pharmacy has challenges with that historically, but I worry in particular about the long term viability of biosimilars here in the us. good success everywhere else. And we've been buying provider administered biosimilars for a long time.

Plenty of molecules have been around for a few years here. But on the self-administered, the patient administered side with adalimumab. Right now, it's an experiment that everyone's watching, right? Obviously, the drug has to be equally efficacious for the patient.

Interchangeability would certainly help, but at the end of the day, it's the same molecule. And if there isn't ample competition, what's gonna happen for the next biosimilar molecule? Right? I worry about not so much supply issues. I worry about not enough competition leading to less value for the end consumer, less value for the end, purchaser or risk bearer payer of the drugs, right?

And when I say payer, I mean the employer or the trust or whoever's paying for the drugs, right? Cuz these are self-funded programs. and to preserve that, I think education is really important. And now that an adalimumab is available, at least one biosimilar has hit the market a couple of weeks now.

It's going to be important to ensure there's [00:30:00] an education out there to preserve the value that comes from competition and otherwise. One thing we know for sure is when there is no competition for a product and the pricing has no limits, the pricing gets more and more expensive.

And I'm not picking on anyone. I'm just saying if I were selling widgets and I had no other competing widget makers and I was answering to shareholders, I would keep charging more for the widgets.

I, I can't imagine 

it any other way. What we need to do is make sure that it widget making is encouraged,

Mike Koelzer, Host: When I hear that, I'm thinking of, uh, lobbyists, greasing the coffers of politicians and manufacturers of course. 

, are those the right targets of people obviously not wanting a cheaper alternative?

Joey Dizenhouse: Well, it depends on the position you take. Yes. But you're right. the rules, right? The rules in this country preserve and protect the value of research and development, which encourages that investment, which is valuable for us. So we'll often have first access to many of these new and exciting molecules that improve quality of life.

But there has to be a financial overlay to this. It can't be at all. Eventually, if we develop a drug that will cure toenail fungus one day faster, but cost $1 million more per treatment, is that a good idea? That's an easier question to answer than a drug that, for example, will cure congenital blindness, but is $700,000 per eye.

And then you have to ask yourself, do you cover both eyes or just one eye? Very difficult questions will come up. So preserving competition on balance with that continued research and development, in my view, is the answer. But without some change, I think that's gonna be difficult because in today's day and age, and I don't pretend to be an expert here, but it seems like there's a whole slew of tactics in the bag to delay the launch of the generic, right?

The biosimilar, the pay for delay, call it what you will settle. But I think the adalimumab molecule is another great example of that, right? How many years did it take? How many years have biosimilars been available overseas, with interchangeability? So these are the conversations that are, it's difficult for plan sponsors to have a big impact, but they need to increase their voice because ultimately they are mega purchasers of these agents.

Right. and for the local pharmacy owner. Right. We're on a tangent because they're not gonna be allowed to dispense these kinds of products. Right. And this is another sort of challenge in the PBM space where the PBMs will lock into their own specialty

pharmacies. Right? 

And we've had some good success with opening that up as well.

So for example, any of our members that have their own pharmacies can use them, or if they have pharmacies they contract with, they can be considered for the 

network. But it is a real concern. if we're not, if we're not encouraging competition, . Even if one molecule's cheap, the next one might not be.

And over time they won't. None of them will be cheap enough. and we will have, I mean, pharmacy costs have gone up so much that if you include all pharmacy costs together, the going statistic is right around half, almost half or right around half of your total health care expenses are attached to pharmacy.

Right now, it depends on who you ask, but if you include all of the pharmaceuticals that are being administered through medical insurance, they're still drugs, right? They typically go through medical insurance instead of pharmacy insurance. But that's neither here nor there. you're approaching half, right?

and 20 years ago, pharmacy was5% of total spend, 6% of total spend. So it's not that long ago. And this is something we need to be aware of. And it's,I say it only because, we don't, my comment earlier about you, one must not just relax and feel good about the deal, have to continue to push.

That's because we have to think about next year and three years from now and seven years from now. And even the good deal today is not gonna always protect us tomorrow if we're not ahead of it and on top of it. 


Joey Dizenhouse: Yeah, lots to worry about. I don't sleep.

Mike Koelzer, Host: When I think about the pharmacy costs going up, I guess there's different arguments and I don't necessarily take any of 'em. Somebody's gonna say that, well, yeah, those have gone up. But look, hospital costs and long-term care and all that's come down because we're able to treat this with this drug instead of doing a lifetime in the institution or something that's gonna be one someone else is gonna say, no, they're expensive because nothing's really changed.

The manufacturers have just raised their prices. when you look at those figures, Joey, of the five and 50, where is that 45% difference?

Joey Dizenhouse: , so when you look at increases in cost, right? What we like to do is we like to, and we call it trend, we call it cost trend, right? We like to break it into three pieces. There's unit cost, there's utilization, and then there's what we call mix or intensity. So the unit cost is that the price [00:35:00] of, atorvastatin, 10 milligrams times 30 went up from $5 to $5 and 50 cents.

Utilization is over time. we went from hypertension as an issue to pre-hypertension as an issue. We started patients on a statin, a little bit younger. with better lab values. I think that's a good thing for the record, but more people use a statin, so costs go up from utilization.

Finally, you have mix or intensity, and that is just to continue my statin example. That is the notion of replacing all the folks on statins with PCSK nine inhibitors, right? A $700 drug to treat your high

cholesterol.and maybe it works better, maybe it doesn't. That's not the purpose of my point. It's just the effect it has on trend.

So if your calculation of trend includes all sources, not just pharmacy costs, but medical costs,

Then your comment about some drugs actually producing an incremental benefit is right on what used to be a lifetime of pain and difficult treatments and expensive treatments as replaced with a cure.


It's pretty easy as long as the money is about the same or even cheaper with the drug. That's easy. but those arguments don't hold for lots of different molecules. More, more commonly is,a new drug treating a non-life threatening condition that may be equally efficacious.

It may be difficult to even gauge cuz of indication based differences. The only real difference is that the drug is a thousand times the price to treat the same thing. And this is back to my point about at some point it gives because the plan sponsor can't afford to do it anymore and the pharmacy trend just keeps going.

So this is where. A good contract with the PBM back to that contract gives you the flexibility subject to the clinical rules and the p and t committee and all that good stuff of making sure that patients really do get exposed to what's cheapest and prescribers get exposed to what's cheapest. Most prescribers just have, they don't know.

They don't know which insurance covers what, when and how. So how are they supposed to know this drug is cheaper for the patient and cheaper for the plan? They don't. So educating them has to be an ingredient to this, right? And so we do that through technology that's made available to patients and to prescribers, to their emr.

Just to tell them, did you know, like you're, you're putting into the, to the pathway, atorvastatin 10 milligrams, which would be probably the cheapest already, but did you know that you've got Simvastatin, right? And you've got Lovastatin and the same class.

Right. Or even the same molecule, different manufacturer. Right. Trying to help. Right. And that's, you've got a lot of that sort of growth in the industry, right? A lot of third parties coming out there to try to grow transparency about pricing variations, which, I have to say, I another area where I feel for the independent pharmacy, cuz it, these, I'm not gonna name names, but these, like third party card,companies that, will advertise to patients where the drug is 1 cent cheaper, but it's a different Mac list for everyone, right?

Different drugs. And so it forces the pharmacy to try to do lost leaders to compete and pay the third party for the volume. And, again, it's just another thing that makes it harder on the independent pharmacy.and I just don't see that going away. 


Mike Koelzer, Host: So Joey, what you were talking there, I think in the pharmacy side, we know that as kind of a step therapy, you've gotta try this before you can try that and so on. At some point, those are decisions they probably make with you, right? That we're not gonna cover this thousand dollar toe fungus prescription , those are decisions they're making with you. and that's that, right? They just make those, I'm sure they're fallout from that because eventually, an employee could say, Hey, Sally and hr, two years ago it covered this 

and now it doesn't. Those are the plans the sponsor has to make.

Joey Dizenhouse: yes. The decisions that the plan sponsor has the ability to make, right? So they can simply take the shelf program, right? That is still a custom that we've designed to help be efficient, but we also don't want to tell the plan sponsor what to do. So we have a whole menu of just a la carte things on how to handle certain classes, how to handle, prior Roth step therapy, quantity limits, something, what we are mindful of, what I'll call hoarding. Your listeners are very familiar with refills too soon, right? And some, sometimes that's mandated by the state. Other times it's mostly, it's just about people kind of filling on day 25. So they accumulate over 

time, right? , 

it doesn't matter so much when it's a cheap drug, but you wouldn't be surprised by some of the drugs we've seen filled, maybe you wouldn't be.

you might teach me about some of those, but we see it all the time Now. What we have not just refilled too soon, edits, but we have cumulative refill too soon

edits so you can't get five days early for a got two months supply in your pocket. So we cap you, I think [00:40:00] it's at 18 days, you accumulate 18 days in your capped.

and so that's gonna help avoid wastage.

 We have a program, for example, that doesn't penalize the pharmacy. It doesn't penalize the plan, doesn't penalize the patient. But if the patient is starting therapy for a drug that is known to have a high abandonment rate, you are new to therapy, like kinase inhibitors, oncology.

So in that space. So instead of filling for 30 days , they take it for 10 and stop. for the first period of time. they fill it 15 days at a time, but they don't penalize 'em for it. They don't charge 'em double or you lose money and the PBM keeps something. It's just for the benefit of the patient.

and we think that things like that help without hurting anyone. It's just helping. And then there's some other things that, to your point, somebody may not like, but you also said, and I think correctly, that people are used to things changing in their insurance over time. So how much noise do they really make, even if they are, if they realize that this drug was covered and now isn't, it's never in lieu of nothing.

It's always, there's always an alternative. We'll, never, we'll never allow or advocate for a class,to, uh, an essential class of drugs to just be excluded. Doesn't work that way. It's just a matter of do you cover the $2,000 therapy at all, or do you cover it only after stepping through a few other agents, Or what have you.

We just make these tools available for our members and their advisors who are usually weighing in on these decisions. and then back to the bigger picture, the PBM doesn't always want to allow that to happen because there's some incentive for them to keep that $2,000 drug on, but they don't make the call for our members.

We make the call and administer it with them. And so that allows us to preserve the maximum value that's possible. And, we don't get a lot of noise, Mike, really? If plan sponsors were getting a lot of calls from their employees complaining about this drug or that drug, it wouldn't happen as easily.

you back in the early two thousands when you're non-sedating antihistamines and your proton pump inhibitors and your hmg, there were no generics, right? There were just. Four brands that competed for volume. And so there was, those were the days where if you cut one out, people got mad cuz they were told to switch products.

That's not so much the disruption that we see anymore. It's more about people not wanting to jump through hoops to get the drug that they want or that their prescriber thinks that they want or wants them to have. So education goes a long way just to understand the cost. And back to my earlier comment, if the prescriber knows that they wanted to write drug number one is 10 times the cost of drug number two, three, and four, knowing that, and their reaction is, oh, I don't care.

Drug two is fine. I didn't know drug one was 10 times as expensive. It solves the problem. and no one is unhappy. that doesn't fully solve for the situation where the employee has seen the commercial. 

Right? They've seen the jingle for that product that they want and their friend is taking it.

and so you can have a little bit of noise there, but if the drug is $5,000 a month, shouldn't there be some level of management to ensure the patient both really needs it and will really benefit from it. If they're not gonna benefit from it, they still have to pay some of that 5,000 too.

So this is how we think about it.

 There's always a process, right? So there, you know, there's always a medical necessity review. So sometimes it can be a little bit too harsh, where 99.5% of the time by not covering a drug, you're solving the issue. But that other half a percent, one in 200 people who need, who are written it actually need it, right?

So you don't really cut them off from it. 

You just,

 you have a medical exception process that you can go through. But it's important that the process be managed correctly and not be a rubber stamp, an extra sort of hurdle. But once you complain, you get it. You have to actually need it.

So that's another thing that we do, and probably why we don't get a lot of noise, is because those who truly need it end up getting it. I like to think so.

Mike Koelzer, Host: From like 2015 to 2020, I wasn't around the pharmacy a whole lot. I was sick of the PBMs and we were losing money and my staff was too big, and I kind of buried my head in the sand a little bit. When I came back, I thought that I entered a different dimension, and here's why. Because I went to the doctor for something. I forget if it was a migraine medicine or whatever, and I had one of my team bill it for me, maybe to try it, and it said excluded not covered. And I think it was the doctor then asking me, or maybe it was someone on our team, they're like, did you ever start that medicine?

No, it was excluded. it wasn't a prior authorization, it wasn't step therapy, it just said excluded. And they said, well, that doesn't mean anything. Did you get a double exclusion or something like that? . I had to get like a, until they give you like a double No, it's still possibly a yes, kind of thing.

And so there's these new vernaculars 

Joey Dizenhouse: [00:45:00] You're right. It is, terms aside, there is some element in a typical program of, the mechanism is there to deny, to filter out the, it's like the shoebox effect. if you force people to have the receipt to get reimbursement, a lot of people will put 'em in a shoebox and forget.

A lot of people are gonna give up and avoid confrontation and not, so those who are willing to embrace. and make a little noise. Sometimes that is enough. But , let's just go into your example a bit, and I'm gonna, I don't want to collect any phi from you, but I'm, let's look at those new, monoclonal antibodies for, for chronic migraines, right?

That class of products. And you've got several, you've got AMA Vig, you've got Advi, you've got Emgality. There's several in there because they're part of that same class. what a lot of PBMs will do is there's four of them. they'll cover two and exclude two, and what they do is they then go to the manufacturers and say, okay, I'm only gonna cover two.

How much are you gonna gimme back? And that's that backend money we talked about, not front end to the pharmacy, per se, backend money that the PBM sometimes keeps a piece of, not in my deal, but in other deals, they keep a piece of it. And so it could have just been, in your case, if my hypothetical is right, it could have been just as simple as the pharmacist.

Calling the, calling the prescriber and saying, I'm making this up. Legality is excluded, but is Aim Avi covered? Right. or trying an aim, Avi claims, seeing it's covered and then getting the, the, the prescriber to rewrite it and then you end up with a different product that's in the same mechanism of action.

That could be what happened. And that's happened increasingly over time where formularies will not just require clinical steps or edits, they will exclude products from coverage. But again, there's always a medical necessity sort of approach. It doesn't happen often, but there are patients who will try and fail three drugs out of the four in that class.

And for some reason, the fourth one works for them. There are some bizarre things like that happen and you don't want to ne you don't want to. I mean, in that example, I feel terrible for a person who has to suffer. 15 migraines a month would be just terrible. And if you can drop that from 15 to seven, that's like doubling their life, right?

 So for me, things like that are where you gotta make sure, even if you can't explain why, if it works, do it. and forget the cost. There's productivity benefits. That person who's got that many chronic migraines is gonna be very difficult to be productive at work.

And even when they come in, they're not gonna be doing very much. They'll either be absent or they'll be present but not working, which we call presenteeism, right? and so they're gonna be miserable too. poor person, be miserable. So helping them might actually save the employer money in a different way there.

Not because they spend less on healthcare, but because they get more out of the


So you gotta think about all these things, 

right? It's gotta be a factor.

Mike Koelzer, Host: Is there a hard no? Are there times when somebody is gonna come to the plan and say, look, I'm allergic to these three, this drug, you've never done it. It's Off the list and all that stuff. Is there potential always for room 

Joey Dizenhouse: Always, 

always plans have to offer appeal processes 

has to be Right. And there's multiple levels of appeal

Mike Koelzer, Host: That must have been where mine was. it's excluded, but not yet, Or not fully yet. 

Joey Dizenhouse: Could be. Yep. And, there's multiple levels of appeal including, what's called IROs, review organizations, plans have to require, And, in, in many cases there are external last level appeals done by independent groups that go ahead and,and review the cases to make sure that way even the PBM is not concerned, that there's the perception that they're denying something that somebody really needed.

So they'll use a third party to do it. and so that there's, there are ways to get at the drug. I feel pretty confident in saying that when a patient really needs the drug, they get it. Now, if you've read the news lately, there have been some really heartbreaking stories out there, published by a couple of insurance companies denying really, j code products that are really needed infused.

but this is, we're not talking about that here, right? I mean, that's the insurance company making a

decision, right? Here, the plan sponsor has control because they're the, they're, they absorb the risk. So they have some ability to influence things, within reason. And so we don't, I mean, I don't have any stories like that in, 25 years of doing

this. so I feel comfortable saying anyone who needs a product gets a product. Just the patient might view they needed the product and they didn't. That's hard to deal with, but it doesn't happen that much.

Mike Koelzer, Host: Joey, let's say you could take any position, either private sector, public sector, you could be the president, you could be ahead of, a pbm, you could be c e o of Twitter, whatever it is. What position would you take in order to make that change? 

Joey Dizenhouse: Such an interesting question, Mike. I really do think that the answer is the job that I have, and that's kind of, kind of funny, but I really like what I do, my [00:50:00] entire existence and the amazing team we have here, we get up in the morning fighting back against, the perils of the industry.

I'm not picking on anyone in particular, but the difficulties in getting to that lowest net cost and all the dynamics of the industry, new products and patents and everything. And so not only do we get to fight back, but we get to, I guess we get to be righteous because we get to do it. We get to make a difference.

The only part I hesitate on is, for the three, 3 million plus lives that we help, there's hundreds of millions that we're not at least helping that much. And there's a limit to how big we could get. I mean, realistically, I think we can get a fair amount bigger, but not to become half of the country, so to speak.

So that's the only downside in hesitation is I'd like to be able to do what we do for even more groups and we're growing, but not when you think about the country as a scale and would like to see us do it at a bigger level. And I'm trying to think if I could come up with a role where we could do that at a bigger level.

But even as the president of the pbm, that's a job that has the ability to be righteous. And I'm sure the right person in the role will do that job well. And I do know of at least one or two people that do that job well, thinking about the patients too. but, at the end of the day, you gotta answer to shareholders too.

and my role is not about answering to shareholders or corporate profit objectives. It's about saving money.

That's a, it's, that's the whole purpose of what we do is save money. And, and all of the companies that own us are also in the program, so they save money too. 

So it's just a win-win. Uh, so I, I, I answer, I answer. I'm already there.

Mike Koelzer, Host: Joey. So someone's listening to this and they're the HR or the leader of a local bank or something. Or let's say there's a pharmacist whose spouse does this or that. How do they come across you and how do they not come across? Do some of those people deal with brokers, do some deal directly with PBMs?

Where do you fit into that?

Joey Dizenhouse: Yeah. And the answer is yes. some will. Some organizations will work directly with PBMs. Most will work through an intermediary, an outside party that they've hired to help them run their trap, so to speak,

to look at the PBMs. 

Mike Koelzer, Host: Would that be an individual person that's a broker?

Joey Dizenhouse: So the industry has a number of terms. Consultant, advisor, broker, I use them interchangeably, but some firms will take offense to one of those terms based on some legacy



the purpose is to help provide expertise to support 

the client, the company. But so we will work with companies directly. They'll call on us, their brokers will call on us.

Mike Koelzer, Host: It's not necessarily one way, it might be some connections and sometimes it might be one connection, sometimes it might be three.

Joey Dizenhouse: That's right. That's right. and so The broker may listen to their client and say what you're asking for. I think I already know where to get it for you because I know of this deal over here that we've used before that's really strong. or the group knows us. and we haven't done a lot of, sort of public advertising of who we 

are, which,

I think we've always been a little reluctant to sort of, sort of toot our own horn, so 

to speak. But we've come to the realization that if we can help groups, it's better for us to get our message out and at least make sure people have the opportunity to know who we are and decide if they want to look at us or not. Versus right now or historically,a random organization probably never heard of us.

So, any organization that's interested can reach out to us,through our website. certainly welcome to Call me or anyone on our team directly. and our website has profiles of our leadership team, and I'd appreciate that. we're just happy to help, even if it's just to provide information.

Mike Koelzer, Host: Joey, thanks for joining us. It's. Really interesting to see all the different facets because,as pharmacists, it's easy to sit there and throw arrows at everybody. We need to narrow down the target.

, we can't, we've gotta get more specific here. Now. It's fun to see everything and see how the puzzle goes together. So thanks for your time. Thanks for your good work and I'm gonna look forward to the following. See what you guys are doing.

Joey Dizenhouse: Well, appreciate that. Mike. Been a pleasure. It Was a pleasure being on your program. and I think, role of the pharmacist is just so critical to this. and in more ways than one there is of course the most obvious, but there is the financial acumen, right?

There is the business aspect of that where clinical and financial meet together. That is the core of what we've been talking about today. And so, I hope maybe some of your listeners might be intrigued by some of what we've talked about today because there can never be enough quality Pharm Ds in the business side of this.

There's just so much opportunity out there. 

So thanks so much. 

Mike Koelzer, Host: All right, joy, we'll talk again. Thank you.

Joey Dizenhouse: Thank you.