Traditional PBM Disruptor | Nathan Gabhart, CEO, TrueScripts PBM

Transcript Disclaimer: This transcript is generated using speech-to-text technology and is intended to capture the essence of the conversation. However, please note that it may contain multiple spelling errors and inaccuracies. It should not be relied upon as an exact or comprehensive record of the discussion.

Nathan Gabhart, TrueScripts: [00:00:00] Um,

Mike Koelzer, Host: you're listening to the business of pharmacy podcasts with me. Your host, Mike Kelzer.

Well, hello, Nathan. Hello, Mike. How are you? I'm doing well. How are you doing? 

Nathan Gabhart, TrueScripts: I'm doing great. Thank you. It's a pleasure to be with you tonight. Thanks for joining 

Mike Koelzer, Host: us, Nathan, for those who haven't come across you online, introduce yourself and tell our listeners what's going on. Why are we talking? 

Nathan Gabhart, TrueScripts: Sure. So I'm a pharmacist by trade.

I used to own some pharmacies in Indiana and now we own a PBM. So I'm the founder and CEO of true scripts. And we've been in the PBM industry now since about 2006. 

Mike Koelzer, Host: Tell our listeners, how we met and we're meeting for the first time right now. But I had, uh, a friend at school at Purdue and a, uh, a fraternity brother and a fellow pharmacist and so on.

And he reached out a few weeks ago after I had Eric Pacman from 46 Brooklyn on, and he said, we're going to be talking to Eric and so on and how the podcasts go. And I said, oh, well, it was good. I said, I don't have it ready for anybody to listen to yet. But basically we talked about this and that. And I said, Eric worked on wall street and.

He was talking about the old days on wall street, how you had a lot of corruption and you had the banks writing good stuff about themselves in the press to get people to buy those stocks and things like that. So Eric was saying that the corruption on wall street was nothing compared to the corruption of the PBMs.

And I said, so that's what we talked about. So I had lost track of where Ellen was and he said, oh, well, I worked for a BBM. And I thought, oh, I just stuck my foot in my mouth. But then he said, Mike, you're talking about the traditional PBMs. We've got something different here. And I said, ah, I'm going to talk to someone there.

Who do I talk to? And he said, we're going to talk to Nathan. I said, perfect. I want to get Nathan on here. But that's why we're talking is to find out. What is a good PBM? Is there such a 

Nathan Gabhart, TrueScripts: thing? Oh, sure, sure. Mike, it's certainly a lot to unpack. There. There was an independent pharmacy in Washington, Indiana.

The three brothers ran and they were third generation pharmacists and just great guys, um, are still considered brothers today. So they saw something in me and brought me in and said, look, you come on board, we're going to put another pharmacy down in Princeton. And that would have been our third pharmacy.

And then, and then it really started to explode. And then as a retail pharmacist, I love the customers. I love the interaction. Testing new jokes on different, different people. And I just, you know how it is you don't farm to CCS, mostly, almost all, not all, but almost all that we need walk in. And there's a few that are really special to you.

And even to this day, I haven't dispensed a prescription in 10 years, but, um, so we saw it firsthand. It really started back in 2000, 2001 when the anthrax was being mailed to all the politicians, the white powder and the envelopes and Cipro was the drug of choice. And Cipro went generic and became pretty much a $4 drug at Walmart.

And then a new drug came out called pro Quinn and pro Quinn was just a specially coded Cipro, but it was $500 instead of four. And we had some PBMs who were rejecting the generic and requiring the brand and were the ones buying it, right. You know how much this stuff costs. And we sat in then, and then we knew there was a problem in 2002 or three or whatever it was.

Um, the merger started to happen and the CVS care mark deal and the maintenance choice and that funneling of business, uh, to the pharmacies that they want. It was just an extreme conflict of interest. And 

Mike Koelzer, Host: Nathan, just for the listeners that may not be right in the jungle of pharmacy. It's like, you're sitting there saying, okay, wait a minute.

This drug costs $4, but the insurance doesn't want us to dispense this. They want us to dispense something that costs $500. Okay. Somehow they're getting kickbacks 

Nathan Gabhart, TrueScripts: and a hundred percent. And it had the exact same chemical molecule in both drugs, identical Cipro, pots, foxes, and hydrochloride, and both molecules.

One was a specially coated tablet. So I guess if you had to or problems swallowing, but none of my patients did. And if you did, you could, you could figure out a way to swallow a $4 tablet that's for 30 of them. So we knew firsthand that something was wrong and we knew the writing was on the wall that these PBMs who are supposed to be these fiduciary agents, in my opinion, should be protecting the client and the member.

And in full disclosure, there are some bad pharmacies out there too. And so PBMs should be protecting the clients and members. From the drug manufacturers and from the bad pharmacies [00:05:00] and they weren't doing that. And it's the only industry in the world that despises the laws of mathematics. 

Mike Koelzer, Host: What would a bad pharmacy be in your example?

Who would they be protecting 

Nathan Gabhart, TrueScripts: against? Oh sure. Oh, so in the compounding pharmacies out there who are charging $50,000 of a claim for a pain jail, that should have been about $20, should have been, say, call it $75. Let's get dispensing for you there. 

Mike Koelzer, Host: The PBM could kind of be watchdogs and say, Hey, we're going to put some limits on this.

Nathan Gabhart, TrueScripts: So on. Yeah, they could be the watchdog and some pharmacies are out there. Obviously they got drive revenue. So they're trying to generate as much revenue as they can. And some pharmacies are trying to convert patients from, from generic over to brand because the dollar per prescription margin is higher.

Yeah. So that's what I mean. And we just wanted to use common sense. And fifth grade math is really how we built this huge company that we have now with the 

Mike Koelzer, Host: brothers. Then how many pharmacies did you get to that? I think we had around 

Nathan Gabhart, TrueScripts: 12 and some of them were medical equipment only by way of between 12 and 15.

I read nursing home, home infusion, compounding and retail. 

Mike Koelzer, Host: You started noticing some, some of these shenanigans going on? We did, yeah. 

Nathan Gabhart, TrueScripts: We were seeing firsthand some of the shenanigans going on and we saw the writing on the wall with the vertical integration. And when the PBM started buying pharmacies, it was the Fox guarding the hen house.

And so therefore one of the brothers and I just still, you know, over, over a drink one night, I said, look, let's, let's try to do something about this. So this is how long after 

Mike Koelzer, Host: you had joined the three brothers originally. So 

Nathan Gabhart, TrueScripts: I joined in 98 and then this would have been probably an oh 4 0 

Mike Koelzer, Host: 5 0 1. We're seeing this, the Cipro problem and that, so this is a few years after seeing all this baloney going on.

Nathan Gabhart, TrueScripts: So one of the brothers and I, we had the idea, but we didn't know how you did it. Right. We knew why we knew that. But we didn't know that. So one of my neighbors was an HR director and he said, look, Nate, if you're a, if you get your PVM stood up on the one of your first clients, so what he was able to provide for the first time up to that point was he was able to provide these, his invoices from, um, express scripts.

And so here's thousands of claims that he was being billed because of the way the system works as the PBM that you indicate the claim, then they build. They get, then they get paid and then PBM pays the pharmacy. So they're the intermediary pharmacy and the client never knows what each other is getting.

So I was able to take his invoices and go and find my checks that express scripts paid. And I was able to put them side by side. And there was a case with Mike, where he was charged $800. I paid $100. He was, I mean, overall that they don't do that on all claims, but I added all of the claims together and it was an average of $15 a claim.

Then that was back in 2006, 

Mike Koelzer, Host: $15 a claim difference that they were 

Nathan Gabhart, TrueScripts: getting the spirit of spread pricing. And that is a factor in the rebates. That's just what they were overcharging the client and keeping for their profit, 

Mike Koelzer, Host: the buyers of this service. And if they're like me, I don't know what the hell is going on.

Anyways. As far as what I'm supposed to have benefits, I'm supposed to be getting from different things, but what did they think was happening to your friend's business? Did he think he was paying a certain percentage to the PBM? What would it be like if he was being treated well 

Nathan Gabhart, TrueScripts: by them? It's the most finished educated product sewed in America.

So what I mean by that is the broker comes in and basically the insurance broker tells the client, you want to pay a Mac plus a dollar 50, or do you want to pay Mac plus a dollar 80 and the client says, well, I want to pay Mac plus a dollar 50. Then you go back to the client, say what's Mac.

And they said, I don't don't really know what it stands for. Score. Let alone that it's just a made up number from that particular PBM. And most PBMs have five or six different Mac lists. So they were 

Mike Koelzer, Host: getting the same Mac BS as the pharmacists were getting, oh, 

Nathan Gabhart, TrueScripts: 100% in one, they weren't even getting the BS because the broker was just saying, Hey, this is the right thing.

You know, nine is less than 10, so you want nine, right? So then what happens on a weekly or bi-weekly basis? All that the client sees is one line item with their total medical expenses, and usually it's medical and pharmacy, both, both combined. So it just shows $47,000 is, was last week's medical and pharmacy expenses.

They fund that account and that's all the detail they give. And your 

Mike Koelzer, Host: friend have all those details from owning that business 

Nathan Gabhart, TrueScripts: express scripts sent him the actual invoice, but the way it works tradition, that national discussion, he was very particular. 

Mike Koelzer, Host: He might've asked for us, show me more, show 

Nathan Gabhart, TrueScripts: me more Mo most clients use to set up a medical account and they simply draw out of that account and you get one line on them.

You don't get any detail behind 

Mike Koelzer, Host: it. He pushed for that probably back then when they were still probably offering 

Nathan Gabhart, TrueScripts: it, he pushed it. And I told him the information I needed. So he reached out and got the information I needed. Wow. I'm sure I violated several different covenants as far as you know, how it is that the [00:10:00] PBMs make you sign an 89 page, they take everything except your kids.

They leave you with the one thing that causes you headaches. So I might just take the kids to IRS and I might even 

Mike Koelzer, Host: do that school just started up and I got a couple that are, or one that's just, just, uh, 

Nathan Gabhart, TrueScripts: we've got a trade. And then maybe someone told you there's people in this world that are praying for the things that you're complaining about.

Mike Koelzer, Host: One of the lines. I heard that at 30 people are in a circle and you all, through your problems in the middle, you would all probably take your own back. You know, you just know them, they're yours. So this guy got the information. And so three years later you had. Partners you say we've got to do something, so yeah.

So you didn't know how, but your neighbor helped you out. 

Nathan Gabhart, TrueScripts: He was an HR director, so we just basically got online and just started researching and we found, uh, a great fellow, um, um, his name's verse McAnally. I went though his name out there and, uh, just great texts and a Southern accent, just the sweetest guy and is willing to share and share and hear everything.

So, he educated us on what we needed and we just learned from there. And then on this shows how little we knew our first client came on September 15th, 2007. So it was the middle of the month and it was on a Saturday. And we did that because it was our lowest pharmacy volume day. And we knew, we knew we could watch the claims come through.

So, um, and then we were off to the races after that. You, you still have these 

Mike Koelzer, Host: pharmacies, 

Nathan Gabhart, TrueScripts: so I still had the pharmacy. So we're still doing the PBM, um, on this. And then, um, and then that started to grow. So then I was the co-founder and CEO of the PBM, and then I was the VP of the pharmacies. And then, it was 2007.

So I basically helped grow that PBM and bring it, hire the folks and, and develop the programs. And then, uh, make a long story short, you know, 2010 is really when I really started to, um, find my personal faith a little bit more. And I've never been like a Bible Thumper by any means. And I always thought growing up, we never won one.

We never went to church cause me, we live paycheck to paycheck and I thought people were just born religious. Um, inside I went to a retreat at church after two or three years of saying, no, it's not for me. And it absolutely just to let the light where these men, that I had a tremendous amount of respect for, or share on their stories.

And, and it was just like, So that was in 2010. And then, um, I got, um, built relationships with a different group of men and to this day or who are my, who actually, I, we, we went out a little mantra last night with some of them. And so, but what that did though, is that made me start to kind of drift away from the brothers a little bit because philosophically and morally, we just became a little bit more and more different.

Sure. And then in 2013, a number of things were occurring. And, and I, and I knew to be a completely transparent PBM. Uh, we couldn't be owned by a pharmacy. So I made an offer to buy out the PBM. They declined and they bought me out with no strings attached. So I just spun off. And the majority of the clients and the members came over with me.

And, um, we started at zero. I mean, we lost a lot of money for the first year, and this year we'll process about $200 million of top line revenue. And we've got clients and members in all 50 states. 

Mike Koelzer, Host: Business-wise you offered the brothers that you would. Buy out your co-founded PBM and you were going to buy that out and leave the pharmacy 

Nathan Gabhart, TrueScripts: basically split off from them at that point.

And 

Mike Koelzer, Host: They said, no, we're not offering the PBM to you. 

Nathan Gabhart, TrueScripts: Yeah. We had a golden goose that I'd helped create in, in, into their, you know, fairness to them. They had a golden goose. And the PBM, because it was such low overhead. Why would we want to get rid of this? And I was like, well, it's supposed to be my baby. And it's my program.

It's my team, my clients. And, you know, as I just feel like it should go with me. 

Mike Koelzer, Host: So, but they were saying, no, it's at least 50 50. And we were 

Nathan Gabhart, TrueScripts: basically all 25% owners. And then once I've always been pretty good at math. And then once I looked at that, I said, okay, I'm kind of the odd man out. Yeah. 

Mike Koelzer, Host: Because it's 75, 25 then.

And you had that set up originally. I mean, you knew you were only going to be 25% of that. 

Nathan Gabhart, TrueScripts: So when we first started the company, we didn't have any operating agreement, no business documents. So anything for the PBM yet for the PBM, we literally ran it like an elimination stand, cause it was just a philosophical mission.

And then once it started to take hold, we said, okay. And then, you know, again, uh, for full disclosure, they decided on their own to take that under their own. And uh, they created all the documents themselves without EMI involvement. And, and they came to me with the final product and I said, look, timeout here.

This is, you know, my company. Um, I should have been involved from the very beginning with all that. 

Mike Koelzer, Host: That's when they went to 25 

Nathan Gabhart, TrueScripts: each, we were 25 HR ready? 

Mike Koelzer, Host: Almost like their handshake thing. You were all 25 each already. 

Nathan Gabhart, TrueScripts: We had the stock agreement with no operating. 

Mike Koelzer, Host: I imagine when the PBM forms, you're not really thinking much.

And you [00:15:00] almost like to do it on a card table right next to the counting machine or something. Right. It feels like it's just part 

Nathan Gabhart, TrueScripts: of everything. Just like Dave Ramsey. When he started his financial piece on the card table, in his living room, there was no goal. We're done for a philosophical mission. We were going to be willing to expose the bad guys, 

Mike Koelzer, Host: But in their mind they were being met, it was in their store and things like that.

They're thinking it's more theirs in the end 

Nathan Gabhart, TrueScripts: somehow. Yeah, I think so. I think they were just looking at the ownership and set of 75%, ours, 25% yours. And, you know, we all created it. Really two of us did. And at the end of the day, the, the ownership, um, Fit 75 is more than 25 and it philosophically, I just, uh, some of the brothers, you know, and I prefer getting along less, um, less better than, and then we, uh, we needed to part ways it was 

Mike Koelzer, Host: time.

So then when you left, were you like screwing my 25%? Did you get 

Nathan Gabhart, TrueScripts: anything from that? Oh, they bought me out. What was crazy about this? They'd bought me out, gave me a pretty hefty check over the next three years. Well, they did because they had two cars. I owned, you know, I wasn't a part of the pharmacies.

I wasn't a part of the PBMs. And I think it's really where some Eagles of the, some of the brothers got in their way. They thought, you know, this, this poor kid from the west end of Washington, let's see. What's he going to be able to do on his own? Let him go. 

Mike Koelzer, Host: How did they put a value on the PBM at that point?

So, 

Nathan Gabhart, TrueScripts: yeah, typical fashion. They just kind of shot from the hip a little bit. So they got on, they got online. Yeah. Actually, the interesting story is, they got online and found a price per recovery life. And then they came in and said, Hey, this is the price that we should pay you. And I said, no, it was like the price wasn't right.

And it's like, it's, it's too high. I wouldn't buy you out for that price. And I don't expect you to buy me out. Really. I lowered it and, you know, took it, especially the first year because we didn't get paid the salary for the first year, but it just wasn't. Right. So I tried to protect them to the very end.

Mike Koelzer, Host: So then you start this thing off on your own. Now you're without a pharmacy job, because I imagine you're not working in the pharmacy. Once you went on your own, that's gotta be a little bit of a scary time, but I suppose you knew that some customers would come over with you and so on. 

Nathan Gabhart, TrueScripts: Yeah, I, I did, obviously.

I mean, this has gone on since August of 13 through December of 13. So, a number of folks knew I was transitioning out. And I, I owned most of their relationships and they were, they turned into personal relationships, which are the best kind. And, and to this day, um, I, we don't, I don't want to come across that.

We select who we want to work with. Yeah. But, if someone is. Um, it doesn't share the same core values. We do. We don't work with them because we don't care how much money we make. We truly don't and growing up on welfare, I've got more money. Now, whenever I make six figures as a pharmacist, I make it.

Right. So no matter how many more decimal points it is, bringing more attorneys and more CPAs is all that does. So when you 

Mike Koelzer, Host: say you own the relationship, you mean emotional wise that these people knew you better than the 

Nathan Gabhart, TrueScripts: brothers. There was no contract, nothing like that? No. You 

Mike Koelzer, Host: knew they'd come with you 

Nathan Gabhart, TrueScripts: instead of staying with them.

I built the relationship. I was the face and voice, uh, of, of, of, of our company. I attracted enough people and who were consumed, saw me for who I was and, and they, they trusted me. Uh, and I'm sure I repelled. So some people are too open, right? And I'm not a sales guy. I just like to share with people what I know and I like to learn.

And I like to, um, I like to make things better. What are you feeling like 

Mike Koelzer, Host: That first month? Would it be fear? Would it be exciting? Would you wonder what was the main, like psychological feeling in your head? 

Nathan Gabhart, TrueScripts: So the, the main psychological feeling I had in my head was would some of the existing vendors that I had used in the past would work with me?

And once we were able to confirm that, then everything else was here. The vendor being all the folks we use, it'd be like your, your drug wholesaler, your, your vial. So we'd have a claims engine, a rebate aggregator. And those were the big two, our claims engine and our rebate aggregator. What 

Mike Koelzer, Host: What the hell does that mean?

Tell me what are those? 

Nathan Gabhart, TrueScripts: The claims. So it's like, so your pharmacy systems or as a pharmacy system. Um, so it's like a QS one system. So QS one, your pharmacy operating system is the brains of your operation. Yeah. So that's what our claims engine is for us as a PBM. So as these vendors that you can lease their claims engine, truly a 

Mike Koelzer, Host: computer program and so on, 

Nathan Gabhart, TrueScripts: so to speak.

Yep. So basically they give you access to their system and then you just wrap your programs, your plan parameters in how you want things done around their end. And their engine makes all the magic happen. So the pharmacy network, you can, you can, you can lease or create your own, [00:20:00] um, the, uh, pharmacy help desk, same, same thing.

Uh, we did all the members and all the client care on our side. And then basically you just have third-party vendors that work for you, that do more of the pharmacy administration and pharmacy contracts, pharmacy payments. And we have simply hired someone to do that. 

Mike Koelzer, Host: Okay. So like, when I think about my pharmacy system, we use it for obviously the database and all that kind of stuff.

But nowadays it's mainly to talk to the people that are going to. Pay us the third party who's on the other end of this pharmacy aggregator you talk 

Nathan Gabhart, TrueScripts: about. Yeah. So there are several of the marketplace that you, that you can use, or you can create, create your own. Once you get enough volume. And that's where we are working towards is what we'll have our own, our own system.

But right now it's just much more efficient. So, there's a number of these claims engines out there. And so relay health controls like the, the, the, the highway, so to speak that all these claims go down. So when you submit a claim, you have a. Uh, a bin number and a PCN number. Well that routes P relay health routes, that bin number back to the owner of that in number.

So that goes to a particular claims engine. So that's basically what it says, take a left on highway 41. W or 69. So it's just basically just your, the roadmap. Nathan, 

Mike Koelzer, Host: let me see if I got this right. There's a pharmacist. Let's say they're working on QS one, basically QS one is talking to your claims computer sorta.

Exactly. So it's a way to 

Nathan Gabhart, TrueScripts: merge. Give us once talking to relay health. So greatly healthy is typically the, the intermediary that controls all the 

Mike Koelzer, Host: claims. Really how Fenn is communicating with your computer, with all the different VIN 

Nathan Gabhart, TrueScripts: numbers, all the different bin numbers. There could be a thousand bin numbers out there, and 

Mike Koelzer, Host: then someone at your place physically on like this screen looking and seeing what relay health has told you through this claims program.

Nathan Gabhart, TrueScripts: So what we do, we set that plan parameters up in our system. We do a tremendous Q. The checking. So once we get the plane parameter set up in our system, which is our claims engine, everything's done automatically. So whenever you hit and submit that claim in about a half a second, about 200 things are transacting, and then you get your response back.

Gotcha. So what happened in that half a second is I went to relay help and it hit our system, hit our plan parameters, and then we returned to you what the deductible amount is for that member. Cause you sent the member ID, that group number of the birthday, the person code. So they were hit against our system.

And then we then interface with the TPP. Who processes the medical claims. And we have an accumulator file that exchanges claims back and forth so that we can track deductibles. 

Mike Koelzer, Host: You had said two things. One was the claimed one. And what was the other thing that you said the other a 

Nathan Gabhart, TrueScripts: rebate aggregator, which is one of the most disgusting parts of the industry, but let's hear it.

So with the rebate aggregators, obviously these manufacturers know the game. If. Uh, and again, obviously take it with a grain of salt. But when I say that the prescriber does not determine what the patient gets, I'm not being literal, but the PBM does determine what the patient gets. That's the reality.

Mike Koelzer, Host: What do you mean literally? I mean, you mean the doctor sorta does, but the PBM really has the 

Nathan Gabhart, TrueScripts: same. I mean, this is a practical question to everybody who's ever gotten a prescription filled. If your drug was not covered, who has voluntarily pulled out $450 and just paid cash for that drug or who calls their doctor and says, well, what's covered.

Gotcha. So the PBMs control what's preferred and what's non-preferred, and there's this inherent belief that, well, they're looking at the most cost effective product for that patient, the right drug for the right patient at the right dose of the right time. And, and I'd say in most cases, in many cases, that's.

But in some cases, they can obviously drive volume to a certain product over the other because as you, and I know as pharmacists, there's certain therapeutic classes that have brands only as your three options, like when the Advair inhalers came out. For instance, in that therapeutic class, he may have had two or three competitors and they were all brand, right, right.

Traditionally PBMs do not take a generic drug and try to get a member to switch over to our brand. They're not quite that brazen just yet, but what's happening behind the scenes. And again, I think it's just too tight of alignment to walk personally, but I forget the inhaler that just went generic, but our P and T committee sent it to me for my review.

And they said, look, the rebate that we can get for our client on the brand nets out at much lower cost for the client than using that generic. And I say, well, theoretically, if you can flip it on back to the generic, the day that that generic becomes a multi-source and not miss one claim, then the client can be whole.

But what happens is, the brand name companies know that the patient [00:25:00] conversion rate back to the generic is fairly slow. So you do the math on that single source, generic, and the math makes sense to use that brand. And we have a full pass through, on our rebates. So we look at the fifth grade math and common sense type of philosophy, but we did not feel we can be reactionary are we can be, we can react quick enough to where every single claim, because if they just get two or three claims per patient to go through that rate at that brand rate, whenever it does go multi-source, which to the, to the veers means that that price plummets.

So now the generic makes more sense. Um, it was just too fine of an alignment to play, but if a PBS. And again, the common sense part of our model is what, what does your current PVM charge the client, uh, for, for revenue and all in almost all cases, it's a zero, it's a zero disclosed admin fee. They do it for free in the country.

Yet they're making $180 billion in net income. All right. Let me 

Mike Koelzer, Host: back up on two things. Nathan, the brand name thing you were talking about, it's kind of like a brand name in the grocery store, offering coupons three months in a row on a certain cereal. Hoping that when you don't have a coupon, people are going to be slow to go over to the generic because they're so used to the brand name.

So you're saying that you could give someone a better deal by getting the brand name, if you pass the rebates through, but it would be really hard to get all the customers to switch over the first day. It goes multi-source in that plummets. Cause even if you get a few of them to stay with. Brand name for a while.

It's, it's kind of screwing people over base 

Nathan Gabhart, TrueScripts: with the manufacturers. In my opinion, I've done all the math and all the market analysis where they know, look, the, whatever the term is, I call it migration rate or whatever, whatever it's called. They know that there's going to be enough members who stay on that brand to pay for those rebates, to pay for them.

But theoretically, if the PBM, as soon as MediSpan marks at multi-source, which usually we get our MediSpend files once or twice a week, as soon as the day it goes, multi-source the brand is rejected. Well, now you're going to have tremendous member abrasion, abrasion. You go to the pharmacy and now your brand is not covered anymore.

It's like, well, you mean it's not covered? Well, it's not, it was covered last month. Well, it, it, it, that triggers on September the 12th then as of September 12th, brand's no longer covered. So if you go into the 19th and get your brand refilled, it's going to reject and you're not going to know it. Because his members aren't notified because there's not enough time to notify them.

So the 

Mike Koelzer, Host: friction is just that they have to get the generic. 

Nathan Gabhart, TrueScripts: The friction is, typically they may have got a new prescription of his Adderall. Whereas if it's a C2, for instance, they'd have to get a new one, they'd have to get a new procedure. 

Mike Koelzer, Host: When you were talking about the PBM committee doing this and that I'm always back there thinking.

Yeah. But, uh, Nathan, you know, doesn't, this company gets to decide and you already told me it's like, no, the broker from their town or something went to the. Person and said, do you want to pay a dollar, whether 50 dollars or 35 dollars or something? Sometimes that's all the decisions that they make. And the TBM is making all the other decisions, right?

They don't get their hands dirty in any of this stuff. 

Nathan Gabhart, TrueScripts: It's a hundred, a hundred percent. And I gave, I was certainly not the one stones. There's a lot of great people out there working on behalf of the clients and the members. And there's a lot of bad companies out there. And typically in, in my opinion, this will not give me any fans, but if the truth hurts, they need to change the truth.

And the larger the brokerage company, uh, they have preferred PBM. So they work with the bigger, the TPA or carrier they have preferred PBMs they work with, and that preference means they're getting paid. And I've seen firsthand where people have asked me, you pay us two to five, two to $5 a claim, and we'll put you as a preferred.

Uh, PBM. Well, that's almost all of our admin fee that we charge. So the folks on this, on the ground level, the brokers on the ground level, aren't necessarily aware, aware of this for corporates, putting down these dictates that says, here's your preferred vendor list. And then this is the price discount that the client gets if they use a preferred vendor.

So that's how they get them signed up for a particular PBMs, and then they can call them coalitions or whatever. And that's, that's a, that's a joke. And it all goes back to the fact of how did these PBMs generate their money? 

Mike Koelzer, Host: Do some PBMs. Do they have the audacity, I guess to say, we're not making any money, we're doing this all for free.

Why would someone fall for that? When they're talking about the PBM they're hiring? I 

Nathan Gabhart, TrueScripts: would say 70% of all, all claims that are being transacted or on a zero admin fee. 

Mike Koelzer, Host: So the company thinks that the PBMs are doing this out of the goodness of their heart. 

Nathan Gabhart, TrueScripts: So basically what happens is, is here. Here's the sales [00:30:00] pitch and let's use Anthem and ESI.

As an example, they'll come in as they'll say, Hey, look, if you use. The Anthem ESI package will be $42 PEPM and you pay Anthem $42 PEPM and then all these other services are provided at no-charge. If you use true scripts, there's going to be $15. PEPM carve-outs standing for what a per employee per month.

So I remain an employee. So therefore, if you use a non-preferred PBM, you're going to pay $15 more. So the theory is that if you use our preferred vendors, the cost of doing business is cheaper, where they don't realize that I have a PBM that can administer those services. And once we get the interface set up, there is no work at all that the TPA or Medicare carrier does on the pharmacy side.

It's just all a mess. So when you pull up that contract and you say, well, how much of that is ESI? What are you not getting any of it? The $42 PEPM is going to Anthem where ESI makes their money on them, on the spread pricing with the pharmacies and with the. Rebates. And they're telling people that are not well, they're not telling 

Mike Koelzer, Host: anyone that, how do people think that does a topic?

Never come up, never come up. They don't care if the PBM makes 

Nathan Gabhart, TrueScripts: money, nine is better than 10. So who cares? Right? Who cares? And meanwhile, their discounts continue to get better and better. And their PEPM costs continue to rise every single year. And that's where folks, he visually gets sick and tired of being sick and tired.

We'll, we'll look at their, their, their drug claims. We'll run it through our system. Then we'll come back and say, Hey look, AWP. Is not a standard number. So AWP minus 17 and AWP minus 18, those aren't based on the same data sets because there's so much manipulation over what's the definition of a brand.

The AWP is tied to the NDC number, which is the 11 digit number or the last two digits is a package size. So theoretically, if the PBM owns a mail order pharmacy, they can order a 10,000 count bottle that's made just specifically for that mail order pharmacy. And then that has a new NDC number. Well, a new NDC number generates a new AWP that's created by that pharmacy and that drug manufacturer.

So the AWP is controlled by the drug manufacturer. And if it's a restricted product, meaning that only one pharmacy can buy that package size, then that pharmacy can help participate in what that AWP becomes. Um, 

Mike Koelzer, Host: She's, that's really. You know, what you don't, I'm finding out, talking to you is that it sounds like the exact same BS manipulation of the English language, you know, of what means, what it sounds like they're using the same one on the companies on that side, paying for it as they are for the pharmacies and so on.

Nathan Gabhart, TrueScripts: Exactly. And I mean, we have a 13 page contract. I think it used to start at eight pages. Um, some of the traditional PBMs have an 80-90 page contract and it's the devil's in the details. And it just goes back to common sense. Every employer has to January, every paper business has to generate revenue.

Even the nonprofits have to generate revenue. You 

Mike Koelzer, Host: talked about the carve-outs, but a lot of times that's not even offered. A lot of times, they're like, here's these three national ones you can go to McDonald's or burger king. We're not going to talk about Joe's burger joint. You know? So a lot of times you're not in the conversation, right?

Well, 

Nathan Gabhart, TrueScripts: we're not, and that's where it's basically, it's like a pyramid. And at the very base of the pyramid is where are the clients, the next tiers, the brokers, then the TPA is the third-party administrators giving an example of a broker. A broker is like, um, let me see here. Um, boy, uh, USI, Aon, Mercer Willis, uh, Uh, no, that's a, that's a TPA.

So our broker is just an insurance advisor that the employer hires. And because that employer knows nothing about insurance, they make widgets, right. They hire an insurance consultant who charges them a PEPM, which is a per employee per. Fi, um, as an advisor and they're the ones that do all the due diligence for dental vision, all your insurance needs that you offer your employees.

Mike Koelzer, Host: Oh, so that's probably who my pharmacy would have gone to just like, I would go to a car insurance person in town who would then show me that. Just like your 

car 

Nathan Gabhart, TrueScripts: insurance agent, except for your peer, your health, your employee benefits. So there are the brokers that's who we're partnered with. So we basically try to align ourselves with the brokers.

And it's usually the regional independent owned brokers because the larger brokers, again, you know, when they, when they're getting paid one, two bucks a claim and not all of them. Right. But you know, whether they're getting paid 1, 2, 3 bucks a claim and there, they got 150 to 500 million claims, uh, with a certain PVM they're there.

They're not moving that business. 

Mike Koelzer, Host: Right. In those cases, [00:35:00] there's a, what's the term margin with mystery. Yeah. The brokers are getting money. In some cases, in some cases, the big PBMs are getting money. Tremendous. But the, the businesses 

Nathan Gabhart, TrueScripts: continue to 

Mike Koelzer, Host: increase their costs, continue to increase and, and everybody just kinda goes along with it.

Nathan Gabhart, TrueScripts: Then the traditional PBS said, well, it could have been worse because you know, nine is better than 10. And then we come in and say, look, some of, some of what we do is on trust. The majority of it is verifiable. Uh, because you can't prove that you're truly looking out for our client 24/7, we can show the data and what we did, how we do our blocking and tackling, but it all goes back to trust.

And so we built some really great relationships with some regional brokers nationwide, in some cases directly with a client. And then that client reintroduces us to the brokers. We share the same values. And then that broker then goes into UMR or Anthem that says, look, if you don't carve this out with no fee, because I know that because we know the game we're, you're going to lose this client.

Then lo and behold, instead of charging us a million dollar interface fee and a $15 per employee per month, carve-out fee to the client, which has been attempted, their broker says, no, you're going to be fired. We're gonna switch. We're gonna switch to TPA. So then they come back and say, okay, well we'll interface.

I've had a TPA. Tell me, look, I need $15. One five, um, per employee per month fee. So basically what they wanted me to do. Because they wanted me to create a formulary that would generate $15 in rebates per employee per month, that I could pay the TPA so that they could lower the admin fee down to $25 to compete with the blues in their state.

So they wanted me to stack the formulary with all these highly rebateable drugs and then give the rebates to the TPA so that they could lower their admin fee. Because that was the only thing that the client was looking at. The loser again, is the client and then the member and then the local pharmacy.

You always, because those prescriptions go into a mail order. Uh, the costs are going up. The premiums are going up. The bottom line of that employer is going to. And it's just a vicious cycle all around. Because their insurance costs are going up and their revenues staying the same. So it's his fifth grade math that when revenue stays flat for that particular client and operating expenses increase in the form of health insurance, you have less net income.

I think it's a humanitarian crisis. I tell you, I really do. And that's why philosophically, we said in enough, everybody's 

Mike Koelzer, Host: going to make their money, the losers, the client, even a pharmacist, when a pharmacist, things like, oh, I'm going to really stick it to the PBM on this one. The pharmacies hate the PBM so much that if we can find a way legally to get a little bit extra money from them, we're going to make that decision.

But it hurts your neighbor across the street because the PBM is going to keep their money. Yeah. The 

Nathan Gabhart, TrueScripts: PBM does not fund this system. What one nickel all the money. Every penny comes from the employer and the employee. They're the only two people who put money into the system because they're the ones that cover the entire drug cost and copay and 

Mike Koelzer, Host: plan paid somehow, no matter what it is, they're going 

Nathan Gabhart, TrueScripts: to cover it.

When you adjudicate a claim, you have the patient's cup share and you have the employer share. So that's covering 100% of your contracted price. Yeah, because 

Mike Koelzer, Host: the PBM is not a risk taker. They're just a money mover. We're a third party administrator. You're shifting money back and forth. You're not taking any risk.

Well, 

Nathan Gabhart, TrueScripts: You know, we take some risks because our clients don't fund it. We funded it last January. I wrote a check for $282,000 out of my pocket because a client went bust because their client went bust. I could've stuck it to the pharmacies, but as past president of the Indiana pharmacist Alliance and past president of the community, pharmacies of Indiana, I'm like, look, it's not their fault.

There was a contractual agreement that the claim was adjudicated electronically. There's a contractual agreement in my opinion, between the PBM and the pharmacy that says, as long as you didn't commit fraud, pharmacy. You're gonna get paid for that claim. Otherwise there's no way you all can take the risk, right?

When you start to spend a thousand dollar drug and the patient pays $50 and you're waiting for your nine 50, you got to know you're going to get paid 

Mike Koelzer, Host: for that. Let's go back to 1980. I was a freshman in high school and that's just when it seems like some of the third parties were coming in, you know, blue cross and we had the claim forms and typewriters and all that kind of stuff and all that kind of.

In every scenario, would you see the same abuse happening again? Let's say we're in the multiverse with 10 parallel universes, whatever. Well, this happens every time again, because there's bad players or could someone have done something back in the eighties to stop this abuse? Whether it be someone like you who had the vision and knowing this was going to happen and came in and did a better way, or the government did something now maybe the [00:40:00] consumers put their foot down or would this still have played out the same way across these 10 different scenarios?

Nathan Gabhart, TrueScripts: Yeah, I think so. I mean, I think, I don't know if there's anything that could have changed in the past or if there's any better way of doing it. Mike, in the end. Any industry, um, greed is present and greed is also progressive. And I think back that's what happened in, back in the eighties when PCs, which were pharmacy card services or prescription card services.

Yeah. And the only thing I liked about PCs was that their cards are so easy to understand. Because he had an ID number and group number, some insurance companies didn't have any of them to include ID numbers on their card. And you're like, how in the hell you want me to fill this stupid thing for a dollar 10?

Right. So anyway, um, so by what, what was happening though is they saw an opportunity and they said, look, we're administering all these claims here and we're saving the HR team because before that, you know, the employee would just turn in their HIPAA 1500. Form and get reimbursed claim by claim by the HR manager.

So, uh, do PCs have an opportunity where they can streamline the administrative functions. And then they said, look, you know, there's, there's, there's supply and demand here. And right now we're paying these retail prices. And with the 70,000 pharmacies. There are 70,000 retail prices for the same drug and mean, and when we ran our pharmacies, we didn't maintain our retail prices very effectively because 95% was built to an insurance company.

Right. So you always kept them as high as possible because you never wanted it. Have it below your reimbursable rate. Right. So they said, Hey, we can do some supply and demand. So then they went back to the employer and said, Hey, look, tell you what, let me, let us negotiate some prices. And with these pharmacies and, and it's basically, Hey, do you want access to my 10,000 members?

And if so, I need 10% off your retail price. When once you get the first pharmacy on, you have to have the people walking through and then PCs start to charge for that value. So it was a very legitimate value that they brought. And then when they became publicly traded companies, um, I want my stop for polio to perform well.

So they had to continue to beat the wall street estimates. So, so there, they had to keep going back and say, how can we make more? How can we make more? How can we make more than they looked at one point in time, remember Merck, Merck, Medco. So you have merch, which is a drug manufacturer. You had Medco that was a mail order pharmacy and a PBM all owned by the same.

Right. So they told you where you're going to go and what drug you're going to get and what you're going to pay. And it was all by the same umbrella. So the conflict of interest there, and that's one thing that we shed at true scripts. We do not feel that any PBM should ever own a pharmacy. I could add a specialty pharmacy at my headquarters.

I'm still a licensed pharmacist. I could take that thousand square feet and I can generate about five to $8 million in net income just by having 500 prescriptions a month through specialty. Well, we philosophically said that that is not aligned with our morals and our core values. You can 

Mike Koelzer, Host: make that because you would take that business.

Nathan Gabhart, TrueScripts: I could restrict all my clients to use my specialty pharmacy. Right, right. Because it's, it's a, it's a restricted supply chain anyway. So, we partner with specialty pharmacies across the country. And we use them as our specialty pharmacy providers, and they're all independent. Most of them are independent pharmacy providers and they are a specialty network.

So the point is, we said from day one that we will never own any pharmacies whatsoever. When we are a PBM, we should be the fiduciary agent looking on behalf of our clients and members and protecting them against manufacturers. And in pharmacies, Nathan, 

Mike Koelzer, Host: right now, what would you do? Well, not, you let's say an evil person comes in, who looks just like you and knocks you out, takes you out of the picture and wants to make the most money.

He can. But he's got to do it for 10 years. Okay. So he can't like, just hold up a bank and make the money. He's got to do it for 10 years. What kind of things would that person do for 10 years to make as much money as he gets? All he cares about is making money. How would he do it in your company? He's 

Nathan Gabhart, TrueScripts: very easy.

They would stack the formulary with just a few drugs at a time for a sort of a drug like Duexis, which is going to cost about $30,000 a year. Um, yet you can get the active ingredients over there. So for that $30,000 a year drug, I could probably make about 15 or $16,000 in a rebate from the manufacturer.

Mike Koelzer, Host: They don't care if they need some profit and they need to pay for their ingredient 

Nathan Gabhart, TrueScripts: gloss. It's a three-sentence drug with an ibuprofen. So if they can net out 14,000 bucks a year per member and then get enough members on it, they can make hundreds and hundreds of millions of hours. So they pay the PBM half of that price.

And they said, make us a preferred, require a PA you know, make sure that date [00:45:00] they take and build, and then quickly get them over to, to Duexis so that the PBM could stack the formulary because they're spot 4,000 drugs, total that we, that we adjudicate on a GPI level in DC level, GPI level, different, uh, different, different drugs.

That's on your shelves across the country. So those four, 4,000 drugs, if you slip in five, Now, meanwhile, this is seeing how the system works. And I know I don't have a whiteboard in front of me, but this is how broken the system is. Mike. I can take a drug like Duexis, which is $30,000. You can buy the active ingredients over the counter for about $9 a month.

Okay. Which is about a hundred bucks a year. Let's call it so 30,000 versus nine for the exact same active ingredients. So what I can do is I could tell the manufacturer, look, here's the discount I need through my mail order. I need a deep discount on it. So therefore give me a new NDC number, create a new AWP.

That's 10% higher. Cause I've got to go back to my client, my broker who's spreadsheeting me and in my discount needs to be better than the other discount. So inflate the WP so I can give five more points off of AWP discount to the client. So I tell the client, look, I'm going to give you 23% off instead of 21%, and then also increase your rebates by $12 a claim 

Mike Koelzer, Host: you've made a different NDC and 

Nathan Gabhart, TrueScripts: you've jacked the price up.

You added $30,000 of net cost to the client. You give them back a thousand dollars. So they net out at 29,000. They were telling them that broker you're the best broker ever. Cause look at all these rebates. And then the broker says, well, look, had you not used us. You wouldn't pay 21% off instead of 25% off.

Well then that's where we come in and say, now. Yeah, cause we wouldn't have used that same drug to begin with. Why would you want 25% off of a drug that's 10000% higher when we could have used the generic ingredients and netted you out at $9 off the 

Mike Koelzer, Host: start. All right. So remember though, You are gone. So now this evil person comes in and does this, and he does it for 10 years and it's done.

What's stopping them 

Nathan Gabhart, TrueScripts: nothing. Nothing's stopping them. The industry is not prepared. Um, there's not enough people with the right skill sets to catch it. Regardless if you're whichever consulting company you want to come in and do some data analytics, this stuff is almost impossible to catch. Now you can, because you're talking about 4,000 drugs and you're sliding one or two in a, some of these drugs that may be at $400 drug versus a $350 drug where it's not even noticeable.

So, but you can do it on volume of claims. When you, when you adjudicate one and 2 billion claims, how many millions of claims can you slip through? So it doesn't take much. So basically the bad guy and the data figures don't lie, but liars figure. So in this particular industry, the data is so easy to manipulate because it defies the laws of mathematics.

And again, everyone drank the Kool-Aid. It's about four things. This says it's all about your discounts, all about your dispensing fees, the admin fees that you're paying your vendors and your rebates. Okay. Those are the four buckets you need to look at. So you want rebates high. You want dispensing fees, low admin fees, low in discounts, high, right?

And you'll win every RFP out there. Well, it's a broken system because there's this inherent belief, Mike, that every PBM is going to adjudicate the same drug. So AWP is the exact same. So just apply the best mathematical formula on top of that. And then you'll net out a lower cost. And that's what.

We're different. And there's many companies like ours out there, uh, that are transparent, that are good, that had disclosed all of their revenue to the client. There there's a few others higher than us now, but for a long time, I always told our clients, we are the highest disclosed admin fee PVM in the country because no one else, everyone else is doing it for free.

Gotcha, gotcha. Right. I think, but when you look at their financials, I mean, the financials are readily available. Look at the net revenue, look at the claims and do the division and look at what they're generating for a claim. And they're doing that by charging you zero. So our point to our clients is, do you want the manufacturers to pay me or do you want to pay.

And with S you don't get a choice, but clearly the hand that feeds you is who you serve. All right. So 

Mike Koelzer, Host: back to this guy, there's no way to stop your evil twin. I don't think so. Can the 

Nathan Gabhart, TrueScripts: government help you? In my opinion, and again, I've had, I was, uh, and I'm not throwing all these titles around to impress anybody, but I was president of the Indiana association of county commissioners, the first one in the history of Davies county.

And so I got to work with, and the county commissioners are basically like the mayors of the county, if you will. We're the executive and the legislative branch. So we're the president and Congress of the case. The county commissioner, you said all the local ordinances. Yeah. You're the buck stops at the county commissioner level.

My point in all of that is, you know, I'm from the government and I'm here to help or eight fairly frightening words depending on the situation. Because, [00:50:00] because the government is just not equipped for this. So what happens is, the government has set some policy that, you know, they can only set one policy, right.

But they have literally a hundred thousand different clients and maybe 1000 different situations. And now you have one policy and you try to just average it all out and say, okay, here's the one policy. It actually makes some situations worse and other situations better. Net positive. But at the end of the day, I think, you know, pharma now has 14 lobbyists for every one legislator in DC.

Um, there's so much, there is so much money PBMs when they do their job effectively, they can, and they do bring tremendous value to the healthcare system. But. They can also do a lot of damage. 

Mike Koelzer, Host: So the stuff going in front of SCOTUS, you know, the, the different states, I guess one way to look at that as saying, Hey, it's pretty good.

Another way to say it is like, there's a thousand ways the PBMs can cheat you and you might've taken away two of them, but now there's 998. Is that a 

Nathan Gabhart, TrueScripts: fair statement? A hundred percent. And the creative mind is very creative. I mean the capitalistic free market world that we have. Um, and, and again, I mean, think this thing through, if, if all the traditional PBMs plummeted, uh, everyone's going to be impacted because they're typically in most of the mutual funds, most of our IRR 401k.

So therefore we're like, well, we don't want our stock to go down. We just want them to make less money. You can't have both, you can't have both. So it all goes back to how you generate your money. What value are you delivering to your client? And are you being on. The 

Mike Koelzer, Host: government can't do anything about it.

Nathan Gabhart, TrueScripts: Let me peel back one more layer. So one thing that we did in Indiana, and again, we were not necessarily surly proponents of it being, and I'll tell you why, but on Senate bill 2 41, I would say the campaign manager for a state Senate candidate, six years ago, we went against an incumbent, which apparently you're not supposed to do in the United States.

And we defeated a 20 year incumbent. Hey, we're just. Two bumpkins from Washington in Indiana. I've always been involved legislatively. So I helped get the PBM audit. Bill passed. Um, a number of years ago, 2012 to protect the pharmacies. So there was, uh, another PDM transparency bill that was being introduced in the state house.

And the bill was terrible. And so what was happening is the traditional PBMs all have their lobbyist who knew all these legislators that independent pharmacies, God love them. I mean, that's who I am on the inside. They had one little lobbyist who had no statute in the state house and they were trying to file this bill.

Well, they got the bill actually in and they got it authored and they got it heard. Well, the bill was terrible. Um, what all the bill was going to do is make it look like PBMs were regulated. Meanwhile, they did nothing. So we got involved, um, again, begrudgingly and we spent hundreds of hours on this bill and we rewrote about 85% of this bill.

And all of our edits stayed in the final bill that passed. And basically it's a licensing bill. Um, so we at least know who the PBM. And there's some transparency and pieces in there, meaning that if you receive rebates or any sort of market manufacturer compensation, you have to disclose that to the department of insurance.

And here goes to some of the problems with why the government is so inefficient, nothing against the state administrations that they get. There's a lot of dedicated government employees that we have 100%. There's also some who can't find jobs in the private sector, and that's why they take 80% of the pay and work for the government just for full disclosure.

So, so now we've got this director of insurance who's known as nut Desi, you know, a PBM stands for, and now he, or she's going to be the one governing this in, in, in creating the rules, the rules process to create rules, to administer this guest guests who they're going to, to write the rules, the PBM. So therefore the PBMs are writing their own rules.

Meanwhile, what's happening is the traditional PBMs are creating their own group, purchasing organizations, the GPS to spin off the whole rebates stuff, to spin that off the PBM, put that with a sister company and they say, okay, the GPO is the one that actually manages all the rebates were the PBM were regulated under Senate bill 2 41.

And we create, we received no revenue from the manufacturer, 

Mike Koelzer, Host: but they've just made their sister company like an offshore account kind of thing. They 

Nathan Gabhart, TrueScripts: just spun it off. So at the end of the day, employers have to get sick and tired of being sick and tired. And once they start saying enough's enough, and if you keep doing the same thing over and over again, and you expect different results, you're insane.

Mike Koelzer, Host: God bless the government, but they can only do so much. Employers have to get sick and tired of it. We know that you need to get it. Your word out. How does that flip then? I mean, like I'm sick and tired of paying a high cable bill, but I don't know enough to go out and find some independent thing, or [00:55:00] do this.

And I'm sick and tired of a lot of stuff. I don't know what to do though. So where does this go? How does this turn the course? 

Nathan Gabhart, TrueScripts: So what I think happens is similar to what happens with us. And we have no girls' strategies with our current trajectory. We'll probably be over a billion dollars in about four or five years, but I couldn't care less.

So what happens is, there's going to be enough insurance brokers out there who say, look, there's a real opportunity here. We can go in and expose this flow in the system. We can go in. And if we get this set of data and we can get analyzed in this way and we can show them. In a very simple manner what's happening on your, their current brokers guidance.

We're going to really grow our business and that's what's happening. There's a lot of these regional brokers now that are going on with scaling and going in and taking on these billion dollar, um, consulting companies. And they're going directly to the employer to say, look, you've been, had your discounts continue to go up and up and up and your rebates go up and up and up.

And your PEPM goes up and up and up. And here's 

Mike Koelzer, Host: why these big consulting companies, they're the ones that are supposed to say, well, this has to happen. This is a natural course of action. That kind of 

Nathan Gabhart, TrueScripts: stuff. The big guys are basically just taking the message from the PBM partners they partner with. And so they're the big guys, I'm sure going back to their PBMs and saying, Hey, what the heck is going on?

My PEPM continues to go up for my clients. And then the PBMs have billions of dollars of payroll in these. It's a tongue box, as you say. Well, yes, but according to our analytics, if you would have used a non consortium model, your costs would have been here versus here. So you need to take that back to your client and show them where they would have been.

Then the client looks at that spreadsheet and says, well, I would have been worse off. So I guess I'm, I better just 

Mike Koelzer, Host: stay put and it's shiny and has got a nice 

Nathan Gabhart, TrueScripts: cover. And that kind of celebrity is shiny. And in nines, less than 10, the PBMs are 

Mike Koelzer, Host: saying, if it wasn't for us, your insurance rates would be 30% higher.

Now they're only 20% 

Nathan Gabhart, TrueScripts: higher. Well, and then the PBMs defense we can say, look, look at the retail price, the pharmacy submits. We get your 45% off, off of the retail prices right out of the gate. Eliminate your PBM. Like I hear some of this going on. You'll get rid of the PBM. Yeah. And have the employer pay the retail price.

How much do you think their costs would go up then? 

Mike Koelzer, Host: I think a lot of things have been helped by the internet. One of them is maybe some of the corruption and I let's just say in Hollywood, you know, if it wasn't for the internet, these people who have come forward, they wouldn't have had the strength to come forward.

If they didn't have a ton of people agreeing with them, you know, and having this force of Twitter and all these people, I think this is the best. If there's a time for a group rising up, it could be everybody exposing the PBMs. Now I'm not sure if that's gonna work because it might work for me too, movement or different things.

But I think it's so hard to understand. I don't know if that can get the traction of just the social media bringing this up 

Nathan Gabhart, TrueScripts: again. I'm a pharmacist. I'm a pharmacist at heart. I'm an independent pharmacist or heart with the tone and the messaging coming from that pharmacy. Industry is just more of, you know, in my opinion, Hey, they're taking too much money from us, from the pharmacies.

And there's nothing from the pharmacy side that says, look, we're trying to look out for the client and the member pharmacies are looking out for themselves. And it's a, to some degree because they're getting totally abused. So in, in my opinion, what needs to happen is instead of saying, you know, PBMs are terrible.

PBMs are bad as is, get rid of all PBMs and you don't offer everything, the whatever place. Yeah, then that's a, that's an even worse situation than we're in now. So, here's what I see happening. I see it in Ohio. I see it in Pennsylvania in particular. And again, we're moving, we got clients and members in all 50 states and we're moving more towards the west, but the biggest clusters are on the side of the Mississippi.

Uh, what I'm seeing as some very, very, um, intense. The pharmacist, uh, that are creating consulting companies that now they are aligning with a local regional broker. So that local regional broker now has this value proposition to employers who say, look, I've got a pharmacist who owns a partner C who knows the inside perspective of pharmacy better than anybody.

And then that pharmacist is the one that's vetting out. All these RFPs. That pharmacist is the one that is interacting with me where I can say, well, yes, nine is less than 10, but take this into account and take that into account. And then they can say, oh, okay, well, I can dumb that down where. You know, you say this, but here's how I'm going to tell the client because we're in the end and the creator or interface, sometimes that's just too big of a gap as far as a knowledge gap.

So I see that happening more and more. I see a pharmacist creating podcasts to try and get the message out. [01:00:00] So pharmacists are taking a stand we're just used to seeing immediate change in front of us. And, but the change is happening. 

Mike Koelzer, Host: And Nathan, in that example, you gave with the. Let the client know that they've got this pharmacist 100%.

They would, they would let them know this. Hey, I had a pharmacist, explain this to me, but I'm going to give it to you a little bit simpler, but he told me this, and this is what's 

Nathan Gabhart, TrueScripts: happening. It's a huge value proposition. And now it's being adulterated. And so even the larger companies now have quote unquote pharmacists on staff, but in the legitimate cases it's as good as a great value profit.

The insurance agent, the consultant, you know, they pat you on the back. They're your glorious, Hey, let's go golf. And they're your relationship guys. Right? They can articulate this whenever they're able to bring their pharmacist partner to the table and say, okay, look, here's our pharmacist partner.

They've looked at your data and here's what he or she found. And I just want them to explain it to you directly. They would 

Mike Koelzer, Host: actually have the pharmacist talk to the client, but through the broker sort of broker team with the client and the pharmacist ever talk face-to-face or not a hundred. All the time, but always with a broker, they're kind of dumbing it down if needed and so on.

So this 

Nathan Gabhart, TrueScripts: pharmacy consultant is basically a, a, a, an employee of this brokerage company on a part-time basis. So they run and operate their pharmacies. And then whenever they have a new prospect, then that broker basically they do the re-pricing, the pharmacist consultant does all the repricing process, and then they bring in MN.

And then sometimes they'll connect us. If we're like one of the finalists they'll connect us via zoom or via teams, or we'll go there in person and we'll show our value prop. And then the pharmacist consultant that works for this independent broker will then add their commentary. And then it makes us insurance brokers who brought these folks to the table that much more valuable because they want to have a good team around.

And then they're able to grow their business. So pharmacists being involved in the prescription in the insurance world isn't happening more and more. 

Mike Koelzer, Host: Who do you need to make the most business relationships with? Is it brokers, 

Nathan Gabhart, TrueScripts: brokers a hundred percent. You want to 

Mike Koelzer, Host: get tight with brokers 

Nathan Gabhart, TrueScripts: in our model because we have no debt.

We have no outside investors. We have no private equity. We have nobody knocking on our door saying you need to make more money. So if we wanted to grow the quickest, you got the clients at the base, you got the brokers, you got the TPS and you got the stop loss at the top. So if we want to grow the quickest, we contact the top 20 stop-loss carriers and say, look, you know, here's our, here's the commission.

We can pay you per covered member. And also here's the value of added programs we can bring to you, which protects the soft losses. And, they wrap that with amazing care and we have the best customer service and the PBM industry that you can get. But I tell my team, Hey, stay humble because you're in the PBM industry.

You're not saying much. Right, right. But the insurance broker is really our sweet spot. 

Mike Koelzer, Host: Wait, the TP, the one that you were just describing, I think I'm following, but would that feel good for you? Would that feel ethical or there's something not good 

Nathan Gabhart, TrueScripts: about that? So the TPA would feel good, but what's going to happen?

Here's how, here's why it eventually is going to happen. The larger PBMs have to continue to grow. They grow by creating preferred relationships with TPS. So in my opinion, they all have spreadsheets. TPA is one through 10,000 and they're working their way down the list. Eventually they're going to get to the TPA we partner with, and they're going to say, Hey, look, we can give you $3 per claim.

What are you currently getting from true scripts? And they're gonna say, I don't get any of that for Surescripts. What do you mean you? The TPA comes to me and says, Hey, I've got a hundred thousand claims for you. I need three bucks. And then we were like, well, that's it, we can't add that $3 to our existing admin fee to the client.

Right. And we can't take half of our admin fee to give to you, what are you doing for it? Like, well, this other guys, this other guys go going to, so it's a, it's a pay to play 

Mike Koelzer, Host: the TPA. We're going to throw that out because eventually you're going to get bidded out or whatever by them. So then the next step down would be the brokers, the 

Nathan Gabhart, TrueScripts: brokers, the stop-loss is the tip of the pyramid, but stop-loss 

Mike Koelzer, Host: is a tip.

Could you do a similar thing with the 

Nathan Gabhart, TrueScripts: similar thing? So, it happened with the stop-loss company. Eventually you're 

Mike Koelzer, Host: going to get some shenanigans with the bigger PBMs. 

Nathan Gabhart, TrueScripts: Exactly. So the broker really is where we've had most of our success, Mike, because most of the regional brokers we work with have like a zero commission plan.

And if we need to get 50 or 60 cents of our admin fee and they're doing the right things for the client and, and I, and, and I want to invest in and I charge the exact same, no matter. So once I earn the money, I can do anything with it that I want to. And if I want to give 10% to a broker who shares our values and is bringing business to us and we're all protecting the client and the member, then that's my prerogative now.

And we do that in a handful of cases, but this is not, is not a 

Mike Koelzer, Host: standard. What's [01:05:00] your best way then to build those relationships 

with 

Nathan Gabhart, TrueScripts: the brokers and I get face-to-face when we can get face-to-face. So we can say, look, send us a claims file. These are incurred claims. The client's already paid to these claims you can't change incurred claims, incurred expenses.

So there's no manipulation of the data because the data is. This has already been incurred. So as soon as the data file, let me run it through our analytics. Let my team look at it. We'll run that through our programs, our proprietary programs that we have in-house, uh, are for specialty and for formulary guard.

And then let us show you what the costs would have been. Had we been your PBM we'll show your admin fees, our rebates, and we'll also show you some of the drugs that our formulary guard program caught and explained to you what some of the alternatives could have been. So once we talked through that message and were able to get face to face, we're not hiding anything so we can peel the numbers back as much detail as they need.

Your sales team will when we just added a sales team really in January, and I've never had a sales team, um, just when this has been, we've grown from word or word of mouth, really word of mouth broker to broker client. And someone hears about us, our client retention rates, about 95%. From the very beginning, we rarely lose a client.

What 

Mike Koelzer, Host: Is your sales team going to do it? Are they going to cold call these people? Or 

Nathan Gabhart, TrueScripts: I did question if they're listening. That's a good question. We got three sales guys, one in Ohio, Atlanta, and, um, in Indianapolis. So, um, they're, they're getting some traction. So basically what they do is that they try to identify the local regional brokers.

They, uh, opened the door and they say, look, can we connect to you? Can we get you on the phone with Nathan or chastity or Dean? We've got a team of professionals in, in, in, you know, that's an interesting story. And usually with me, we either really, really connect or we are done. And life is so short and like, look, if we don't connect, I don't need the money.

We don't need to be looking over each other's shoulders through school, just move separate ways. But typically we connect very well knowing that 

Mike Koelzer, Host: The government may not be the answer, knowing that pharmacists themselves may not be the answer because people are listening to them complaining and they say, well, yeah, well, of course you'd complain.

You know, everybody wants to make more money for the sake of argument, you going to brokers is going to be the answer. Can pharmacists help you out in 

Nathan Gabhart, TrueScripts: any way? 100% pharmacists can help out everybody by trying to educate the HR manager or the president or the CC CFO. It's gotta be some sort of decision maker for these and self-insured clients.

Typically anyone with 50 employees or above. If I owned a pharmacy today, I would start at a high level. Are your prescription drugs increasing or decreasing? Th th they're continuing to go up and you say, you know why these PBMs are making hundreds of billions of dollars. If you Google PBM lawsuits, you're gonna need about 68,000 heads.

So, but basically there are some good guys out there. Now you have a broker. Do you have an advisor of some sort, if you're interested, have that advisor, that broker comb, I call them brokers, have the broker call me Mr. Pharmacy owner, or give me their name. And I'll forward that name over to some PBMs. And I'll have him reach out and kick the tires.

No cost, no obligation. Tell him to get lost. If you don't like what they say, people want to work with folks that they know, like and trust. And you're so true. So no wonder 

Mike Koelzer, Host: why I'm having such a hard time at the store. Yeah. 

Nathan Gabhart, TrueScripts: You know, you got to shake up a little bit like today, it's only so much we can do here, but you blame the PBM all you want, but it's a very soft sales strategy.

So then what happens is that, that broker then says, okay, well shoot this client now because here's why the broker doesn't want to happen. The broker loses their job very, very easily because they get fired all the time because the new broker comes in and says, Hey, I've got a shiny new tool. And then the client, the client looks at the existing broker saying, why didn't you tell me about this shiny new tool?

So they always feel a little threatened at the very beginning. So then, but if it's a regional broker, then once we reach out, we usually say, Hey, look, here's four other clients that we have in your geographical area. And then that usually sets them at ease because no one wants to be the first. And then we just start, start telling them our value.

Prophecy, look here, here's our story. And just like we had the conversation we've had tonight, you know, we usually tell them the messaging, here's the data we need, no cost, no obligation. Um, and then here's how the process works. And then usually that broker then says, huh, this is pretty interesting. And maybe it does work for this client and then what we do and let's say it was your best.

And it'll give you a for instance, and we've done this several times and we tell the client, we don't care where the drugs are filled at. Here's your costs. Here's our contracted rates for all, for all the pharmacists. So we'll create different networks in place. So if it's a [01:10:00] municipality, we'll have a shop local where I call, I call it CVS seen CVS, or what it means is if you use a local independent pharmacy, you pay a lower copay.

If you use a chain, you pay a higher copay because we want all that business. You go to the locals. All the 90 day supplies can be restricted to one pharmacy. And so we can, we can carve out this network that says, look, if you're within the zip code, here's your 90 day pharmacy. If you're outside of the zip code, you can use.

So the fact of the matter is, we can customize that network to drive the business locally because every dollar that's spent locally, like circulate seven times versus eat buggy. You know, you know what I'm getting, and we're like, as long as we can show you, the net cost, the net cost is better and we know how much pharmacies get paid.

And I know all the tricks on pharmacy ownership. I know the discounts and the rebates, and we want pharmacists to make a fair wage. And, you know, if they're making 16 to 18, 19% gross margin, and they have volumes of 70,000 claims, they're going to be there and do fine. Right. But it was when they're making seven or 8%.

And, but then the farm, the client's not paying that because of the spread pricing. So anyway, you guys have a tremendous, tremendous amount of power and it's just you, but you gotta start at a high level. You got to be an idiot, prove it and say, look, guys, this is easy. All you gotta do is have your broker called Nathan.

Here's a cell phone. Hey, you know, like what's your broker get paid for? And if your broker says, Hey, Nathan is a clown. We'll just explain why Nathan's a clown and then move on. And then if your client says, well, he doesn't sound like a clown. And Mike went and referred me to a clown. So maybe my broker's a clown.

So. 

Mike Koelzer, Host: Pleasure meeting you. Nathan 

Nathan Gabhart, TrueScripts: Mike, my pleasure at all. I could, we could, I could talk all night about this stuff. 

Mike Koelzer, Host: We could go all night on this stuff. So that was great. That was really interesting. I think I might've learned something tonight. 

Nathan Gabhart, TrueScripts: It's always great talking to another pharmacist and talking to another, 

Mike Koelzer, Host: I'm pretty sure the football teams didn't go undefeated this season.

Nathan Gabhart, TrueScripts: You know, it's the first year that I can ever remember that we're not going to have a loss. 

Mike Koelzer, Host: It's going to be great. All right, Nathan, we'll talk again. Take care. Sorry, Mike, take care, buddy. Thanks, 

Nathan Gabhart, TrueScripts: bye. Um,

Mike Koelzer, Host: You've been listening to the business of pharmacy podcast with me, your host, Mike Kelzer. Please subscribe for all future episodes.