0:00

Episode 435, "Optimized Pharmacy Benefits Are Required If You Want

0:06

to Do or Buy value-based Care".

0:09

Today, I speak with Dan Mendelson.

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American Healthcare Entrepreneurs and Executives You Want to Know Talking.

0:26

Relentlessly Seeking Value. This conversation I am having with Dan Mendelson, my guest today, all started

0:34

with a post that he had written on LinkedIn considering how pharmacy

0:38

benefits can or should be optimized within the broader context of value-based care.

0:43

Total cost of care, value-based medical care, and pharmacy benefits.

0:47

These worlds have to collide.

0:49

There is just so much intertwined into all of this, which is why I pretty much

0:53

immediately invited him to come back on the pod to discuss in greater detail.

0:57

A few years ago, I heard a doctor say that practicing medicine without

1:00

considering pharmacy is like getting to the 90 yard line, putting down

1:04

the ball, and walking off the field. And yeah, when a patient gets to a certain point in a whole lot

1:09

of disease progressions, optimal medical therapy includes pharmacy.

1:14

It's a thing. Adherence is a thing.

1:16

In fact, I saw a stat the other day that patients not taking

1:19

their meds cost an estimated $3,874 PEPY per employee per year.

1:27

Also half of all hospital admits are caused by non-adherence.

1:31

Those two stats, by the way, are from a post on LinkedIn by Brian Bellware,

1:35

who was recapping a video from Dr.

1:38

Eric Bricker. Link in the show notes.

1:40

But also, as Barbara Wachsman said on the show, half, I think she

1:44

said, of all ER visits are due to patients not taking their meds right.

1:48

Olivia Webb was on the pod, if you want to go back and listen to that

1:51

one, talking about how she spends hours every month trying to figure

1:55

out how to navigate access issues to manage to get her Crohn's disease drug.

2:00

So yeah, one underlying reason why a lot of this stuff happens

2:04

is that pharmacy benefits are purchased and siloed a lot of times.

2:08

In fact, I have yet to see, really, any mainstream contract wherein a

2:13

PBM is held accountable in any way for downstream medical costs, which

2:18

may be incurred because of suboptimal pharmacy benefit design, right?

2:22

And there are so many examples of bad downstream medical impacts.

2:26

I really like how Dr. Mark Fendrick put it in episode 308.

2:30

He said benefits, including pharmacy benefits, are like peanut butter and jelly

2:35

relative to enabling high quality care.

2:38

You gotta have both working in concert, like CMS or a plant sponsor just paid a

2:44

ton of money to get a patient an organ transplant, and then the patient can't

2:49

afford their transplant meds, which aren't on formulary and are really expensive,

2:53

and therefore there's organ rejection.

2:55

This happens. Or a patient with uncontrolled diabetes with a huge co pay for insulin, doctor

3:02

says, hey, you gotta take your insulin. Patient says, can't afford it, right?

3:05

Like this makes no sense, and it's shockingly common.

3:08

I'm thinking right now of that young man who died in the Midwest because

3:12

he could not get his asthma inhaler.

3:14

It wasn't on formulary. So here's the game plan.

3:17

I talk with Dan about the five kind of vital considerations he had brought up

3:22

in that aforementioned LinkedIn post when considering how pharmacy benefits

3:26

can or should be optimized within the broader context of value-based care.

3:31

Dan's advice for the pharma industry are woven in here as much

3:35

as his advice for EBC's employee benefit consultants and employers.

3:39

I am sure that most of our listeners are going to be very familiar with

3:43

Dan Mendelson, my guest today, and his work, but the quick background

3:47

here is that he runs Morgan Health.

3:49

The mission over there at Morgan Health is to drive innovation in employer

3:53

sponsored health care, and they do that by investing and working with their portfolio

3:58

companies in the context of the 300,000 or so employees over at JPMorgan Chase.

4:04

At the same time, Morgan Health also engages in policy discussions

4:08

because, as Dan says, no one employer is going to control public policy.

4:13

As a footnote here, I just will say that I actively seek out opportunities

4:18

to listen to Dan Mendelson's thoughts.

4:21

He has spoken a lot and really eloquently and with great insight

4:25

about setting up the economic models for healthcare, not sick care.

4:28

Recently, actually, he was on a panel at the Milken conference.

4:32

Along with Natalie Davis, Dr.

4:34

Yele Aluko, and Dr. Henry Ting, there are definitely insights to be gleaned.

4:39

I will link to that panel discussion in the show notes.

4:42

My name is Stacey Richter. This podcast is sponsored by Aventria Health Group.

4:46

Dan Mendelson, welcome to Relentless Health Value.

4:49

Great to be here, Stacey. The conversation that I would really like to have today is connecting the

4:53

dots between value-based medical care and then the buying of pharmacy benefits.

5:00

What are your thoughts maybe on how these worlds collide, the pharmacy

5:04

world and then the medical side? Well, look, value-based care is fundamental to everything that we

5:10

are doing here at Morgan Health. We believe our employees and their dependents need to get

5:15

high quality and affordable care.

5:18

It really starts with having a clinical team that will help guide you and

5:23

having a tool set so that you can be guided in a way that makes sense.

5:27

Pharmacy has to do the same thing.

5:29

I mean, it has to be accessible to employees.

5:33

It has to be managed by a clinical team and it has to be integrated into

5:39

the overall context of their care. When you say managed by a clinical team, so you mean that the formulary development

5:47

needs to be managed by a clinical team? Is that your point there?

5:50

It's not just the formulary, so when you are prescribed a medicine,

5:54

we want that medicine to be the appropriate and rational medicine

5:59

in the context of your condition. And we want it to be prescribed in as cost effective way as possible.

6:05

So that becomes a target, you know, if you think about value-based care,

6:09

if you're improving the affordability of care, you're improving the value.

6:13

You had written a post the other day on LinkedIn, which I thought was super

6:16

interesting because it hits this middle ground that I think isn't explored a lot.

6:22

It's this middle ground between how does medical care improve if

6:25

pharmacy benefits are done well? Which sounds obvious on the face of it, just to say, but it really,

6:31

we don't talk about it a lot. I'd say one of the biggest problems that we have is that for most employers,

6:37

the pharmacy benefit is really divorced from the medical benefit.

6:42

They are two separate things, and they're really not being

6:45

considered or managed together.

6:48

Yeah. And in their defense, the whole way that even data is collected, just the

6:54

framework, the buying, the everything is, is so completely separate.

7:00

You have the incentives. Like if you've got a pharmacy vendor who's thinking to themselves, well, my

7:05

job here is to reduce pharmacy spend.

7:08

Then they're going to do reducing pharmacy spend kind of things, even if those

7:13

same things increase medical spending.

7:15

That system is increasingly difficult to swallow.

7:19

Look, you do have systems, and again, I go back to Kaiser as my example of

7:24

a highly managed system where pharmacy and medical are truly integrated.

7:29

But you do have systems where things are integrated and when you look

7:33

at those systems, when you analyze those systems, you see better generic

7:36

utilization, you see more drugs being prescribed in general and more

7:41

affordable drugs being prescribed.

7:43

We think about where things need to go for an employer and the work that we're doing

7:48

right now in Columbus, Ohio with APRI, we have primary care clinics in the worksite.

7:54

And the drug spend needs to be integrated.

7:58

You had written there are five points any plan sponsor might want to consider

8:05

if they're interested in making pharmacy benefit decisions that are

8:09

wise from both the plan standpoint, but then also a win-win with members

8:14

that actually enable members to get, you know, the best possible health

8:18

that they can and also align with value-based goings on elsewhere.

8:21

So I really want to go through these five points because I think

8:24

they sum up a lot of wisdom.

8:27

The first one that you offered was to have some kind of value-based component

8:31

in the decision making process. One of the things that I would just say is that you can't do whole person

8:36

health if we're making it really hard for someone to get a drug that they need or

8:40

stay adherent to a drug that they need. So your first point was to have some kind of value-based component

8:46

in the decision making process. How do you think about that?

8:50

Well, the most important starting point is when the physician prescribes

8:54

a medication to the patient. If she starts with a cost effective generic medication, we will get

9:02

a more cost effective solution. If she decides to go immediately to the most expensive brand of

9:08

medication, you will never go back. And then I'd say also kind of a second point here is that physicians often

9:14

prescribe ignorant of the formulary that the patient faces and the prescribing

9:20

has to be done in consultation with the formulary that the patient faces.

9:25

All right. So many questions, so little time.

9:27

I know that every doctor listening right now, so I'm just going to hit the

9:31

last one first, is like, I don't even know what insurance my patient has.

9:35

And even if I did with all the carve outs, right?

9:38

So like, oh, they have Blue Cross Blue Shield. Fantastic.

9:40

Except there's some employer carve out that affects the formulary.

9:43

So how do I even know what this formulary is?

9:47

How do you enable the information that's necessary at the point of care

9:52

to be able to do something like that?

9:54

This is one of the many reasons why a tightly managed environment can be

10:00

better for the patient financially because the physician actually does

10:05

know their way around the formulary.

10:07

I think that particularly when it comes to very expensive medications

10:12

it is incumbent on the physician to understand the financial

10:15

situation that the patient faces. And by the way, it's also associated with adherence.

10:20

So if you prescribe a drug that is way expensive for the patient,

10:25

they are much less likely to fill it and to keep taking it.

10:29

When you say a tightly managed environment, what does that mean?

10:31

It means Kaiser, you know, or something similar to Kaiser.

10:35

There are really interesting startup companies.

10:37

One of them is a company that we invested in, Centivo, that offers a tightly

10:43

managed product for employed populations in places where Kaiser doesn't operate.

10:48

It's a managed network. So it's a narrow network product, and it's a formulary that is

10:54

calibrated to cost effectiveness. We had Ashok Subramanian, who's the CEO of Centivo on the show a couple of years ago.

11:01

So the point that you're making is to have an entity wherein patients

11:06

are navigated to high value providers who have proven their adeptness at

11:14

delivering patient care that's both affordable as well as high quality.

11:19

Yes, and I'll make the additional point that many payviders just

11:22

haven't gotten to pharmacy yet. They need to, because it's 25 percent of the expense for the employer.

11:28

And so when you think about managing cost effectiveness, they

11:33

have to be dipping into that.

11:35

And look, we're also looking at a world where increasingly the

11:40

cost of medications are going up. The pipeline is unbelievable.

11:43

I mean, think about the, the GLP-1s are incredible technology.

11:47

They also come at an incredible cost.

11:49

I mean, we're looking at data that shows that some employers are spending

11:53

up to 2 percent of their pharmacy benefit right now on GLP-1s alone.

11:57

That's not tenable in the long term. You think about cell and gene therapy, therapies for sickle

12:03

cell and other genetic diseases.

12:06

Those therapies are going to come to market with price tags

12:09

between two and a half and 5 million dollars per application.

12:13

And employers are going to have to figure out how to deal with that.

12:16

And so when you think about what payviders are offering right now to

12:20

the market, they have to be thinking about how to integrate the pharmacy

12:24

benefit into the medical benefit. And when you say how to integrate it into the medical benefit, do you mean they

12:29

have to be contemplating how they're going to be doing total cost of care stuff?

12:34

Yeah, exactly. We need to be in a world where the employer can contract on

12:38

the basis of total cost of care. If I'm a pharma company that's listening to this right now, there's pharma

12:44

companies that have these pipelines. I'm hearing you say that now we're going to have provider groups taking

12:49

on total cost of care and really contemplating and having to think

12:53

through what the impact is of some of these drugs that are prescribed.

12:57

What's your advice to a pharma company? Well, look, what I would say is first, keep innovating because the benefits

13:04

of pharmaceutical science are really driving what is improving medicine today.

13:09

And I wouldn't want anything that I'm going to say to be

13:12

mischaracterized as against innovation.

13:15

With that said, I think that the cost of new medications coming to market is

13:21

incompatible with our current insurance system for a couple of reasons.

13:25

First, it's just the quantity of innovation that's coming down the pike.

13:30

I don't think we'll be affordable at current prices to employers.

13:33

And we have to be thinking about how to accommodate the costs into the system.

13:38

I'd say also that there is a very strong interest going forward in figuring out how

13:43

to share risk across multiple employers.

13:46

We have to figure out ways to share the risk of these expensive medications

13:50

across larger pools of employers.

13:53

Otherwise, the employer based system will not work.

13:57

if I'm thinking about this relative to a pharma company, again, that's

14:01

listening here, because, you know, like, pharma prices that are charged

14:06

is kind of the elephant in the room. Like, we would not even be having this entire conversation if that

14:11

wasn't on the table as a factor here.

14:14

Pharmaceutical companies need to be prepared to contract

14:16

on the basis of value. We haven't seen a lot of that in the market today.

14:21

We've seen a lot of discussion of it, but if a new cellular therapy comes out.

14:25

And it costs 5 million dollars.

14:27

The employer is also going to want to make sure that it doesn't have

14:30

to be repeated two years later. But, like, you don't see very many pharma companies doing very deeply

14:37

collaborative kinds of things. You know, part of it is being ready to contract on the basis of value.

14:45

Part of it is keeping up with what's going on in the delivery system.

14:49

To date, I think that we've seen a lot of really excellent medical science come out.

14:53

It's been released. It is paid for on the basis of how often it's used.

14:59

It is not paid for on the basis of whether it works and what the

15:03

value is ultimately to the patient. And I think therein might lie one of the rubs.

15:09

Just it's really hard to be accountable for anything if there's no way to

15:12

clinically measure what's happening.

15:14

Like if a health system, nobody can even measure the output of

15:18

the care that's being delivered. Yeah.

15:20

Rik Renard was like 16 percent of care flows have any sort of evidence basis.

15:25

If you're a pharma company and you're trying to prove the value of your drug

15:28

or try to prove the performance of your drug, like, that could be a deal breaker.

15:32

Yeah, I think that's right. I think also, though, for example, in the GLP-1 class, Many of the

15:38

drugs that are coming to market are essentially forever drugs.

15:43

You will be on them forever once you start them.

15:45

And that's the way that they're being marketed.

15:48

There is one product, I believe it is an Amgen product, where there is a theory

15:53

that you would be able to take that GLP-1 for a couple of years, it would change

15:59

the signaling in your body, and then you would be able to go off the drug.

16:02

Employers are very interested in that kind of drug.

16:06

The idea of starting on a therapy and having to pay for it

16:09

forever is not as attractive as being able to cure the patient.

16:13

So we've had a very robust conversation I think around the first point that

16:17

you're making and obviously this is a topic that we probably could have a

16:22

college curriculum on which is, have some kind of value-based component in

16:26

the decision making process for pharmacy.

16:28

You have to do that. Otherwise, you're going to wind up squeezing the balloon.

16:33

You're going to have higher medical costs. Right.

16:35

And conversely, drug development needs to contemplate value.

16:39

So, when you think about which drug is going to be successful in

16:43

the market, choose the one that will bring value to the patient.

16:46

And the conversation with Nina Lathia from several weeks ago,

16:50

we did dig into this also. So if someone's looking for more information about this, please

16:54

go back and listen to that. The second thing that you talked about was making sure that we're

16:59

engaging the patient in this whole mix.

17:02

What was your thinking when you listed that one?

17:05

Well, look, what immediately comes to mind is Don Berwick's statement,

17:09

"Nothing about me without me". Prescribing has to be done in consultation with the patient.

17:14

And for physicians who are working and living in a value-based environment,

17:19

ultimately their success is improving the health of populations.

17:23

It's really making sure that it's done in a way that is cost effective

17:27

for the patient and ultimately improves their health outcomes.

17:31

Nothing about me without me. Don Berwick.

17:34

Don Berwick. Yeah. Gotta love him. Dr.

17:36

Kenny Cole on the show a couple of weeks ago was talking about just the, you know,

17:39

first step is this engagement and trust.

17:42

Some of the work that you're doing with advanced primary care, this

17:45

is actually part of the whole gig.

17:48

But I would strongly suggest that probably the ability to pull it

17:52

off is limited across the industry.

17:55

The engagement piece is something self insured employers, plan sponsors

17:58

really struggle with, number one.

18:01

But so do health systems, for the most part.

18:04

I agree. I agree with what you just said. If we're thinking about the third thing, possibly designating a

18:10

new pharmacy tier as experimental, that would have a much higher copay

18:14

if there's inadequate evidence. And you had said let the market work.

18:19

Yeah, this is another thing that employers struggle with.

18:21

There are drugs coming to market with very limited studies.

18:25

It's a good thing that these drugs come to market, but the evidence could be limited.

18:28

Or, such as in the case of the GLP-1s, we have no idea what happens after five

18:33

years, but yet there is the expectation that patients are going to stay on

18:37

those drugs for longer than five years. There are drugs coming to market that you want them to be on the

18:41

market, but you also want to, you want to be studying them.

18:45

So, the idea of approving a drug with the proviso that it needs to be studied

18:52

more extensively I think is ultimately in the patient's interest and it isn't

18:57

a bad thing to designate that with respect to the formulary so that the

19:01

signal can be clear to the patient.

19:04

When the drug meets the market, it should be so designated for the

19:09

patient and for the clinician so that everybody has transparency about

19:13

how that drug should be introduced. And that is a nice follow on to Nothing About Me Without Me.

19:20

Patients are in, a lot of times, a pickle, or the patient's parent.

19:24

They are struggling, they are facing some really, really difficult news,

19:29

and then this drug is introduced, which potentially could help.

19:33

Like a lot of times, you're going to do anything to try to

19:36

figure out how to get that drug. One of the other issues here is the kinds of static formularies that we have right

19:42

now where you know, you have generic, you have brand preferred, you have brand

19:46

non preferred and specialty do not give the kind of information and granularity

19:52

that patients need to navigate.

19:54

The other issue is we might want to be thinking about how the tiering is giving

20:01

incentives to the patient and to the clinician to produce the optimal outcome.

20:06

One of the things that we do in the JPMorgan Chase formulary is

20:10

that preventive drugs are free and that's kind of a way that we operate

20:14

here and if the drug is going to prevent illness, they are free.

20:18

So think about that as kind of an element of a formulary that ultimately could

20:23

be used to bridge the gap between the pharmacy benefit and the medical side.

20:29

That's a really great example of an understanding that there

20:32

is actually some ROI here, or whatever term you want to use.

20:36

Right. And by the way, that includes insulin.

20:38

The idea of putting a big hefty copay on insulin is crazy.

20:43

I mean, Type 1 diabetics need insulin to live.

20:47

Under what theory would you put a copay on insulin?

20:51

That is probably the most perfect example, or even Type 2.

20:55

Like, you know, like, you have a patient who is prescribed insulin.

21:00

Like, how could, how can you abuse insulin? The same thing with, like, asthma.

21:03

Yeah, it takes you back to the theory of why do you have cost sharing?

21:08

You have cost sharing to deter utilization.

21:10

If you put cost share on insulin for a type 1 diabetic, they could die.

21:15

And so it doesn't make a lot of sense to have that coping.

21:18

If what you're trying to do is finance the benefit, do it in a way that does

21:22

not incent poor medical behavior.

21:25

Well, you bring up an amazing point there that it's to deter

21:29

inappropriate utilization. This is where initial intent meets the real world.

21:33

And what started to happen is plan sponsors have

21:36

started to try to save money. In the shortest term way possible, and if you fundamentally don't understand

21:42

that, then just cost containing, across the board, and just preventing anybody

21:46

from getting anything, that seems like an amazing way to save money.

21:49

But yeah, it goes back to what you were talking about before, that if

21:53

pharmaceutical purchasing occurs in a value-based way, it should

21:56

improve outcomes and optimize or reduce total cost of care.

22:00

Right, and the purpose of copays is to incent patient behavior.

22:03

So back to this question of how do you engage the patient, a lot of

22:07

it is through financial incentives.

22:09

My issue is that a lot of the financial incentives that are

22:12

layered into formularies today are the wrong incentives.

22:16

They are not incenting good behavior on the part of the patient and we

22:21

have to look really carefully at that. As they say, the most expensive drug is the drug sitting in a bottle

22:26

that no one's actually taking. If a drug is paid for, they have an obligation in a way to take the drug well.

22:33

So there is certainly a level of patient education and

22:36

patient engagement and trust. With the evolution of health information technology, we will have better ways for

22:44

patients and physicians to communicate about what's in the formulary and

22:49

what is the best way to navigate. And so, you know, in a world where you didn't have a smartphone, you wouldn't

22:55

be able to pull up your formulary. But now, you can, and that conversation is going to be had.

23:01

The second thing you said was making sure that we have patient

23:03

engagement, and then the third thing was having this experimental tier.

23:06

It seems like you can't have one without the other, right?

23:08

Because if you have this experimental tier, part of making sure that plan

23:12

members are satisfied and know what's going on there and appreciate it, for

23:16

the innovation that it kind of is, you have to have the communication.

23:20

It's tiering that reflects the incentive that we want the

23:24

patient to have around the drug. We also want to give pharmaceutical companies strong incentive to bring

23:31

information into the public domain that will enable both employers, clinicians,

23:37

and patients to make good decisions. So, that's kind of the thinking here.

23:43

Right now, if you think about what the FDA requires for

23:46

registration, it's a limited subset.

23:48

And there's information that I want as an employer on how the drugs actually

23:53

work in populations and subpopulations that is not required by the FDA.

23:58

So, increasing the evidence requirements I think is really good for everybody.

24:02

It's good for the pharmaceutical companies too because it helps to set a standard

24:07

for what kind of information is necessary. Yeah, and you had mentioned that in Europe, they have cost

24:13

effectiveness evaluations on different cohorts of subpopulations.

24:17

And one of the things that has been suggested by you and others is to

24:22

do that in the United States too. But this is going to be a culture clash within pharma companies who maybe in some

24:29

cases are a little bit less concerned with ensuring that the patient is appropriate.

24:33

And I think the point that you're making is If we all want to work together on

24:36

this, then making sure that the right drug is used in the right patient

24:40

is going to be really important. And ultimately, it's to pharma's advantage to be a part of that moving forward.

24:47

Because if the drug is prescribed to a patient and it doesn't work,

24:50

somebody's going to be noticing that, oh, this drug doesn't work.

24:53

That's right. We are living in the information age.

24:55

Employers see which drugs work and which ones don't.

24:58

I would say also, increasing the flow of information to employers is in the

25:02

pharmaceutical company's best interest. Because it's the way we want to contract.

25:06

Ultimately, we want to contract on the basis of value.

25:09

When you think about the 25 percent of our spend that is on drugs, we

25:13

want to contract for that the same way that we want to contract for medical

25:16

care and we want to integrate it. And so that's kind of the, what will be facilitated.

25:22

But look, I think that there's a reluctance to change the bringing

25:26

more evidence to the market. It doesn't change registration or the commercial launch in any way.

25:33

It just gives the consumer more information about how the

25:37

drug works in the real world. So let me bring up the fourth thing that you said, which is using more

25:42

than just ICER to tabulate value.

25:44

And I think you're inching toward that point right now.

25:47

Yeah, ICER has been critically important for helping the American

25:52

health system understand the importance of the evaluation of drugs and the

25:56

importance of bringing that evaluation forward by a neutral third party.

26:01

I think they've done an amazing job. Steve and Sarah and others have really pioneered this.

26:07

And we're talking about Steve Pearson, who founded ICER, and Sarah

26:11

Emond, who's the current president. One of the problems is that we only have ICER, and there should be two or

26:16

three similar organizations nationally that are evaluating the drugs, because

26:20

you don't want to just have one group that bears the brunt of that evaluation.

26:25

And by the way, it's a difficult thing to do, you know, because there

26:28

are always going to be financial interests that are looking at it.

26:31

How things are being done and there will always be criticism.

26:33

And so I think we need more ICERs in the market and we need more information

26:38

coming in to enable good decision making on the part of employers.

26:43

Do you think that most employers, you know, because the one thing that you

26:46

often hear if you talk to somebody in pharma or you talk to many people

26:50

across the industry is, well, maybe there's a vanguard of employers,

26:54

but if you're talking about the vast majority of employers, they're not

26:58

paying attention to this kind of thing. So we should just get while the getting's good and just wait for the clamp down

27:05

to happen because I don't see it coming.

27:07

Most employers will appropriately delegate this responsibility to

27:13

their health plan or to a PBM because they don't have the expertise.

27:17

With that said, I think what's going to happen over the next five years as

27:21

more of these incredibly powerful, And expensive drugs come to market is that

27:28

we are going to face an affordability crisis that will bring employers into

27:32

those decisions much more directly. So it's going to go slow until it goes real fast?

27:36

Is that kind of what you're saying? Yeah. I mean, look, cell and gene therapy.

27:39

It's coming. It's here. The last point that you had talked about is to consider how far we really

27:45

need to micromanage time horizons.

27:48

I don't think it makes too much sense to worry about whether

27:52

an employee is with you for two years, five years, or ten years.

27:57

I think that you don't know how long you're going to have the employee,

28:00

and I see a lot of discussion around what is the appropriate time horizon

28:05

for judging cost effectiveness. So my hope is that we can be thinking about cost effectiveness over a longer

28:13

time horizon so that we can make better decisions on behalf of the system as

28:18

opposed to becoming captive to, you know, where we are right now, which is kind of

28:22

worrying about our own narrow interests. I want to tie this last point that you made back to something that you

28:28

mentioned at the very top of this conversation, this whole idea of sharing

28:34

across employers, because I just have a sense that probably this, how are

28:39

we going to micromanage time horizons and the whole, we got to share costs

28:42

across employers are probably related. Pooling of risk is going to be really important.

28:47

In the age of cell and gene therapy, and we have to figure out a way to pool risk.

28:53

The idea that you have relatively small employers taking financial risk for the

28:59

cost of their employees is not going to be tenable in a world where you want

29:02

to be covering cell and gene therapy. So, thinking about how to do that better is one of the areas of focus for us.

29:09

Chase Bank's about half of the small businesses in the United

29:12

States and we hear from them. We hear their concerns about healthcare and the ones that are looking around the

29:18

bend are very worried about this idea and thinking about ways so that they

29:23

can protect themselves and still offer a meaningful benefit to their employees.

29:27

Well, let me give another definition of pulling risk, insurance.

29:32

Right. Yeah. So are we back where we started?

29:36

Yeah, well, you know, look, I think that many employers appropriately

29:41

are trying to keep their costs down. They go to self insurance because they reduce administrative costs.

29:48

That makes sense. I think the question is, how can you pull risk without paying massive risk

29:53

premiums to an insurance company?

29:56

Is that a rhetorical question or if I asked you that same question,

29:59

how do you pull risk without going to an insurance company?

30:01

Would you have thoughts? I do have thoughts. I figured you might.

30:04

I think that, look, there's a reasonable risk premium that can be

30:08

applied to cell and gene therapy.

30:11

It's not 200 or 300%. And so, making sure that there is a way to do this in a way that makes sense is

30:19

really in everybody's best interests.

30:22

What you're saying is we've got payer organizations who have consolidated,

30:27

there are very few of them.

30:29

So therefore we have the whole anti competitive, whatever you want to call

30:33

it, situation in the market today.

30:35

You're basically saying that maybe there's a different way for employers

30:39

to solve their own problem themselves or in a different way than might

30:46

be in the market traditionally. Yeah, we need more innovation in the provision of benefits

30:53

that make sense for employers. And it will make sense for some employers to pay a risk premium,

30:58

go with a traditional product. That's fine. However, increasingly, we're going to see employers want more value-based products.

31:04

What that will mean is narrower networks, better care navigation,

31:09

better integration of pharmacy. Yeah. All of the things that Stacey, you have on your show and are highlighting.

31:15

That's the world we are trying to engineer.

31:17

And I think that when you think about drugs have to fit into that in a way

31:22

that makes sense for the employer. So let's do a lightning round, Dan.

31:25

Are you ready? Yep. I'm going to name a stakeholder and, you know, a party in the healthcare industry.

31:29

And based on this whole conversation that we've just had, if you had to just

31:33

give one piece of advice or just kind of like a summary, like this is what

31:36

you need to be thinking about right now. Pharma companies.

31:39

Yeah. Yeah. Yeah. I think pharma companies need to understand that employers are

31:42

increasingly going to be contracting on the basis of value for drugs.

31:46

What that means is they need to be developing drugs in a

31:49

way that makes sense for value. They need to be bringing more information on value into the healthcare

31:55

system and they need to be thinking about how the locus of prescribing

32:00

is changing in a value-based world. Hospital systems.

32:04

The advice to hospitals is value-based contracting is coming.

32:08

Cost control is important, and when you look at the value that is being

32:13

delivered in a hospital, it's not just about the cost of the drug, it's about

32:16

whether the patient outcome is actually being achieved in a cost effective way.

32:20

So, I would say hospitals are going to need more information from pharmaceutical

32:25

companies about how these products work. Perform in their environment and how to increasingly deliver

32:33

cost effective care to patients. That would probably be the way that I would frame it.

32:36

Yeah, and you know, here's the one thing that I would take away

32:40

just from what you just said. Hospitals better get better at being able to calculate their own effectiveness.

32:49

Because I hear over and over again from physicians, most notably and most

32:53

recently Alex Summers and Jodilyn Owen, just that they're trying to figure

32:57

out that they can't even do a survey. They just can't get any data relative to like, how effective are, is this CareFlow?

33:03

How effective is this department? The other thing I'll say about that clinical environment, I'll probably

33:08

regret saying this, but the other thing I'll say about that clinical environment

33:11

is markups on the basis of the cost of the drug make absolutely no sense.

33:16

Why should a cancer center get paid more for prescribing drug A over

33:23

drug B if they do the same thing? It just makes no sense.

33:27

That's the system that we live in today. So You know, in a value-based world, buy and bill does not make sense.

33:34

We could probably do a whole show on that. What's your advice to primary care doctors?

33:39

Primary care doctors who are practicing in the context of a value-based system

33:45

are going to need to think about prescribing on the basis of value.

33:48

Primary care doctors need to be consultative with patients in prescribing.

33:54

Got it. How about entrepreneurs and innovators?

33:56

A lot of what we're talking about requires health system change and

34:01

requires better information systems.

34:04

There's a huge amount of opportunity to innovate in all of these different areas.

34:08

It's what we look for at Morgan Health.

34:10

I would say that it's a lot of what investors are looking for to

34:14

drive better value in health care.

34:17

I think it's understandable. That many investors have not found good levers into the pharmacy space

34:24

at this point, just because of the way the system is structured and because,

34:29

look, when we started Morgan Health, we decided very consciously to go after

34:33

the 75 percent of our costs that were medical as opposed to the 25 percent

34:37

of our costs that were at the pharmacy, but now we're broadening things out

34:42

and thinking about that cost center and starting to find ways to get in.

34:47

Dan Mendelson, thank you so much for being on Relentless Health Value today.

34:51

My pleasure. I really enjoyed the conversation.

34:54

I enjoyed it this time. I enjoyed it last time. So let's talk about going over to our website and typing your email address

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