Breaking Free from Big PBMs with Modular Solutions | Matthew Gibbs, PharmD, Pharmacy Transformation Leader, Blue Shield of California

This transcript was generated automatically. Its accuracy may vary.

Mike Koelzer, Host: Matt,

Introduce yourself to our listeners.

Matt Gibbs: Matt Gibbs. I've been a pharmacist for about 25 years now.

I've spent most of my career in the managed care, health plan, pharmacy benefit management space kind of was there, I wouldn't say quite the beginning, but was there in the early days of the early claims administrators and back when retail pharmacies like Walgreens owned a PVM, so that tells you how long ago that was.

 I've always had sales and growth and account management as part of my responsibility. And I'd say the last 10 years I worked at two, I would say, growth or startup pharmacy benefit managers in the transparency space. In particular, that's always been a passion of mine.

Currently, I'm the Pharmacy Transformation Leader at Blue Shield. And came in to help the organization move into a new pharmacy model that most health plans have kind of steered away from.

They've really, you know, pulled it all in with the big PBMs and put all their eggs in those collective baskets and let those organizations operate them. And I was brought in because I'm not only an operator, I also understand the tenets and components of transparency and to operationalize it and turn it into a viable business model.

Mike Koelzer, Host: Matt, your name came across my computer and I thought of the California blue shield. And I remembered reading something about the California blue shield. They were like the first ones to dump, I don't know, CVS or something like that. And so I said, there's a connection, Matt and Blue Shield.

And I said, let's get mad. So that was national news, I think. And you're one of the first ones, maybe Blue Shield to kind of boot out one of the big three and kind of start fresh with a little bit of Amazon and Cuban and NADAC pricing and that kind of stuff.

Matt Gibbs: Correct, yeah, it's basically a year ago now, so August time frame of 23.

We made a I wasn't here, so I can't take credit 

for it. 

Mike Koelzer, Host: I thought it was a year ago or so. I know you've only been there for like four months, but I thought it was a little bit further back, 

Matt Gibbs: correct. It was about a year ago, and then, as you know, with vision comes reality and practicality. Practical nature of how things work, and I think that's kind of where I come in. Not that I don't have the vision, but the vision was really in place in terms of what we need to get away from, kind of feeding the beast and, using what 80 percent of the market is using, which are the larger, fully, vertically integrated pharmacy benefit managers.

And in many cases, They are also owned by or own a health plan, which is your competitor as a blues plan in many cases, so the initial thought is there's got to be a better way to do this and really control our own destiny But the only way we can do that instead of just building, you know going back and building a claims engine and doing all these things yourself takes decades and there are enough Disruptors and novel providers in the market space now that are not Part of the large vertically integrated behemoths that run pharmacy benefits for the majority of the country.

That Blue Shield was able to go through an RFP process, pick best in class, and really find some uniqueness. And it's everything from the technology platforms to picking the right dispensing and fulfillment partners that a lot of folks, I think, don't even realize are options. Because, you know, they're not given those options when you use one of the bigger organizations.

So, that's really the impetus is Taking control of your own destiny, and finally getting to what the price of a drug is. So all these great member tools and digital interfaces actually can relay accurate information and not mislead people, and that's really where we're headed here.

So it's two pronged. Independence. And also having the ability to really present the actual value and cost of a medication to a member, which shockingly shouldn't be a novel concept, but in our industry, it's groundbreaking.

Mike Koelzer, Host: No, Matt, I might've heard your comment wrong, but did I get this that you were saying with all the fancy technology and all that to steer people correctly, you still might not get the right answer. Or were you saying that we finally can, because this stuff is in place now?

Matt Gibbs: Sure, I believe that today the majority of folks that are accessing their pharmacy benefit are not being presented with what the actual price is of a medication. It's not what the pharmacy is being paid for. It may not include what the net of rebate is. It probably doesn't include what the net of rebate is.

Most people don't even know what that concept is as a consumer, and those are certainly not displayed through digital tools. Digital tools have mainly been used to steer to mail service or go to this pharmacy because we own it. That's really where it's been. 

Mike Koelzer, Host: They look fancy like they're gonna make it a little bit easier and things like that, but all that tool is doing is still just putting lipstick on a pig 

Matt Gibbs: No you're exactly right and it's been fun to kind of peel the onion and I would say I started some of this in my previous career at a couple organizations I was at. I wouldn't say I started it, I would say the organization

started it. But it's led me into the experience of now I'm part of a very large health plan with two and a half million pharmacy lives that we can turn on on January 1st and create this instance experience because When you're at a startup PBM, like I was before, it's a knife fight.

You're out there trying to win business. It's really hard because the big guys are so entrenched and you can make a difference in one, 200 life groups at a time. And it really feels good to do that. But this was a unique opportunity to say, we can take all these same tenants and overnight change the lives of a lot of people and really make an impact instantly.

Mike Koelzer, Host: Matt, earlier today, I was just going over some old and making some audiograms and things like that. When I came across it, it was a comment I said I'm not sure I like. What they call transparent PBMs, because if I'm going to get screwed by someone, I'm not sure I want to see it.

I just kind of want it to happen in the dark, but. Am I on to something there where some people can say they're transparent and they're doing this and that, and they're still not, or when you hear the word transparent from some PBMs, are there still some that are kind of twisting that language and not being as forthright as compared to others who are being more transparent?

Matt Gibbs: definitely is a spectrum, and I think where I kind of draw the line is, You can be transparent, but you can still do all the things that would not be considered Disclosure or pass through, so it's very hard to say well This is how much money we're making on your account and these are the buckets or areas that comes from Versus we're gonna make is an admin fee from you everything else goes to you So those are kind of two very different statements so It's actually easy, even for one of the larger PBMs, to say we're transparent because we're going to be willing to show you that we're making lots of money, or that we're continuing to do these activities, or we have contract language that discloses it, but maybe not the dollar amount, 

but really finding those partners that are truly what I would call pass through and are willing to disclose what they're making to manage your business and help manage utilization and all the clinical programs and all the components that come with it. Really being willing to do that.

It's a pretty small list. So you're right. It is a spectrum and some of that is in their control when I say there I mean the transparent PBMs and some of it isn't. A lot of them outsource tons of stuff to who? The big PBMs who are also doing the thing. So you're only as good as your downstream partner in many cases And that's a critical take home message when you're building a new model.

Mike Koelzer, Host: It sounded like you pretty clearly defined what you would say is almost 100 percent transparent. And it sounded like that was quite simple. You said everything is out there. We tell you the fee and that's all there is. Somebody had compared it to Visa and MasterCards. Everybody knows what the price is. You're buying stuff. They're not touching the price. They can tell you your exact fee. And that's kind of the end of it.

Matt Gibbs: Yeah, it's kind of the end of it, but also think about even with a Visa or MasterCard, the retailer is getting hit with a surcharge that costs you more money, so even in that scenario, you're better off paying cash. I think in every business this exists, but this is healthcare and I just feel like it's different and I know we as a country have made the decision, this is a for profit and sometimes not for profit business.

But when we spend as much as we do and we have as bad of outcomes as we do for what we spend, we have to do better. And I think this is the first step is like, what does it cost? What informed choices can you make as a patient or consumer and not have it all veiled in layers of pricing and everybody with their hand in the pot to make sure they hit their quarterly earnings.

That's just not going to work anymore . And I think you're seeing all the movement in D. C. with legislation, and at the state level in particular you're seeing it. enough is enough. you've heard the saying, pigs get, fat hogs get slaughtered.

Well, I think the hogs are just about to get slaughtered.

Mike Koelzer, Host: Matt, you said that you kind of had an interest in this transparency and so on. When did that start for you? Because I know that relatively early out of college, you were already in some of this stuff, kind of moving toward your career you have now. Was there any personal Goal for you of the transparency, or are you just seeing it as you can bring a benefit to the market and people will buy it and thus it's capitalism and you'll make money on it by being the clearer you are, or is there anything more behind that, that you had more of this goal?

Maybe you saw the corruption.

Matt Gibbs: I started my job in clinical roles within managed care, and I noticed at the very beginning, nobody with letters after their name was sitting in the boardrooms or sitting in the executive meetings. And I remember scratching my head going, most of these people can't pronounce the name of half these drugs, let alone they're making decisions that are for the benefit of their membership.

 And I just felt I needed to be in there. if I ever really want to make a difference. And so I knew immediately that I had to change my business. I had to improve my business acumen because they don't teach you any of that in pharmacy school. I was PharmD. I did a fellowship in oncology.

I was deeply clinical, but I knew that I had to be able to understand how the profit model worked. And so I went from clinical to sales because you learn it right away. And that taught me. Okay, this is how people buy the product. This is how employers implement it on their employees. That really gave me the hard lessons of not everything is being passed down financially and also from an information standpoint to patients and it caused a trigger, which I don't think if you weren't a clinician you'd necessarily have.

Because you don't have that understanding or that empathy or whatever you want to call it. But then when I joined a company that's long gone now called Hewitt Associates, which became part of Aon eventually they asked me to do a direct RFP on behalf of employers to manufacturers for rebate contracting to bypass PBMs.

That was in 2006.

That would be earth shattering today, let alone in 2006. Drug companies had no interest in doing that work because they had tons of different PBM relationships. They were trying to figure out how to do contracting. Aggregators didn't exist. Today they'd probably be excited about it, but they weren't excited about then.

But it just kept showing me why isn't the person closest to the bill and the drug having the conversations or making the payment? There's like 10 people in between and I don't understand it. So that's always driven me to be like, you just keep peeling the onion and there's another layer, another handout to take their nickel or dime or dollar, and it just is fundamentally wrong.

Mike Koelzer, Host: It's interesting what you see as needed. One of my staff yesterday got transferred. He said like eight times before he could speak to somebody about a prescription. This place doesn't allowElectronic requests from the pharmacies for prescriptions.

 It's abused or something. And I don't mean abuse, like medical abuse, maybe like too many patients are asking for stuff and they want to slow it down so they can, I don't know, use the phone or something like that, but anyways.

I went on their website and I looked at their top brass and it was kind of the opposite of what you and I are saying here now, because it was all like MD, this stuff. It was all clinical stuff. And I'm like, they need a business person in there to get that phone answered after one transition or two, not eight of them.

So it's just funny that here we talk today and both of those are flops. ButI think the lesson behind that is you need both people in the boardroom and probably. The strongest would be having an individual like yourself that has both of those splashing around in one brain.

Matt Gibbs: Right. I call it and I can say this because I am one. It's the clinician or pharmacist analysis paralysis, you're at the hundredth of a decimal point and you want to go to the thousandth. I'm like, you don't need to do that. You know, we're, we're not compounding here.

 it's not that precise. And I see it a lot because I've run both clinical teams and business teams and both at the same time, and it's a very different dialogue, and they're both very important, but I do think you're right. There are several folks, not a lot, that can cross over and then go back and forth and kind of use both sides of their brain on that, and we just do not have enough of that.

I would say not just in pharmacy and PBM, but healthcare as a whole.

Mike Koelzer, Host: And that gets changed by changing the curriculum a little bit and maybe having more training and maybe having externships or something like that in businesses. Because you mentioned earlier that colleges don't train that. Is that the simple answer? Get more of it at school?

Matt Gibbs: they certainly didn't back, I mean, I graduated

in 99.

 PharmD was optional in Indiana, and there were very few of us that did it. Most people were RPH. So I had to go out on my own, and I remember getting an internship at PCS and Phoenix.

That name is long gone, but they were kind of the first original big pharmacy. I was there the day that Eli Lilly sold it to Rite Aid or maybe it was the other way around, back when drug companies owned PBMs, which today is kind of a no no. So it's, kind of old bottles, new wine, you see old ideas come back and then you see them filtered through. But yeahI would say in general from what I still understand and from when I do see. Students every now and then we get them through residencies or internships.

There's still very little exposure to managed care. Part of me believes there's still a big need in the retail and hospital setting. And that is the primary vocation, like that is what you want to learn and to do. And it's so hard. The dream of having your own pharmacy, that's really difficult.

And that's certainly not taught at all anymore. Which is kind of sad, because I think there's a lot of niche, really unique opportunities you can do in that space. Managed care is probably even lower on that list, and there's still that big push for some kind of chain, retail, hospital, pharmacy.

It's because we need it. I mean, you have a lot of pharmacies now that have hours that are closed, because there's no pharmacist to staff the pharmacy, and these are real problems, But that wasn't the case back when I was going through. 

Very few faculty come from managed care. They come from the clinical space.

Mike Koelzer, Host: I forget who I was lamenting about this to somebody, but I'm like, They took me. So I was at Purdue and I came in a little bit before you did at Butler. 

Matt Gibbs: I won't hold that against you that you're a

Mike Koelzer, Host: I don't think we left you any beer when you took a road trip to Purdue.

I had to get loaded up again over that next decade probably. but. You know, Here I came from a retail background and it was good to see retail for what, three, six weeks or something like that. But in retrospect, boy, it would have been so cool for me to have spent it. One day in a doctor's office, one day hanging out with the front staff and learning their computer system, and then spend a day in the ER and then the business part of it, even, and then spend a day in a dental office and then spend a day at Blue Cross, talking to the phone customer service people, stuff like that.

What a gift that would have been. I know it would have been a pain in the ass to set that up. That's what we're paying people for. you're paying good money and if any place should be able to do that, it should be at a college, boy, we sure all could use that experience.

Matt Gibbs: I think you're right. I think where I see, and I felt this, going through as a PharmD and an early on PharmD when it wasn't mandatory. I felt like they were trying to make us MDs, like really push us clinically into that space and not give us enough practical experience in all the things you just said.

Like we're the best to talk about drug therapy management. We should know how to talk to a patient on the phone about drug therapy management or a caregiver of a patient or a senior other than just understanding the diversity of the patient mix. but, they want you to work in a Coumadin clinic and pull an INR.

And it's like, really? So, I think, and all that is honorable work, but I do think the focus early on was how do we up level PharmDs so they're right on the door of the doctor's office? And I don't know, at least at the time, I did not go to pharmacy school to become an MD.

I would have become an MD, I think it's still evolving, and I think you're seeing People take different routes now because it's a little unclear exactly where the profession's headed in some cases.

Mike Koelzer, Host: So in that case, Matt you're saying not even have a business or an accounting class or something like that, but just certain things like dealing with a family who's trying to get their mom into assisted care and working that kind of stuff out. You think even that stuff wasn't done because it was so much focused on the medical side of us trying to Push us closer to an MD so we can go out there and try to go chest to chest with them instead of just doing practical stuff.

Matt Gibbs: Right, 100%, it's probably not a very popular answer in some circles but I think it's kind of proven me right. I mean, nurse practitioners, they advanced, physician assistants have advanced, they have prescribing privileges in many states, and we're still struggling there. And I think why? I don't think most are comfortable there. Pharmacists have a really specialized role, and we should really focus on that, because there's a great need around safety, efficacy, drug therapy, management, duplication. And I'm not like, just stay in your lane, because obviously I didn't do traditional pharmacy, but I'm still, that's still my ethos.

I'm not out trying to become a prescriber in a clinic. So, I think that divergence is important, but it's also recognition. I mean, clearly, the country has not embraced pharmacists as prescribers. And, we should hunker down and do the stuff we're good at, because there's a need.

Mike Koelzer, Host: I kind of joke on the show here that I'm lazy. And so my pharmacy doesn't do much of anything outside of pretty much traditional stufF. Part of the reality of that is it's like. I got trained for all this stuff.

I didn't get trained to be the mass unit for the doctors in town. Either pharmacy training has to switch. It's gotta be a year of drugs, a year of primary care, and a year of whatever. Or shorten it to a year or two because the stuff that they're teaching as you talked about to compare yourself to a MD isn't needed in the general population.

Or the stuff you're talking about, the drug specialty, you know, all the stuff that nobody else can do. But it's just not my bag either. Kind of be a nurse practitioner or a PA. It's like, that's not the field I went to.

Matt Gibbs: Right, I think we've learned, you've probably seen this too, I mean, COVID I have so much respect for the entire retail pharmacy community, which I think put more shots in arms than any other sector in healthcare.

Very specifically, they were all trained on how to give vaccination, but I also know a lot of pharmacy friends of mine who did not, enjoy or like any of that.

They didn't like that period of time because one, it was like, do this on top of your other job, so you still have to do your other job. You don't get, you're not in a position where you get to replace it. You have to do it plus. And if that's always the equation, this will never work, 

it just won't work. 

Mike Koelzer, Host: So, Matt, Why was I reading about California though? Is it because of good marketing? The leadership knew how to work the press. Or was it that California blue shield was so advanced that nobody else is doing this?

 Why didn't I hear about California before? Other ones.

Matt Gibbs: I think it's partly because Blue Shield is big. I mean, it's a big entity in the biggest state, so, I think that's a big part. It's not for profit, which is a rarity in the overall health plan world. And I think a lot of people don't know this or know the history.

I did, because I was trying to sell the Blue Shield many years ago. Blue Shield had a kind of, not a dis intermediate model before, but they were with the old Argus platform, if you remember that, probably four, five years ago, and then they moved everything into the CVS fully integrated model.

And I think people quickly realized, all right, we had a little bit of control under the old model, nowhere near where we're headed. We're gonna have way more control than we did even then, but they, I think they had a taste of it. And then they saw how that basically evaporated and changed when you move to a fully vertically integrated pharmacy benefit manager.

And, the big moment was when Aperodorone was costing thousands of dollars and through our Civica script relationship that we have as a blues plan could get it for pennies on the dollar. And just asking why is that, and again, this gets into my, peel the onion analogy again.

There's countless other drugs that are like that. And until you are free from the financial incentives of your PBM, who makes money the more money you spend, that is the perverse incentive that can't be there, or you will never be able to present true costs to a member, and you're never going to be able to lower the cost of healthcare for everyone.

And that's literally the way things are set up. A PBM makes more money the more money you spend. And anybody that can show me that math is wrong, I would love to hear it. Because that's the scenario. It's completely backwards. And Shield's like, all right, we're done. We're going to break this apart.

We're going to have five service providers that aren't in each other's, they don't rob Peter to pay Paul, if you will. And they're not moving money from here to here, because they can't. They're different entities. if someone isn't working out, you're able to just pull it out.

You're not able to say, okay, I gotta move mail, specialty, claims adjudication, rebate. It's all in one. And if I pull one, it's all done. Like I just can't do that financially, operationally. This modular approach gives us, I mean, God forbid, and I don't think it will happen, but you know, there's things that happen that are out of your control.

Somebody could go out of business. Somebody could have a compliance issue, but this allows you to be able to plug and play where you need to. To give you the flexibility so you're not beholden to all those financial temptations that are leveraged against you when you have a fully integrated organization managing your pharmacy.

Mike Koelzer, Host: you know, I never thought much about that. Like when you guys said that you pulled out a CVS and went with another way to obtain drugs for your patients. I just thought there was basically in my head, I was thinking, well, there's two things there's medical and there's drugs and.

I don't know the medical side very well, but I know they just changed their drug side. And never thought about all of those modulars. There's six or seven things that have to be done whendo when you switch out of the PBM. You mentioned those, Matt, what are those, modules again that you would say?

Because I agree completely and you see this with what they say pharmacists would rather. Independent pharmacy owners would rather retire than switch pharmacy systems because so much now is integrated, it's like your one company is doing your IVR and your credit card and your point of sale and your dispensing and the robotics, everything's tied in together.

Mention thoseMention those again those different modulars when Blue Shield says we're no longer with, in this case, CVS.

Matt Gibbs: Sure. So, I would say there's five core modular solution service providers. I just refer to them as service providers to save some time for us both. But one of the core pieces is your claims adjudicator. Thisthis is Really what the core function of PBMs were when they came intocame, into evolution.

They were a bunch of pharmacists that said our stores should talk, we should be able to bill instead of doing HCFA 1500s, and we want to streamline our payment process. In healthcarein healthcare, pharmacies were 30were, 30 years ahead of medical who thinkthinks an EMR is unique, not unique.

Mike Koelzer, Host: Right.

Matt Gibbs: It's absolutely fascinating to me that people think that is a technological advancement.

When pharmacies arewere like thatlike, we're gonna do this and play nice together because it makes the most sense.

Mike Koelzer, Host: Right.

This is early 

eighties that this kind of stuff was.

Matt Gibbs: Yeah, that's so crazy to think about. And so that claims engine processing is still at the core. 'cause if you can't connect things, nothing else matters. And so the difference is though, there'sis there's a lot of good modern technology out there.

So while the idea is 40 years old, the technology is 40 years old, that is doing claims processing, very old legacy systems built, sitting on servers.

Not infinite capacity and with all these changes in pharmacy, could be MedD, could be ACA plans, could be preventative drug lists, you can go down the list, high deductibles, accumulators, These old systems were not meant for this, and they've been cobbled together, and the big three all use them, and so Shield said, we need somebody that has a modern platform, common language, and that we don't need to, take people out of retirement to change the source code.

And that's the honest truth. There's nobody around that really knows, like, how to code RxClaim. I'm very sure of that. we were able to go to the marketto market and we selected Abarca in that case, which is, their platform is Darwin. And again, common language that's on the cloud, infinitely scalable, all these things you really can't take for granted with the big guys.

And that's more important to a health plan than it is an employer who's like, as long as the claim process is, I don't really care. But you should care as a health plan because now it's simple enough that Ito I can go in and build a plan design. I don't have to rely on my PBM to do it. So I can self serve where I've never been able to self serve before.

I'm able to create a call center module that uses an API from a modern platform, not a spreadsheet that's sent over once a night to make sure I have the right member file loaded. So these things allow you to empower yourself as a health plan to start to self serve where before it was too expensive and too manual.

And so you needed the big vertically integrated PBMs to do that for you. But we're now self aware enough to be like, there's new technology and we can do it ourselves for a fraction of what we could have, ten years ago even, I would say.

So that's one of the service providers. 

Mike Koelzer, Host: That'sthat's one of the modules, basically. what 

are the other ones then?

Matt Gibbs: So think claims adjudication, and then think dispensing fulfillment. Because you got it, people have to get access to their drugs, it's the most accessed part of healthcare that we have, people access it at least once a month in most cases, and so you havegot to make sure you've got good partners there.

So we went with Navitus, which is a PBM, but they also own their own retail network. And they're very well known for decades now of being transparent, pass through, they pay the pharmacies what they bill their customers. I don'tdon't know if the right word is liked by the retail community, but they're not despised by the retail community, which is good.

And there's that, they really can walk the talk in terms of, we have a good relationship with retail because we believe they should be paid fairly and we're not going to keep a margin on their business and not give it to you. So that is who we use as retail. And those contracts are loaded into the Abarca platform to then adjudicate at the pharmacy network, which is your typical, 57, 60, 000 retail pharmacies. And then you have your mail service and traditional mail service home delivery. And this is where I think we really took an interesting detour. Again, kind of going that modern route. We didn't go with anwith, an older retailer that may have a mail service operation somewhere in Florida or Arizona.

That seems like where they always are now, Indiana for some reason.

 They're always in the kind of the same places we went with Amazon. And the reason being is if you intuitively think about how you buy anything Nine people out of ten are gonna have the Amazon app on their phone. They already have a membership, their address is in there, and we know that the mail service registration process for members, it's kind of forced down their throat at a PBM.

We want it to be like, if you want to use it. We're channel agnostic, like it is up to you where you want to go, but we know that digital member experience is going to be better thanbetterthen kind of that forced approach and clicking through four websites, which you have to do today, even at the big guys.

So we wanted to partner with somebody we knew was going to be around because there are some fly by night mail service operations as well. We wanted to make sure they were accredited. They had all their non resident licenses. All these things had to be in place. And again, we run a very low mail service volume.

I think we're below seven percent, which is really small. We wantsmall we want to make sure someone isn't always knocking on your door like the big guys do whenwhere they're saying, Hey, you've got two maintenance meds. You want to move them here and save X where you actually may be paying more or the plan may be paying more.

So we wanted somebody that would sit in that area, not be pushing their own agenda, and would allow us to remain channel agnostic, and Amazon fit that bill for us. And plus, obviously, the digital piece was a no brainer. And then the last service provider in the supply chain fulfillment, we did stay with CVS Specialty for Specialty.

And, it's really because these are youare, you . I don'tI don't like when people say they're the most vulnerable because there's a lot of vulnerable diabetics. There's a lot of vulnerable people with other conditions. So it's not like just because you have a specialty condition, you're the only person thatperson that, that has a serious illness.

So I want to warn youcaveat it there, but these are the cold chain medications, very expensive, not always the easiest to transfer because you havegot to get a new script. And with all the things we're doing and the partnership we had there, We wanted to leave that in a steadyat steady state. Now, we did change one element. We moved to an acquisition cost based pricing with CVS specialty.

So it's no longer, all your specialty drugs, AWP minus whatever. That's not how we want to do it. We want members to be able to understand what their drugs cost, especially in this dynamic. And so we went to a druga drug by drug pricing where we pay CVSpay, CVS by drug at the drug level for the discount and a very fair dispensing fee.

So, migrating our model that direction, our goal is to do that at retail at some point, whether that. Will be NADAC or some version thereof we'll consider that. But that's really the triad of the fulfillment pieces that then all feed into the Abarca platform for adjudication against our benefit design.

IThe, I wouldn't say the last but the one that is probably our biggest in terms of we already have it in place is we moved away from CVS rebates to prime therapeutics. 1 1 of 24. So we're still using CVS for everything except for rebates. And we just started that relationship, and as the way payments work, we're just now figuring out howout, how that's working out.

But it gave us the flexibility to do things that we wanted to do. We've talked about direct contracting with manufacturers. We have one going live. I can't give the name of it right now, but we have one going live in January. But you can't really do that. When you're in a big vertically integrated PBM, they want you on their formulary, their products or else.

And we found the flexibility with prime also owned by other blues, which is probably not unhelpful, that helps us a little bit that we're able to get that flexibility. And kind of create, some carve out, do some things with our EBIO relationship, and be able to maintain this diverse pharma contracting strategy versus here, just take it, give me a check and a guarantee at the end of the quarter, we'll call it a day.

That's not managing drug costs though. That's really our five big service providers.

Mike Koelzer, Host: So in the past, you would just say, all right, CVS or whomever, take care of this, and they would bring all five of these in, basically, 

Matt Gibbs: It's one contract, right? Yeah. So it's one contract for all those services,

Mike Koelzer, Host: they didn't have the service, they would probably 

piecemeal 

Matt Gibbs: in many cases, right, so like if maybe you need medication therapy management, they may have a relationship with Outcomes or somebody like that, that you could easily go through. Because when you get as big as somebody like LuShield, you bring in a new vendor, that's the whole thing, 

so there is a bit of an easy button when you've got agot, a vendor that has subs and you've got subcontract language in there. It can make your life a little easier justeasierjust from a contracting standpoint. I mean, I've got five to manage now with five service level agreements, five performance guarantees, renewal terms, all the things that you usually havehave usually in one is now multiple.

But I tell everybody that is a good thing because now it's disciplined. It's not looking at just one contract. And the kind of holisticof the holistic view, which of course hasthey have little components, but managing them all separatelyseparate where they can't pull levers is an advantagea advantage for us from a negotiation standpoint too.

Mike Koelzer, Host: Theythey kind of have you by saying, Hey, you can't take one of these cogs out. The whole thing's going to break down. They try to pull that and then they can manipulate pricing so they can say, Oh, you're going to go to the market with this program.

Well, guess what? We're going to drop that by 50%. And then the next year you found out they raised the other. One of the other five, 50 percent kindskind of thingsthing. So they can throw that stuff around. So. It's pretty much always better to piece that stuff out, with the API especially now, and I mean, look at all of us.

 anything you do it's a different phone from a different monitor to a different phone service to, whatever. And in today's day and age that's what people want. And people don't want to commit that much to one company. 

Matt Gibbs: Right. It's remember the old bundle deals when you used to have a landline, a wifi, and then you'd get the bill a year later and like, you're like, whoa, what happened here? And now it's like, I don't need a landline. I'm gonna use ado a cell phone over here. I'm going to use a hotspot here.

So I think you're absolutely right. I feel like that whole bundled concept is ais it's a marketing ploy and it kind of is universal across industries.

Mike Koelzer, Host: It'sit's funny. Yeah. Across industries. Cause when you, this isn't my thought, but you look at TV stuff now, I guess that's an old term TV, but you know, entertainment and it used to be, you had the three channels and then you'd get cable and with one bill. You had all these different And then, the services brokebreak up 15 years ago and now you're buying HBO and Netflix and this and that.

Then they all start going together again. Then they're going to break up again, cause people don't want to do it that way. And then they're going to come into a unit again. I suppose, I don't know, maybe five years from now or 10 years from now, you're using all these different things.

And someone says, Hey, Matt, we can make your life easier by, we got five of them. We can. We broke it down, but we're going to bring them back together into one, and maybe it's attractive then, but It sure is nice to see them broken up, though. It sure is nice to see some of that daylight getting through some of those cracks.

Matt Gibbs: Right. And, And, you know, I've used that expression old bottles, new wine, because it's, I've been in this long enough. You do see it. I remember PTS days, they were just a claims adjudicator. I don't think they even owned a mail facility back then. and now we're kind of like moving that direction, whether it'll be government required through.

Legislation or whether it's the market just saying enough and we're going this other way, but you're right I mean the things wax and wane, I think it's because motivations and behaviors change you can behave poorly under any scenario, and I think now we're just in the worst case scenario And, maybe there will be a day when, let's say a certain claims adjudicator owns a hundred percent of the market.

Well, that's not going to be a good thing either, so, that is, it certainly you always have to be vigilant and thinking of different things and not changing systems for a change's sake. But also, not just set it and forget it. 

Mike Koelzer, Host: So when I think about vertical integration, it's more than just a PBM having those five modules. They're going all the way up, they're owning hospitals and I don't think maybe drug manufacturers, but they're really going vertical 

Matt Gibbs: Yeah, I forget you can't see my face on a podcast, which is probably a good thing for everybody's benefit. 

Mike Koelzer, Host: They're not supposed tosupposed, to.

Is that right? Like Merck used to.

own Medco. They're not supposed to do that anymore, but they have 

them under their thumb. 

Matt Gibbs: I, 

i thinkthink it'sit's, it's interesting because you do see the two of the big three now have a manufactured, you could call it white labeled, version of Humira that they're moving all their customers to, and theyand they, they control the AWP and the, and the NDC. So I'm sitting here going, how is that any different? It's literally, you're actually, you can't even shield it withit with with all the other stuff a manufacturer does.

It's literally, here's the product, I own it, I make it, I distribute it, I control the price, and you have to buy it through me?

Like, it's just uh, yeah, and, and all that happened while this FTC investigation is going on. But, you know, I don't have to like it, right? So we'll, we'll see, we'll see where that goes.

 But that, that threshold to me has already been crossed in the last two years with that 

Mike Koelzer, Host: Matt, when I bring up vertical integration, so, alright, so, manufacturer, what are the things are the big guys vertically integrated

in? 

Matt Gibbs: the, the biggest component is, is the healththe, health plan piece that either purchased, purchased the PBM, or the PBM purchased the health plan. 

Mike Koelzer, Host: Health plan would be the one that supplies the, doctors 

and 

Matt Gibbs: the network, the 

medical network, The medical network, access to hospitals, preferred networks. They may own physician groups like you know that the United Enterprise with Optum has a lot of physician groups under theirunder their their domain. Evernorth with Express has physician groups. So it'sSo it's it's a it's definitely a thing where it's everything from physician groups to medical health insurance plansplan to Medicare plans.

They all have a big Medicare division so they're in government programs. Now they're in, two of them at least, are in manufacturing. Offshore aggregators in some cases docases to do the rebate management for multiple other PBMs as well as themselves. So the tentacles are more than an octopus and they continue and I think that is the part that's making everybody increasingly a little more nervous.

Mike Koelzer, Host: really annoying watching those Senate things, you know, someone asks something and these guys can stonewall, not by any means, not answering questions, but just by saying, well, let's see, it's complicated. We got 10 of these things going on. And then you start, you know, the questioner is like, well, I'm not going to follow that.

I mean, these people, the more mirrors you have, the more stuff you can say, well, of course we're doing this correctlycorrect because of this and that. And so that's another reason to break this crap down into individual stuff. So it's like, no, that stops there. How does that 

connect to 

this? 

Matt Gibbs: right. you know, I always I always feel like earnings, earnings calls are the great truth teller. When you live in a quote unquote capitalistic society which is arguable to me at some points, but if you do, and you believe you do, and you listen to these earning calls, you can hear where the money's being made, where the membership is growing, where it's flat, and where profit is.

And it's, it's very consistent that It seems like you now have, in every scenario, a PBM that owns a health plan. Because they are by far generating the lion's share of the margin, you know, because of the dispensing assets, because of the rebate components. It's just interesting to see where it used to be all about the big health plan and what their earnings were, and boy has that changed.

When you get the transcript and you read it, all you have to do is read that, and I don't have tohave, you can pick any of them. And it'll tell you where the motivations and where the money is being made. You literally will read membership drop by, you know, a quarter percent. profits up by twelve percent. What does that mean, right?

I think we all know what that means. 

Mike Koelzer, Host: likeas like a five year old sitting with my dad while he's watching the state of the union, he's watching Nixon or Ford talking. And in my head, it's just like Charlie Brown stuff, like wah, wah.

You know, I remember that you had like no clue what they were talking about. And now I sort of do, at least I can follow a few words, but that kind of stuff, I should. I should read that because maybe they don't make it as complicated as I think they 

try to make it as complicated 

to hide 

Matt Gibbs: I, I'm one of those, when I listen, I hear the wah wah like you're talking about, but when I, read it, I I understand it much better, and that just may be my learning style, but, um, I will tell you that until I started reading transcripts, and you can cut to the meat because there's all the, you know, stuff you don't care but it gets you to, it gets you to the point, you know, you can really, I think, digest it and see, which is, is a lot they give a lot of detail, and it can really teach you a lot about kind of the DNA of some of these organizations. 

Mike Koelzer, Host: Well, the beautiful thing now is with, let's just say, chatsay chat GPT, you can download one of these things and you can say, all right, this thing is 10is a 10 pages longpages. Give me a one page synopsis. So they give you a one page and you're like, eh, that's not deep enough. Give me two pages. They give you two pages.

Then it's like, all right, That's, I don't know some of these terms, so break this down a few levels and you could get one of those reports down to half a page and you could do it in a storybook form, a nursery rhyme and they'll still get the point across to you how deep you want it.

So, AI is really cool for those kind 

of things. 

Matt Gibbs: Yep, that is uh, I wish we would have had that in pharmacy school, right? Right, 

Mike Koelzer, Host: stuff. Cause you go to YouTube, you go to the three dots, you go down, it'll give you the transcript and then you just copy the transcript. And then you throw that into chat GPT. Let's say it's a 25 minute video. And once again, tell them to give you a half page synopsis of that.

 maybe that's all the substance they have in one of those things,

But it does get you there. Man, I've got to think that you're the smartest person in that organization now, because like we talk about, you've got both sides. Now maybe there's somebody with more vision, but I'm kind of a stickler for both sides.

I mean, I could take somebody who's top business or top clinical. It seemedclinical it seemed really difficult to do that without both of those. And I suppose if you get a top leader in a room and you get someone in their ear on both sides in a positive way, I suppose you can get a lot out of that, but it just seems like this stuff is so screwy that the people I think that the PBMs probably dislike the most would be a, uh, senator or somebody who.

Was clinical and business, that kind of history. I think those are probably 

the scariest people for 

them. 

Matt Gibbs: Yeah, I mean, I, I certainly am not the smartest person here. 

Mike Koelzer, Host: The problem with that though, is you just told people we're not recording this video. So I don't know if I should tell him that you winked at me or 

not when you said that. 

Matt Gibbs: think it's just a nervous 

Mike Koelzer, Host: No, no, I'm just joking. . You did not wink at me. 

Matt Gibbs: no, 

Mike Koelzer, Host: So you're not the smartest person 

there. 

Matt Gibbs: I guess my brain doesn't work that way. I've always been one of thosethese that I think everybody is a genius in their own topic. And even from the people you wholly disagree with, you can learn from, and I have plenty of them. In this case, I think Blue Shield, and not think, I know they had the vision.

I think it was just overlaying, okay, here's the practical nature of how this can be executed and get done. And, and that's me. Now, I get, I get to sprinkle some of my own vision in too, or I frankly wouldn't be here because I've been an operator. And operators can be fun, but it can also be like, you know, the most daunting thing if you do it forever.

And eventually you want to be hopefully a little more blue sky, the idealidea guy. But I also, this is the pharmacist in me, I love being part of execution because I think when you don't know some of those details, You can't explain when things don't turn out the way they're supposed to, when you have to pivot, you can't make those things as much.

So, you know, maybe that means I'll never be a CEO. AndAnd And frankly, I don't care. I really want to understand the guts. And I've always said I always have to be able to do the job of anybody That is beneath me or works for me and I mean beneath me meaning an org chart

not in not in statute I believe that I'd answered calls at the last people I was at on january 1st I did prior authorization reviews before because If you don't understand that your head is in the clouds and you can come up with some great concepts But if you can't execute who cares? and I think what I loved about this is this is not a head in the clouds thing, it's something that is very tangible to accomplish. Is it easy? Oh my gosh, no. Is theit going to be industry changing? 85 to 90 percent confidence it's going to be industry changing, which I, I'm a pessimist,

by the way. so, 

Mike Koelzer, Host: is this a step further than any 

state as far as you know, or?

Matt Gibbs: I think in terms of any health plan that doesn't have an existing ownership structure with a PBM, for sure. I mean, you could argue that certain plans that may have, you know, prime therapeutics ownership, you know, can influence in different ways or you obviously have legacy PBMs like Catalyst that rolled up into Optum.

I mean, so, but I would say as, as, as large regional health plans go, I think we're significantly ahead. And we know that because, you know conversations like this, I would say actually the diversity of the conversations we get. So a podcast like this, and then it's, you know, um, a major, journal that wants to hear about it, and they're all curious, and that tells me it's not a flash in the pan and, and it has broad application, which I think, you know, that is usually a major measurement you're doing something right. 

Mike Koelzer, Host: So Matt, you say you don't want to be a CEO, but I know you did lead one of the up and coming PBMs.

You kind of mentioned that earlier. I think you were the presidenta president of one. Is that the case? And how does that differ from. The CEO, it seems like at least as much responsibility and maybe not the ultimate, lever that the CEO has, but it seems to 

be right up there with the 

stress of 

Matt Gibbs: Right. Um, yeah, so I was president at two different PVMs. One was Envision, which became Elixir, which is now gone. Um, unfortunately, I think that rolled into MedImpact at the beginning of the year. Um, and then most recently I was at CapitalRx, which is a startup PBM, I think they're in their sixth year.

Um, I was there almost four times andfour and served as president there and had a very broad role. You know, atI at one point everything from sales to account management to compliance to, you know, things you do in a startup, you kind of take on whatever you can handle. And, I think technically, you know, Having the title is not that important as it is in terms of the end result.

And I can say in that scenario, um, I workedworked with some of the smartest people I've ever worked with. Also with some of the most mission driven and dedicated people that you just don't see in kind of tech healthcare. You know, they all got really good ideas and an app or whatever, but these folks really, um, leave it better than they found it and you know So I walked out of there with more inspiration than I did headache for sure And I it's so important that organizations like that succeed because it's sort of Symbiotic with what we're doing, but different.

So we're focused on health plans. We're focused on shield building this disintermediated model there, where an organization like that is kind of tech driven, you know, they've got other relationships with other health plans, kind of the Intel inside, they've got employer groups, but I, I really wanted to focus on, and the title didn't matter coming to shield, but they were very clear, this is yours and you know, the pharmacy team here is going to support you and help you in any way possible.

But we need someone that kind of understands this outside PBM dynamic and maybe hasn't been within a health plan for 10, 15, 20 years. I haven't, I haven't had that experience. So I need toneed, I rely on them for that. You know, what are, what do we have to tell the regulators? All the, all these things you don't have to do as a PBM. Usually there's a whole bunch of nuances that go along with that. So I think it's more about The role and, and the autonomy that's given versus, you know, the title in this case.

\ 

Mike Koelzer, Host: it seems that they get these rules, they get these state laws and all this kind of stuff.

It just seems like until you put someone in jail, until someone's worried about going to prison, that The corporation doesn't really care about breaking the laws because they can just pay the fines. I don't know. I was just thinking if I was in a position, not a lot would bother me, I guess, unless I know I'm going to be put 

in prison, 

Matt Gibbs: I know aknowa lot of these folks in the industry and like, as individuals, 

they're really not bad people. 

Now, would I want to work for some of them? No, because, you know it's like rinse and repeat every day, and that's not what I enjoy, but it's not because they're bad people.

I mean, we've had bad people in healthcare. People remember certain healthcare companies getting in a lot of trouble I think it's just been the lack of regulation of this industry I, I think that most PBM executives really believe they're doing the right thing.

They're just doing it differently. I really do believe that. I just happen to disagree. I respect them and most of them I know and they're not bad people. And that's the part I kind of don't like about, you know, what's happening to the PBM industry right now is I know a lot of these people.

And here's the thing, I've heard senators and congressmen say we don't need PBMs. I'm like, yeah, you do. You may not need them in the capacity they are today, but you clearly don't understand the value they bring, which shame on the industry for not articulating that, right? and having so many other problems, It's a really good question, but I really do believe in my heart of hearts that these are not bad people trying to do bad things.

Mike Koelzer, Host: It's just a little misguided and unregulated, without the guardrails. I think maybe that's where. Somebody has to step in. And like you say, maybe it's got to be the regulators. Maybe it has to be an index price, something like that, because I'll speak on behalf of all the pharmacy owners. It's not good for anybody when pharmacy owners hate everyhate with every cell in their body, they hate PBMs and they hate getting slapped when there's a negative reimbursement kind of thing.

And it seems that both groups think they're doing good, but it's just not healthy to have that hate from one side. I don't know the answer to that, except maybeexcept that maybe more indexing regulation, kind of how we started stuff up, talking abouttalking, about transparency.

 then at least you can see it. maybe some of the anger is maybe more correctly pointed somewhere, but when it's kind of nebulous, it's like, you just hate the big 

monster. 

Matt Gibbs: Youyou know, I think it's sadsadly when You can have two stakeholders not get along and function but you can't do that when you have patients and healthcare in the middle. So if we were selling

widgets It's different. And, and so the tolerance of the, you know, indignant behavior on either side, I think should be a lot less.

 I'm not a big government guy, but I kind of think like there's been enough examples, although it probably leans a little bit more PBM right now, I mean, we had the whole issue with compound pharmacy, there's enough bad behavior to go around. But if they fundamentally can't agree and patients are in the middle, nobody's going to win. So unfortunately a regulator or something has to come in and by the way, neither side's going to like the result, 

but no one's going to win either.

 We kind of take the political route like we do today, that if you don't get everything, you haven't won, you know?

Mike Koelzer, Host: It's not good. And maybe you worded that correctly. Maybe that's the thing. It's not good to have two sides going at it with at least one of them hating the other one, but having someone in the middle of that.

And like you said, if you have two widget people going at it, fine. But when someone's in the middle And I think pharmacists tend to make that the last victim, but I think eventually someone is victimized when there's that much hate in the situation. And whether the hate's justified or not, it's not good to have that much in there when you've 

got innocent bystanders 

being the patients. 

Matt Gibbs: right. No, exactly. I mean, if you're, if you're, if it's the Cola Wars and they can't get a lawn, well, you have to choose Pepsi or Coke when you're at a certain restaurant. But if you're a patient and you can't afford the drug because the pharmacy won't carry it then somebody 

Somebodysomebody has a healthcarehealth care issue.

It's so different. 

Mike Koelzer, Host: what do we know now as adults, they teach us, you're responsible for your own feelings and, you can't blame those on someone else, so it's my own hate I have, but you're right. Eventually that spills out into black and white, and that's the patient in the middle, 

who's, let's say, not getting their 

medicine, things 

Matt Gibbs: Right, right. But I think that the hard part is, ifis that you are a pharmacist or even an independenteven independent owner of a pharmacy, you actually have to deal with it, with the patient, which I think makes it way more real. Um, you know, so I think that's a really hard place to be in. But, you know, we're seeing it with retailerswith, retailers, some of them like NADAC, some of them don't like NADAC.

We really can't even get agreement on, like, well, how do you all want to be paid? And there's not a singlenot single answer. Well, we liked it this month, but now we don't like it that month. I'm like, well, that's not the way things work. so we got to figure out what's fair and equitable. But also, you know, it has puts and takes in it. You're not going to win all the time, but you shouldn't lose all the time either.

. You know, Matt, You really laid out a good vision for this.

Mike Koelzer, Host: Do you have a vision on top of that? I mean, I'm saying let's go with the one you have. That's great. Is thereis there a panacea out there for healthcarefor, healthcare or like we talked about earlier, it's always a give and take. It'sit's the love of the patient, but it's financial. I mean, it's all give and take.

There's a lot of gray. And that's, I guess, you get in, you do your thing for your career, you try to make it better than when you came in, but I suppose there's not a 

solid answer across the board. 

Matt Gibbs: No, and I mean, know, they just can't lock in and actually see it come to fruition. So I, and again, I think this is the practical pharmacist in me that I'll never leave my, my DNA, is that. I see, okay, I gotta get this done by 1. 1. Am I thinking about what we can do, you know, 7. 1 of 25? 100%. But it's not relevant unless this happens.

And myAnd my, my operational nature tells me that whatever I execute on January 1st will only make 7. 1 more viable and better versus let me get distracted because this is the new shiny object. And I, I think this is the kind of project that allows me kind of. By phase and iterative process, continuing to evolve the vision, but not just rinse and move on to the next before things have really, really developed.

maybe the vision isn't totally right, which I don't, probably isn't. There's probably something wrong with thisin this, right? But figure it out and we'll pivot, we won't change and move to the next shiny object. As I said, it's just very important to me that you finish what you start.

Mike Koelzer, Host: Well, I got to believe a lot of visionaries are not as visionary as they think, or they want us to think, because I imagine a lot of them, they're not on to something better after they conquered the middle monster, they're losing to the middle monster, or they don't know what the hell is the next step, so they just create a new vision.

And then it's like, well, they didn't 

fail. they changed their 

Matt Gibbs: right. 100 percent true. I, I think I, I, I laugh at that sometimes, but again, those people all have, uh, private planes and more than I do, but that's okay. 

Mike Koelzer, Host: Well, golly, Matt, thanks for joining us today. As we wrapped up here, we talked about the dirt and the clouds of vision, but getting things done, I think you have a really good mix.

I can see why Blue Shield chose you for that position Matt. I know you're a busy guy. I appreciate you spending time with us and I wish you and Blue Shield all the best.

It'll be fun following you guys to see what , 

Matt Gibbs: Great. Thanks for having me and love to come back and hopefully have a good success story to tell you about.

You've been listening to the Business of Pharmacy podcast with me, your host, Mike Kelser. Please subscribe for all future episodes.