Empowering Patients with Digital Prescriptions | Chris Blackley, Prescryptive Health

Transcript Disclaimer: This transcript is generated using speech-to-text technology and may contain errors or inaccuracies.

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

Chris Blackley: Um, Chris Blackley, I'm the co-founder and CEO of. For Prescriptive Health, and we are a technology company that is focused on the US prescription drug market. And today we're talking about the, the macroeconomic, function and dysfunction and financial incentives of the US drug system and the reason Americans pay so much for their prescription medications,

The problem we're trying to solve, just to be really precise. Is making it so that patients can afford their medication at the pharmacy counter. I'm not a pharmacist. I'm not even a healthcare expert, but technology has transformed just about every other industry except for healthcare in the United States. And so there's a massive opportunity and when you look at what actually is the core dysfunction of the US drug market, technology can play a critical role in that.

We often look like a pharmacy benefit manager, and there's a reason for that. We look like a consumer technology company, and there's a reason for that because you're not gonna solve the problem with the US drug market and prescription drug costs in the us. By simply remodeling the house, the house is rotten to the core.

It has to be raised and rebuilt, and so that's what we're doing.

Mike Koelzer, Host: It seems to me that there are some people that might benefit from the opaqueness of. The industry and sometimes that opaqueness might come about by not having the best technology or trying to obfuscate things a little bit by not making it real easy to get in and check prices and different things like that. Do you think that every company is doing their best to move technology forward, or do you think that some don't want that it's gonna hurt to have things brought to the light?

Chris Blackley: Well, you just hit the nail on the head when you talk about obfuscation. So when you look at the way. The drug market functions, it's actually operating perfectly in accordance with the way it's designed. And what I mean by that is you've got companies absolutely profit from the way the financial incentives are designed and don't want information. It's inefficient, but it's very highly profitable.

Mike Koelzer, Host: Sure.

Chris Blackley: And so if you look at the history of how it's evolved over the last 20 or so years, you've got two things that have caused this inefficiency in the marketplace that then creates massive opportunity for profit taking.

One of the things that's happened, I think folks are increasingly aware of, regulators have become sensitive to it and are focused on it. Employers are now aware of it. The consumers, I think, are aware but not as Educated yet, but getting there, and what I'm referring to is you've had consolidation in the distribution channel of the US drug market, and whenever consolidation happens in the distribution channel for any market, three things occur.

The manufacturer loses control over price. The second thing that happens is they lose access to their customer. And the third thing that happens is the intermediary that takes control of the distribution channel demands more of the value out of the system. And, I recognize this, and I relate to it because, in my background, I spent, before starting prescriptive, I was at Microsoft for almost 15 years.

And in the commercial licensing business, the vast majority, over 90% of our revenue came through resellers. And so what happens when you create a financial incentive? To a distribution channel to drive share growth, they're financially incentivized to consolidate because it becomes easier to make more money by turning around to the manufacturer and saying, Hey, if you don't give me a bigger rebate or financial incentive at the end of the year.

I'll take your customers to your competitor. Because I now have scale, I now can move the market share through my influence and the fact that I have a relationship with your customer. And so we experienced this,in my prior role and paid billions of dollars in rebates to the distribution channel to drive market share growth.

and that's what happens is they stop competing and they start consolidating. They stop driving market share growth, and they start aggregating market share. And then the economics flip, they demand more of the value. And the only way to pay for that increase in demand for extracting value is to increase your price.

And so that's what's happening. And you see it in the US drug market, and we now know about pharmacy benefit managers. There's a whole nother dynamic that's developed as they vertically integrated with the medical side but I think most people are [00:05:00] increasingly familiar with the consequences of that distribution channel concentration.

But the other thing that happened in parallel, Is the technology companies that provide the commerce and the information flow and the pricing information into that marketplace also consolidated. So you've got Surescripts that controls 95 plus percent of the electronic prescriptions, which is the most valuable and important data in this industry.

You've got the claim switch and the payment processors that run the payment flow between pharmacy and payer. They've now consolidated as well, and importantly, they're now owned. By the distribution channel consolidation. And so the source of information that allows buyers to make informed decisions about the most effective economical way to access medication, that information is now controlled by those who profit from the consolidation and control over the market and can set prices.

So it's the two things in parallel. And so for us, technology is a way to get the information into the hands of the patient so that when they get a prescription, they can understand. All the complexity makes it very simple for them to say, I can't afford this medication, but there's a bunch of alternatives or ways to get financial assistance and to afford my medication.

And so by empowering the consumer, you overcome that barrier.

Mike Koelzer, Host: One of the percentages that grabbed me when I heard it and it grabbed me now, was that Surescripts has a 95% market share. It seems odd these days that anybody would have a 95% market share.

Chris Blackley: Well,they did something that was very effective, in the early days. I actually, in my first, pharmacy technology company back in 1999, built a pharmacy management system. It was the first one that you could, one run in a web browser. I actually paid. Pharmacists, to pay for their i s D in line to, because none of 'em had internet access and

could access a web hosted pharmacy system.

So I went to the great links to make them internet enabled. and this was before e-prescribing. And so, I worked on one of the first, encrypted electronic prescription systems, to go to market in 2000, 2001, RX Hub came along. you had two networks that were developing and gaining share.

In, in, in gaining traction in the early two thousands. and it made sense at the time to kind of bring those two companies together, to accelerate the process. Cuz there was a lot of goodness to be had in electronic prescribing versus paper. But what happened along the way was the reason they've got such,massive market share is one that has very strong network effects.

And so what I mean by that is when you've got all of the prescribers and you've got all of the pharmacies on your network, or you've got critical mass, it becomes very difficult for anyone else to break in. Like, you don't need two electronic prescribing networks once you've got one. , and the other side of that coin is, If you don't have any prescribers, the pharmacies say, well, you don't have any prescribers, so why should I put the effort into integrating into your network?

And since you don't have any pharmacies, the prescribers don't want to do it, right? So you've got this chicken and egg problem in any network business that you've gotta be able to overcome. and then you couple that with the fact that Surescripts, this is the reason the FTC filed their complaint against him, a couple of years ago, is they had a,a, exclusivity, provision, exclusivity disc discount in their contract.

That said, as long as you remain exclusive to Surescripts as the pharmacy, you would get a discount on your transaction fees. And, if you ever changed from that exclusive relationship, that discount became something you had to pay back. So you can imagine over time, during the course of your contract that.

That penalty gets bigger and bigger, it becomes impossible for you as a small business in particular to, to stomach the idea of writing a check, to pay that back, in order to use another service, which arguably could be the same as what you already have.

Mike Koelzer, Host: yeah. And who really cares? I mean, it's not like you want a different style of car or whatever. I mean, if it's working, that's like the last thing you're gonna be shopping for.

Chris Blackley: right

Chris Blackley: So I think it's important to understand the role of the prescription in the patient journey because it's the first indication that there's a diagnosis. It comes in much earlier than all the medical data that comes. That's got a significant lag. It's the thing the patient cares about getting on therapy, whether or not they can afford it or not.

It's the thing that unfortunately prescribers don't get any feedback on. They throw it over the wall to the pharmacy and they get no indication back that the patient goes to the pharmacy. Did they pick it up? Was their

problem. And so the [00:10:00] prescription and the experience that the patient has with that prescription is really important.

And one of the fundamental issues that we have in healthcare today, because it's not a two-way conversation. The patient doesn't know anything. You get a prescription. What's the, what does your doctor ask you when he writes you a prescription? Or she, when your doctor, he or she writes you a prescription, what's the question they always ask you.

It's, where do you want your prescription set

and how do you answer it? You don't know anything other than where it is located and it's the one convenient for you to pick it up. So convenience is the only consideration that you're taking into account when you're asked that question. It's not, do they have it in stock?

Is it affordable? Is there a less expensive alternative? Is there a place that I could go to get financial assistance? You don't know anything. and so we used to give you a piece of paper that you could take and it was your job to figure out what's the best way for me to get it filled. You probably made some phone calls and you would quote, unquote, shop and get a form informed.

That doesn't happen anymore. You get a prescription, they ask you what's most convenient for picking it up. You show up at the pharmacy counter and that's where everything breaks down. It's not covered. You can't afford it. It's not in stock. There's no information and whose job is it to fix all that?

It's the pharmacist's job. And so that's why 10% of all prescriptions get abandoned at the counter. The patient walks away. And 300 billion in medical expenses accrue because 300 billion of medical expenses accrue because that patient ends up in the doctor's office or the hospital. And it's completely avoidable If the patient just understood wh what are their choices, what are their options?

And that's the problem that needs to get solved. and when we go all the way back to the beginning of the conversation, The information exists, they just don't want you to have it.

Mike Koelzer, Host: Well. And back in the day, it was always kind of promised to pharmacies, this is 20 years ago, 15 years ago, where,the doctor's gonna have all this information and they're gonna know what insurance is covered and what needs prior authorization and kind of the stuff that you're talking about.

And we just see these weird prescriptions come in where you can tell that. the doctor was either on his way to the golf course or didn't wanna deal with the technology part of it. And so you can just tell that, you know, a 17 year old office staff was picking which drug?

Cuz it's some dosage form that you never see in this kind of thing. So it was kind of all promised years ago. and then it just went nowhere. And in what you're saying, it was all put in the pharmacy and then people walked away because those questions should have been found out earlier, but now it's sitting there with people walking away from it.

Chris Blackley: Yeah, and it's not unintentional. The decision support in the prescriber's office is designed to steer the patient, and it's designed to steer the prescriber. I mean, first of all, I think it's an unreasonable expectation that the prescriber bears all of this in their workflow. The prescriber doesn't have time to turn their screen around and go shopping with the patient.

and not only that, but the patient, the information that's being presented to the prescriber in that scenario is UNB is biased. The data. That is coming back in. The benefit check is the pharmacy that the PBM wants you to use. Well, guess which one it is? It's the one they own. It's the drug that they want to be prescribed.

So guess which one it is? It's the one they're getting the biggest rebate check on. So by the time the, all of the information is presented to the prescriber, first of all, they don't have all the information. they don't have the expertise of the pharmacist. In many cases. They don't have the information that allows them to make an unbiased decision with all of the information.

And so it's not surprising to find out that the prescription gets to the pharmacy and everything breaks down. And what's missing in all of this is the consumer patient. They're not involved in any of the information flow or the sharing of information or the decision making. And they're the ones with the vote, with the greatest interest.

and if anyone's confused, the patient is a payer today, they have become a payer. We are pushing more and more of the cost. Onto healthcare consumers through high deductible health plans, larger deductibles, there's more and more of the cost being pushed to the

consumer. 

I went from paying zero for my medical care to paying over $35,000 a year through high deductible health plans to get to my first full dollar of coverage so that the patient has more interest, we're giving them all of the burden.

But none of the tools to make informed choices.

Mike Koelzer, Host: As a business owner, if I'm part of that, Obfuscation, I'm okay. Like if I'm a car dealer and someone set it up that they said, uh, you just have to get this car and you have to get it from Mike and you know, [00:15:00] no choice of color, no choice of anything, and just buy it from Mike.

It's like, heck, if I could manage that. But the problem is these decisions are being decided by these large,companies, that don't add any value

Chris Blackley: I think that's a very common opinion and perspective nowadays. Early on when pharmacy benefit managers were. Emerging in the market. They had a role, their role was to administer and make sure that the payment occurred in accordance with the rules of the benefit system.

Right. And, it was probably mostly done by fax at, in the earliest days. and that created value, right? It allowed benefit plans to have to scale. It allowed employers to focus on what they did best and it allowed us to provide the benefits to the employees and to rely on the system to be efficient.

and at the same time,when you look at what's happened now in the. The business model, how it's evolved through, aggregation of the buying power of the employer and payer,and the role that they play today. I think that's right. and I mentioned earlier the important consideration of vertical integration.

These organizations now are part of the health plan, right? they're vertically integrated with three of the largest health plans in the country. And what's happening there is, when they say that if you regulate PBMs, your healthcare costs will go up. That's a true statement. It doesn't have to.

but it will. and the reason is because what they're doing is the pbm, the pharmacy is the most profitable business in healthcare, pharmacy benefit management is the most profitable business in healthcare. What they're done is they've taken the highly profitable business unit of pharmacy benefits and drug costs and profit, and they're subsidizing the medical side of their insurance company.

Because , if you can improve the margin on medical insurance by a point or two, you're doing really well. The market share that they own on the pharmacy side is 30, 35% on the medical side, the largest one, the three largest together only represent about 35% of the market.

Mike Koelzer, Host: Why is that, Chris? There's more players and there hasn't been as much consolidation.

Chris Blackley: more players, it's more fragmented and it hasn't consolidated as much. So what you do is you take the profit from the pharmacy benefits business, you subsidize the medical premiums on your medical business and take share. Because if you don't own one of the PBMs, you can't compete on price because you can't subsidize your medical premiums with that profit.

So you take lives on the medical side. You push them to your pbm, which creates more profit, which allows you to subsidize the medical premiums, which puts more lives into the plan, which then creates more volume on the privately profitable pharmacy. It's the best business flywheel ever invented.

Mike Koelzer, Host: Because if they're subsidizing, then they can make those medical procedures less cost and they pick up market share that way too.

Chris Blackley: They just lower the cost of the premium, the medical premium

of the monthly insurance cost. So, they bundle. So you don't get to buy the low premium medical insurance unless you bundle it with the pharmacy benefit. And so you force the plan onto the bundle. You drive profitability on the pharmacy side that allows you to reduce your medical premium and compete in the market on price with the bundle.

and just to be really clear, that's. The definition of anti-competitive behavior, leveraging your monopoly market power. So that's where when I talk to regulators and policymakers about, what can we do? It's, yes, we need to fix things like mandatory mail, order, DIR fees. Those are important consequences of the system.

They're not the root cause. The root cause is this monopoly power that's driving increased consolidation in the market and this flywheel of. Fact, where you've got vertically integrated organizations that are taking monopoly power to force the purchasing of bundling and tying of these two products to one of them, that is a monopoly.

Mike Koelzer, Host: Yeah, there you go. Because if you don't have that bundling, then you've got the monopoly, but you've got other players and not fine, but you have enough competition. But you could have hundreds on the medical side. but if they're all batched together, you don't have the option. and 

Thus there's a monopoly.

Chris Blackley: The outcome is absolutely certain that you're gonna have increased consolidation on the medical side of the market, and that's gonna be bad for everybody. And the reason is because those who don't own one of the three PBMs can't afford to subsidize their medical premium, therefore, they're gonna be more expensive.

So what's an employer gonna do? An employer is going to [00:20:00] buy the one that's less expensive, and those who don't have a vertically integrated PBM solution that they can use to subsidize their premiums are gonna lose. it's a foregone conclusion. So we really need to scrutinize this, the behavior of leveraging the monopoly and the profit from the pharmacy benefits side of the business to take share on the medical, because yes, medical expenses are going to go up.

Mike Koelzer, Host: Is that all government? they're gonna make laws against it and so on. 

Chris Blackley: Well, it's already illegal to use monopoly power, for anti-competitive purposes. We just need them to enforce it. The hope is the FTCs doing their investigation. Nobody really knows yet what they're gonna come out

with, but my hope, and I think a lot of people's hope and ambition would be to say that they're gonna figure out how this relationship between the vertically integrated two sides of the business work together to drive out competition.

And it's on both sides of the market. They've already consolidated market power in the pharmacy. They're going to do the same thing on the medical side.

I can tell you my own experience,my own experience. When I worked at Microsoft, we were an adjudicated monopolist and there were things that we operated under a consent decree with the Department of Justice. And I wasn't there at the time when all of that happened, but I had to operate under it.

And, we had to open up elements of our platform to our competitors. There were things that we weren't allowed to do. We were subject to very strict scrutiny,and things that we couldn't do in order to block our competitors out of the market. And so it's very realistic. , and it's very effective.

and it's appropriate, particularly in the context of healthcare. And it's, it's very easy for us to sit up in our offices and talk about population health and talk about populations of people, but this is very real. Impact on an individual basis. And this is my, I'll share with you my story of how I keep this in mind.

And I was not personally affected by this, but I think it's very important to understand the context of how this affects very real people. In 2018, we started our company in 2017. And in 2018, my motivation for the company and what we were trying to accomplish and our mission changed. I read an article, and you can search this online, just do a quick search on Heather Holland.

And in 2018, she went to the doctor. She was sick, so she was prescribed antiviral medication for the flu. She went to the pharmacy and the medication, she had insurance. The medication was gonna cost her $116. She walked away whether she could afford it or not. She found that price to be unacceptable, and she passed away two weeks later from complications of the flu.

She had two kids. She's a school teacher. That medication at that time was available for $35. Why did it cost $116 out of pocket under her insurance plan when it could be paid for $35? 

 That's absolutely true. Unacceptable. So we talk about population health, we talk about everything in large numbers, but this affects real people, individuals, on a case by case basis.

And that's enough. If you just fix it for one person, that's enough. it should be completely unacceptable. That decision could be made for purely profit reasons on a medication that costs someone their life. So this is a very real problem. And so you can look at FTC investigations and DOJ actions against other organizations.

If there's ever a case to be made for intervention to prevent further consolidation. It's got to be in healthcare.

Mike Koelzer, Host: Chris, how much has the gag clause removal helped this situation 

Chris Blackley: it's difficult to put it into quantifiable terms, but I think if nothing else for the pharmacies and the pharmacists. To know and have information and wanna do the right thing for their patients. It certainly opened it up for them to be able to do that. Just the idea that you could go to a healthcare provider and they'd be prevented from telling you.

What options are available to get therapy that you need for your health?

Mike Koelzer, Host: And that's like your story. It's like the difference was there, but at the time, pharmacists weren't even legally allowed to

even say anything about that. 

Chris Blackley: Well, they could legally, but they put their business at risk, their own livelihood, their family's livelihood at risk. Because if the PBM decides to cut you off from 30% of your revenue next week by terminating your contract because you helped a patient get me access to their medication, then yeah.

That's the fear, right? , [00:25:00] they still live today. Fear that they're gonna have their business shut down for trying to do the right thing for their patients. So, it's absolutely helped in the context of empowering pharmacists to be able to do the right thing without living in fear of having their business shut down.

Mike Koelzer, Host: So, it was legal, it wasn't contractual. So legal in the sense that you're not gonna get thrown in jail, but it's not contractual and it would break the contract.

Chris Blackley: Yeah, and I, I'm sorry, but I'm a lawyer so I get

very pedantic on these things

Mike Koelzer, Host: I know you are.

Chris Blackley: I, and I'm not giving legal advice, But yeah, you could legally do it, but you would potentially be in violation of your PBM contract and when your PBM contract generates 70% of your revenue, because they have the contracts in, in our area, they have the contract with Microsoft, Starbucks, Boeing,

Amazon.

If I can't take a prescription from a. Employee or a family member from one of those companies. I don't know how to make money. 

 I think the legal restriction precluding those contracts from preventing pharmacists from doing that has helped pharmacists be more empowered in helping their patients. The thing that's still missing is giving that information to the patient at the point of care, or even better at the point of prescribing, so that they don't walk out of the doctor's office with a prescription that can't be filled or that they can't afford.

 You're relying on a pharmacist who's. Behind the counter trying to do everything that they can to get everything out the door today with people standing at the counter, waiting on them over overworked, insufficient resources. And then you're going to expect them to have all the information for every patient scenario that walks in the door to be able to help them afford their medication.

And those who do have that ability and or when you do recognize that option and can give it to the patient, that's great. Now you can do it without. Fear of having the PBMs boot on your neck. But I still think there's this massive gap of patients actually knowing what those choices are, not having to rely on the pharmacist to just fortunately know about it and have a happy surprise.

The pharmacy counter.

Mike Koelzer, Host: Okay, so Chris, you had this idea to get this information more to the patient. Was it clear in your head what it was going to be right away, a SAS program and a handheld, this or that? Was that clear right away? Or how did that evolve then to solve this problem 

not only in theory, but solve it when you've got someone who's got their nose running and dripping on the handheld because they've got the flu and all this kind of stuff. So how did that come 

Chris Blackley: Right. 

Mike Koelzer, Host: then?

Chris Blackley: In 2017, my co-founder Kevin and I sat down in a conference room for about nine months and we whiteboarded it all out and we had a room with no windows, whiteboards all the way around it, and we had this massive spaghetti drawing of.

All the information and money flow in the ecosystem 

Mike Koelzer, Host: Did you know enough

about it? Or did you have somebody that had to share information on the ins and outs of some of the PBM stuff in that.

Chris Blackley: had prior experience from my earlier company where we built, we had to build out the payment system and all of that for pharmacy. So I had a lot of context and expertise, particularly on the data and the payment flow and the technology. And then you look at the payment model of the third party payer model.

And then we did research. We talked to a couple of economists that had been studying the market for years, for like 10 or 15 years and had written papers on it. We found white papers and reached out to the authors of the white papers and did a whole bunch of research for nine months.

and we made a couple of conclusions at the end of that. And I still have pictures of the whiteboard and one of the pictures has a. Stick figure at the doctor holding a mobile phone. And that was the kind of critical component that said if we could get information to the patient on their mobile device in real time.

So you get a prescription and five seconds later you get a text message and that text message. Gives you the patient everything you need to know. Is your drug covered or is it not? If it's not, what drugs are covered? Is there an alternative therapy that could have an equal outcome but less expensive?

Where can you get that medication in the least expensive way? Is there financial assistance available? Should you pay cash instead of using your plan because it's less expensive? Cuz most people don't even hit their deductible. 

It's a multidimensional problem. But if you give that information to the patient at the point of care before they stop talking to their doctor, the belief was they would engage their prescriber and say, hey doctor, how come I shouldn't get this medication instead of the other one? You would change behavior by giving the patient information, and that's, [00:30:00] I've been told by somebody that I respect very highly, that's been in this industry and in healthcare at the most senior levels for decades.

The only way to reduce the cost of care healthcare in the United States is. To change behavior, change the patient behavior, and change the prescriber behavior. So that was our big bet. If you put that information on their mobile device in seconds before they stop the conversation with the prescriber, you could change behavior.

And we've proven that out. We've proven that when we intervene with a text message before they stop talking to the doctor and get to their car, 50% of the time, they will take a different path because that allows them to get on therapy. That's a massive conversion rate. If you could eliminate 50% of the 300 billion of avoidable medical expenses, you've taken 150 billion out of the healthcare system and it's all doable.

So that was the genesis. That was the big bet, was that we could give that information on the patient's mobile device in the moment. Before they left the doctor's office and everybody said we were crazy, no one's ever gonna use their mobile phone for healthcare. You fast forward through a pandemic and now everybody's using their mobile phone for healthcare and the challenge becomes getting the information, getting the data, and because it's consolidated in a few companies that are owned.

By those who are profiting from it.

Mike Koelzer, Host: Chris, you've obviously proven me wrong cuz you're a big successful company, but even being a pharmacist, and maybe I'm trained to, always feel like a step below the doctor, but it just seems to me that when the doctor comes in, and again, you've proven me wrong, but it seems when the doctor comes in and say, Mike, we're gonna do this for you and this and this. For me to take my phone out. I mean, I'm not gonna say who it is, but I've been married to her for 35 years. But, when she needs to take a picture of something, it takes 45 seconds to get the phone set up and all this. And so to think that, let's say my wife, to think that she's gonna say, hold on, doc, take her 45 seconds, pull this up, do this, do that.

It seems to me there's too much stress in the situation to do

Chris Blackley: Yeah. 

Mike Koelzer, Host: If the doctor was in on this, in other words, if the doctor wrote into the computer and then you know, it goes to the person and it texts back and so on, I can see them doing it. And it seems like the doctor has to be in on it somehow in order for the text to even go to the patient, or is that all at a clearing house and the doctor doesn't have to necessarily be in on it, he just has to have that information in the cloud somewhere.

Chris Blackley: Yeah. Great question. There's a number of mis. Perceptions as it relates to the use of mobile technology and consumers in healthcare. First of all, one of my favorites is, well, what about people who can't afford mobile phones or can't afford, right. First of all, the folks who are in the lower end of the income spectrum actually rely on their mobile phone for the internet.

It's their only source of internet. So they are masters. They are masters at using their mobile

phone. 

So it's the thing that they rely on. So that's one of the misperceptions in use of the mobile phone for healthcare. The other is the use of mobile devices by older people.

Demographics and elderly. The numbers on that flipped about four years ago, and the pandemic accelerated it. So the use of digital technology and mobile devices. And there was a recent article in the Wall Street Journal about the accelerated adoption of wearable devices by,elderly as well.

So that's a misperception as well. and then we've proven it through our own user experience. And, the folks who, who use. This and experience it for themselves. Like I said, 50% of the time with no other intervention, the patient makes a change. In order to do that, they have to engage their prescriber.

That's with no other information. They get a message, they click through it in three clicks, they're done, and they ask the prescriber, here's the benefit to the prescriber. And one of our clients is a hospital system. So we work closely with the prescribers. But in, in the case of today, the way the system is designed, You work through your EHR and for every single patient you work through this workflow to try to solve this problem, every single prescription, every single patient for which you're prescribing.

The reality is 90% of all prescriptions are for generics. a health plan that is dispensing 90% generics is doing quite well, and that's really kind of the target. So 10% of the prescription volume drives the cost. So the opportunity is really to only affect a small percentage of the total prescriptions being written, 

which means that why do we have the doctor look at every single prescription to try to solve this problem when the reality is if you just give the information to the patient, they'll tell you they need help.[00:35:00] 

Let's just fix it for those who need the help, where it's not working, where it's broken, where they can't afford it, or where it's not right, instead of putting the burden of the entire system on the prescriber and the pharmacy to fix it. So you actually reduce the workload by focusing on where the system is breaking, which has a big financial impact, massive personal impact if you're the person who can't afford your therapy and needs it, and where the dollars are instead.

Injecting it into the workflow for every single prescription written for the prescriber and the pharmacist.

Mike Koelzer, Host: So if the doctor writes five or six prescriptions to a patient that information might only pop up for the one prescription that's more expensive or harder to find or something like that.

Chris Blackley: That's right.

Mike Koelzer, Host: With that said, thinking a little bit more about it, like in my case, if the doctor writes something for me let's say I had a migraine or something, I'm pretty sure when I walk outta the doctor's office, it's probably gonna be successful.

I might have a little trouble doing it. I might have to drive around, but I probably can afford it, or afford something in the class, at least a generic one. And I'm gonna come up with it. But I can see if I'm somebody there and I can't afford my medicine and the doctor gives me something and it pops up, it's highly likely I'm gonna make the doctor wait and say, now wait a minute.

If I walk outta here without checking this text, I may never get this medicine. And so I can see that value there, somebody pushing it until they have success with it.

Chris Blackley: That's right. and what we've learned through feedback, from patients who experienced this is it becomes very sticky. kind of relate it to my experience with Uber. So I was a very late adopter of ride sharing. First of all, I wasn't traveling a lot until the last few years.

And so I ended up in New York and needed a ride to my appointment and I was running late. And so I very quickly realized that my best case scenario was to download the app for the first time. log in and call an Uber. And I got in the car, it was raining, I was gonna be late, but what I knew when I got in the car was what time I was going to arrive.

I didn't know that before when I called a cab. And so I knew what time I was gonna arrive. I was able to text the person I was meeting with on the other side of Van Manhattan, telling them what time I was gonna be there. I was gonna be there five minutes late and my stress level went down and then I got out of the car and I just shut the door and walked into the building.

And that's when the light bulb went on for me. This is a fundamentally different experience because I knew everything. I knew where the car was before it arrived. I knew what time I was gonna arrive. I was able to tell my appointment when I was gonna be there. My stress level went down. I didn't have to fumble through my pockets for my wallet.

It was a different experience. And that's the same thing we get in the feedback from users is that as a patient, I know before I get to my car, That I'm gonna be able to get on this medication and how, or I know that I've got an issue and I'm probably already problem solving it with my prescriber, or I'm gonna have the conversation with my pharmacist when I get there, or I'm calling my insurance company to get it resolved.

And so it's a fundamentally different experience because you now know things you never knew before you know you have a prescription and the pharmacy's probably already working on it.

People didn't even know, like you don't even know that it actually got there.

Mike Koelzer, Host: right.

Chris Blackley: You assume that it does, 

but sometimes it doesn't.

Mike Koelzer, Host: And the payback on that is instantaneous. It's not like three weeks later you found out Uber was good because you didn't have to

mail 

in the invoice or something. it's like right there. You realize the benefit.

Chris Blackley: right? And so what we've learned over the course of time is that patients that now have this expectation for that experience, they want to know, okay, even when we send them a message that says that drug is affordable, you got a great price, and it's at the pharmacy.

They didn't know that before. And so we've had users tell us, I had an issue where I couldn't get that the prescription didn't go, and I drove away from the doctor's office realizing I've lost something that I had and now I miss it. I want to know all of that information. I wanna know that I can afford my medication before I show up.

So there's this sense of loss that occurs when you can't experience that information 

in the moment. A sense of confidence building.

Mike Koelzer, Host: So Chris, you're sitting in this White Boarded room and you have all these ideas up there, and obviously it came to fruition because we're sitting here talking now. What was the biggest misconception you had that you and your partner were there and you thought, well, of course people do this, and in reality it was quite opposite of that.[00:40:00] 

Chris Blackley: Yeah. I think if I were to pick one thing, I think we missed. You know, we learned a lot along the way. So I reserve the right to be smarter tomorrow. but I think we underestimated the willingness of the employer to embrace change. the employer pays the ultimate bill, and the costs have become inordinate and unmanageable and it's only going to get worse.

I was told the other day that 50% of all products coming to market in the pipeline are specialty medications. So everyone should just expect the cost to go up. Cause that's going to happen. So natural. Human response, rational behavior of an employer who's paying for all this would be to embrace opportunities to reduce their cost.

and I think that's one of the reasons we're seeing regulatory scrutiny as the employers are getting more and more fed up and they're putting pressure on their political representatives, and legislators to do something about it. But, there was some research that came out, I think it was last year that showed, and I'm gonna round the numbers off.

But something around the, in the neighborhood of 85% of employers don't trust their current pharmacy benefit manager, but only about 15% ever change them. So there's a disconnect there. There's a dissonance in that understanding and that behavior that's somewhat irrational. And so I think we underestimated.

What it would take for an employer to embrace change in order to be able to take control of the situation. Cause at the end of the day, the employer is the strongest influence in driving change in the market cuz they hold the purse strings. And so, if I had a magic wand,I would waive it and give all the employers the courage to work with organizations and companies that can demonstrate quantifiably how to reduce drug costs, not just for their plan, but for their employees.

Mike Koelzer, Host: Chris, so. Let me take a stab at this and see if this is the reason where you get a company that's been working with a broker forever to buy their insurance and it's bundled, and the broker comes in and says, here's the plan. This year it went up 10%, but we did this and this, and we've still have the best deal because we're getting 40% off of this and all this hieroglyphics they give the owner, the owner says, okay. is that , the hurdle that you have to get through is that the relationship that is the strongest bond for somebody not changing?

Chris Blackley: That's part of it. For sure. First of all, many of these teams, the department, the HR departments within these organizations are small teams and they just don't have the resources. This is a very complex business, a very complex purchase. So anytime you've got a market that's got a very complex product between the buyer and the seller, you end up with a broker whose job it is to assimilate the information and make it easy to execute, right?

So that's what you have in this marketplace. And these small HR teams have many responsibilities and priorities, and they don't have the deep expertise in, in how to be or how to the time to become an expert in this. So they hire a broker. And the fact of the matter is, some of these brokers are paid by the company whose product they're pushing.

And so you've got financial incentives where they're not actually looking out for the best interest of the employer. And that's not everybody. you've got a lot of brokers out there that are pushing hard to, to drive change and to do the best they can for their employer, clients as well. But it, but the other exists too, and I think it's important to accept and acknowledge that as well.

So you've got the, the, you've got the focus and the priority of the HR benefits team, understaffed, difficult, complex product. You've got a broker, consultant organization and entity that sometimes is in conflict with the best interest of the plan. and sometimes they're trying to get through as many deals as they can in order to get it done.

But that's a big part of it. I think that, the more you, the more the expense goes up, the more the CFO will get involved. Interest will align. It becomes the right priority, and people will, we'll go to the thing that's most important.

Mike Koelzer, Host: Chris, then, where do you guys break into this market? What link? Do you have to break or, or get inside of?

Chris Blackley: Yeah. So in, I shared that in order to deliver that, Consumer patient experience at the point of care, you have to have access to all of this information. And it's a, it has to be a very personalized experience because you're talking about what is the price for you with your benefit plan at a pharmacy.

There's a whole bunch of very specific, precise things that require actual data for [00:45:00] you in your scenario at your pharmacy, in your plan. And a lot of the companies that have that data don't wanna share it for all the reasons we talked about. So for us, one of the biggest challenges was we needed to figure out how we get access to that data to be able to create that experience.

So we necessarily became a pharmacy benefit manager. So that allows us. To set prices, have access to the data, understand the benefit plan, inspect that, and create that personalized experience for the patient in the moment while they're still at the doctor's office. So we did that out of necessity and then built all of the commerce infrastructure to support that experience.

and it's a very complex, expensive commerce platform. To give you a sense of, kind of our experience in, with my co-founder Kevin and I, that business that we worked on together at Microsoft was a 45 billion business. And that's the scale of commerce capabilities you need for the US drug market.

So we built that, we built all of the core financial, prescription, adjudication pricing. Eligibility, benefit administration, all of those core transactions, we own the bottom of the stack from a technology perspective. We own the data, the system of record for that. Then we put the consumer experience on top of it, and we went out.

We built relationships with the pharmacies. We have a contract directly with 63,000 pharmacies throughout the country. We directly contracted with pharma. We directly contract with the employer. So that gives us a full ecosystem that is end to end on a single commerce infrastructure to deliver that unique experience that's personalized to the patient at the point of care.

So that's what we had to do to break in.

Mike Koelzer, Host: double's. Advocate, Chris. The broker still goes in and they've got these, vertical integration healthcare plans. How are the employers able to say, carve out the pbm? I wanna go with prescriptive health. How do you get into that carve out 

when 

they're selling these as bundles?

Chris Blackley: It's very hard. and we're not the only ones that face that

battle. 

Mike Koelzer, Host: everybody is,

Chris Blackley: there's a number of benefits, administrators benefit,managers out there trying to help solve this problem. And that's the reason that I think that should be a focus of the FTC investigation is because the solution to the problem is competition.

And if you're blocking competition with the bundling, you're making it difficult for price to find a new equilibrium. Prices artificially inflated by 30% because of this. If you wanna bring it down to a new equilibrium, open the market to competition, which allows buyers, the employer to understand what their options are and make efficient purchasing

decisions.but that is the barrier. So it's extremely hard and it takes. It takes an employer to have courage to unseat the incumbent that they've, that's been ripping them off for the last five to 10 years. It takes courage to trust a new partner that can deliver a great employee experience so that the CEOs spouse isn't gonna call them from the pharmacy counter and say it's not working.

It takes courage to do those things, but I think we're seeing it. I think the market's evolving. If you asked me, when we started in 17, everybody said we were insane. It would never change. I think most folks now acknowledge that there's enough scrutiny, there's enough. intolerance for the system.

It is gonna change, but it's very hard,

Mike Koelzer, Host: Are there enough? Just like our little pharmacy is not mentioned on the back of certain plans, they'll say, CVS, Walgreens, this and that. Are there enough healthcare plans outside of the big three vertical integrations that you can bundle with?

Or are most of your, uh, customers from a carve out of the big three?

Chris Blackley: I would say. It's a mix. I mean the big three obviously control what the last number I saw was like 82, 80, 3% of the market. We've done a number of mid-year conversions where they fired their incumbent and moved over and so they do. and there's plenty of incentive to do so, and we've had somewhere we just couldn't compete.

And that's okay too, right? If they're getting a great deal, they're getting a great deal, I think for us. One of the things that gives us an advantage is that I don't need to be the pbm. our patient experience that delivers a 15 to 20% cost reduction to the plan sponsor can work in partnership with who, whatever PBM they have or whatever PBM they want.

Because what we're doing is we're driving formulary adherence and optimization so that the patient's making a better decision, which is good for the plan. It's good for the PBM and it's good for the patient, and it's good for [00:50:00] the pharmacy, and it's good for the doctor. So we don't aspire to be the biggest PBM in the market.

Our objective is to empower the patient and get the patient to the right therapy that they can afford. We do that on our PBM because we have the ability to do that, and we own the infrastructure we operate. Our platform for other PBMs. We have PBMs that run on our platform where they're the PBM and we just do the back office.

And it's our patient engagement experience that drives the economics of that for them in a positive way and for their clients. And I'd be more than happy to work with folks who they perceive to be our competitors. But don't have that ability to engage the patient at the point of care in order to drive that last 15 or 20% in savings.

Mike Koelzer, Host: Do they put their own stamp on it and so on?

Chris Blackley: Yeah. they'll put their own stamp on it, but we do retain the prescriptive powered element of, part of the experience because what we're doing is we're delivering that to the consumer. we actually give the patient, when you get your prescription in this way, we actually give the patient control of the prescription.

So before it gets to the pharmacy, you have control of it. You have all this information. You get to pick your path instead of just saying, Hey, send it to the pharmacy and I don't know anything. You're actually getting control of your prescription on your phone,

Mike Koelzer, Host: Oh, I

Chris Blackley: Then you make choices.

And that patient, that experience is prescriptive,

Mike Koelzer, Host: I got you. you're not chasing down where the script was sent to. it's, you have it and then you're actually probably not sending it, but you're then authorizing where it should finally go to.

Chris Blackley: That's right. we are sending it and if you take that paper prescription, you used to get, digitize it and put it in your phone, that's what we've done.

and that's our intellectual property that we built that allows this experience , and for other companies to build on top of it, to create unique experiences for the consumer that, that, 

can't be done today.

And so, so, yeah, so , my chief marketing officer calls that our technology ingredient. It's kinda like PayPal,you know what PayPal is, but there's, how many commerce companies out there have you interacted with? Where it's their brand, it's their store. 

Mike Koelzer, Host: Yes. 

Chris Blackley: know, but you know who PayPal is,

Mike Koelzer, Host: All right, so Chris, let's say you've got the big three vertical integrations, and let's say they don't wanna do a carve out and they don't want anything to do with prescriptive health, you still might be in that path somehow because it might be one of the big hospital systems.

Chris Blackley: right?

Mike Koelzer, Host: Want to use your stuff and everybody's gotta work together.

To kind of piggyback onto this, even though it wasn't the vertical integration that chose it, they've gotta work with it because the biggest hospital system in the city or something wants to use prescriptive health as the technology part of things.

Chris Blackley: That's exactly right. and how health systems are a particularly interesting scenario because they have all the incentives to drive patient engagement, patient capture, patient retention, patient interaction to, to deliver a full patient experience, for that, for that patient in their health system.

And so you just nailed it. , and there's no downside to one of the vertically integrated organizations in that scenario because. we're actually helping them drive formulary adherence to the extent that that's possible with what the therapy is that the prescriber's trying to drive.

So there's no winner and loser in that scenario, but it absolutely can be a significant value add to the health system who has a digital strategy, which they all do now,

And so getting that patient engaged in their digital front door, as they call it, is really important to the health system.

And the prescription is oftentimes the thing that they're trying to manage as a patient that creates the most value at an opportunity to do that.

Mike Koelzer, Host: back when the fax machine came out, it was useful to nobody if you were the company that had the first fax machine, cuz there's nobody 

to fax to 

Chris Blackley: That's right.

Mike Koelzer, Host: Prescriptive health, does it do any advantage? Like, let's say we're in some city that you have not touched yet. Is there any advantage to a pharmacy having it or is that like the owner of the first fax machine?

It has to really be in the healthcare system to make it fruitful.

Chris Blackley: It's a really good question. What you're getting at is,what I characterized earlier is the chicken and egg problem, right? It shows up in, in your Airbnb or, Uber, all of these network business models have this problem where if you don't have any listings, you can't get any customers.

If you don't have any customers, you can't get any listings. Well, if you don't have any prescribers, you can't get any pharmacies. If you don't need pharmacies, you can't get any prescribers. So that, that, that's the reason Surescripts has control over the prescribing market. So the short [00:55:00] answer to your question is no.

This is really about consumers. So, we did, we put a lot of work in the first few years of building out the technology to integrate into and meet everybody where they are today. So you could go to the doctor today. And you could say, send my prescription to prescriptive. And if you do that, and most likely I would be willing to bet that the phone number in your record in that prescriber system is your mobile phone.

And so if you do that, you're gonna get a text message in a couple of seconds and then pick your pharmacy and we'll get that prescription to your pharmacy of choice. And in doing so, we're gonna tell you whether or not it's covered what cash price is, whether or not there's a pharmaceutical coupon available to you.

We're gonna give you all those choices. So we started out by meeting everybody where they are so that you didn't have that chicken and egg problem and could deliver that experience. And over time, you basically have solved the problem of both sides of the network being waiting on the other one, 

Mike Koelzer, Host: For prescriptive health to work when you're with the doctor, is the starting line when the doctor sends it to prescriptive health. If it went to Walmart or something like that, is it ever tied in there too? Because you might not be aware the patient sent it, but you're tied into the healthcare system already, and so prescriptive 

Chris Blackley: yeah, 

Mike Koelzer, Host: to get involved even though it wasn't sent to them.

Chris Blackley: yeah. So we're working with the health system, which we do. Then we'll get it either way. If we are an employee in one of our benefit plans where we're administering it. We'll get it off of the claim and then we'll get it engaged on the next one. So we get it from every path. So that's the reason we had to invest so much into the commerce infrastructure is to connect into every pathway, whether it's on the prescription or the payment.

One of those two things is going to tell us. And then we can engage the patient based on whichever one we get first, whether we're the benefit administrator for the employer or we're working with the benefit administrator for the employer. We get that engagement through the enrollment process with the employee benefit plan.

And so there's all kinds of ways and places and we provide technology and services to pharmacies where we get it that way. So we've kind of , plugged ourselves into each one of the different pipelines. For the flow of the information to be able to get that in that trigger and that engagement with the patient.

Mike Koelzer, Host: Alright, Chris, so I've got a person on my team that. Is excited about 2024 because one of the things our pharmacy does is we don't carry any brand names. And so the dir stuff's a little bit different and stuff for us, so he's 

excited about it.

And I tell him, I'm like, don't hold your breath because I think what's happening, in the legislature, I think a great first step is at least clearing things up. Because then when you talk to legislators, their eyes aren't rolling around because they have no idea this chess game is happening.

And the simpler you can make it will make the legislators understand it better and then maybe make better laws. With that said, if they can think through this, what kind of things are coming down the pipeline as far as laws that help this out?

Chris Blackley: I'm actually more encouraged than perhaps I would've ever thought I would be a couple of years ago. What encourages me is my own personal experiences over the last year. I've been engaged and I've been to DC a number of times where I've been asked to come and speak with policymakers and their staff to just get educated on what this system is, how it works, and what are the levers that would make it better?

So I, I think the anti gag requirements, the d i r fee. fixes. Those are all good things. They should happen, but they're not gonna change the macroeconomic model of how the drug system works in the us. So it takes a willingness to fully understand it before you can find out what's gonna make the change work and be effective.

So my encouragement comes from the fact that they're putting in the time and the energy to understand it. I have spent hours with policymakers and their teams whiteboarding it out, redrawing what I told you was drawn in that room with no windows, and they're staying engaged. I believe they truly are committed to fundamental change of the financial incentives in the marketplace to make it work better and make it work for patients.

So I get a lot of encouragement from just the fact that they're investing that much time, and I see a commitment to figuring out how to make real change work. And that's gonna be more difficult, more complex, solutions than some of the things that could be done [01:00:00] very quickly. I always tell them three things.

First thing you gotta do is you've gotta give. All of the data passed legislation that prohibits holding back the data and preventing a payer from knowing what they paid on a per drug basis, on a per claim basis. All in all the dollars. What was my price?

Mike Koelzer, Host: And Chris, could that be the payer defined as the employer, but also the worker 

Chris Blackley: That's the second thing. make it illegal for them to prevent the patient from having the information 

too, 

Mike Koelzer, Host: is maybe the employer

Chris Blackley: the employer. 

Mike Koelzer, Host: the patient is the patient obviously.

Chris Blackley: right. That's exactly right. Make it illegal for folks to prevent that information from being mail available. I'll just give you my own experience.

I took my employees, we went from a fully insured plan to a self-funded plan, and our insurer refused to give me my transaction data, so I couldn't get underwritten for a stop loss policy because they couldn't underwrite it. they couldn't assess the risk. That should be illegal. I, it's like going to the grocery store and not being allowed to have your receipt so you can't shop.

So that has to happen. And then everything we talked about was about bundling and anti-competitive behavior. And I think once they get into that, I think then we'll really see, okay, there's a commitment to being able to make change here. and then I think with the FTC investigation, I think there's a lot of encouragement and enthusiasm, of what could come out of that.

I think that's gonna be a really good signal for all of us. But I think, again, I'm encouraged and the reason I'm encouraged is cuz I'm seeing a true commitment to change.

Mike Koelzer, Host: Chris, if somebody said to you, you have to leave prescriptive for a year and you can take any job you want, you can be the head of Twitter, you can be the president of the us, you can be the FTC chairperson, whatever you had to leave for a year. What job would you take for that year to make the most impact on everything we've been talking about? Okay.

Chris Blackley: The co-CEO of one of the largest health systems in the country, because they are an employer, they're usually the largest employer in the metropolitan area that they serve. They are a provider of healthcare and they are integral to how the system functions and works. So they have all the financial interests.

In driving change, they also have the tools. They usually own pharmacies and operate pharmacies. They have contracts with pharmacies. So you've got everything that you need to show what's possible. And so, and I say co because I wouldn't know how to run the health system. I would only know how to help them fix this problem.

So I, I wouldn't want the, I wouldn't want responsibility for the performance of the health system and their core job, but

I know that. In that role with those resources, with that ecosystem, in those roles of employer, provider, influencer, technology, pharmacy, prescriber, you could do amazing things to

show exactly what's possible and how big of an impact you could have.

Mike Koelzer, Host: You're talking about a hospital health system.

Chris Blackley: Right. They are a healthcare provider. They are a large employer payer. They have a health plan in the market that they're trying to compete with as well.

They have the technology resources to do things differently. They have influence in the market. They have everything at their disposal to drive change. And if you think about the system in that way with a strategy to leverage all of those assets, resources, and influence, you could do amazing things.

Mike Koelzer, Host: All right, Chris, you wake up tomorrow and for some reason you can no longer be in healthcare. Where would you take your skills? 

Chris Blackley: It's an interesting question. I spent almost 15 years at Microsoft. Before that, I was at ibm, I was in technology consulting.

So my whole career for the last coming up on 30 years has been in technology and applying technology to different verticals, whether it's oil and gas, public utilities, and now healthcare. when I left Microsoft, I used to say at Microsoft that, you know when something would go challenging or difficult or not, well, somebody would complain.

I'd say, Hey, it's only software. Nobody's gonna die. You can't say that. I can't say that. And the other side of that is you can affect people's lives in a really positive way. So I think I would have a really hard time now not doing something in healthcare because the mission is so incredible and so many opportunities.

And one of my favorite quotes, it's more noble to affect the life of an individual than to spend a lifetime trying to affect the masses. [01:05:00] And so healthcare gives you that opportunity to do both. You can have a really amazing impact.

On one person's life. And I think that's very noble and kind of what drives me. And I told you the story about Heather, but you can also have a big impact at scale. So I have a really hard time answering your question. I don't know of another industry that I could go into that would make me want to get outta bed excited every day,

Mike Koelzer, Host: yeah. The story about Heather would not have the same pole if it was something like, she couldn't find the right rams for her computer or something like that. 

Chris Blackley: Yeah. 

Mike Koelzer, Host: same, heartstrings to it.

Chris Blackley: No. And. I've been very fortunate. I love technology. I've been, I started writing code when I was 10 years old, and I've been very fortunate with the experiences that I've had, and I love it and I love the application of technology to things. But, to be able to do that in an industry where you can have an impact in a big way, that's meaningful to me is kind of where I am in my life.

And I think that's certainly what motivates me today. So I, I don't know that I could pick another industry. I'd have to find some way to do it in

healthcare. 

Mike Koelzer, Host: Well golly, Chris, great having you on the show. That's interesting stuff coming from somebody with your background and the mind and the technology to make change because.

Guys like us, we can dream about stuff, but until we get something into somebody's hand, that means something. It's just a dream. So cool stuff you're doing.

Chris Blackley: Thank you. I appreciate it, but also acknowledging that we set out at 17 to do this. We were told we were crazy, it couldn't be done. and in part that's true because we can't do it ourselves. It takes courageous folks in every aspect of the industry, whether it's partners in pharmacy, partners in health systems, the technology companies involved in pharma.

It's gonna take everybody to have this system work in a way that's really best for the patient. And so we're grateful for those relationships too.

Mike Koelzer, Host: Very good Chris. I look forward to keeping in touch and following what you guys are doing.

Chris Blackley: Thank you. Really appreciate the opportunity. It's been fun.

Mike Koelzer, Host: Thank you, Chris.