Gaining Control Over Insurance Contracts | Benjamin Jolley, PharmD

This transcript was generated automatically. Its accuracy may vary.

[00:00:15] Mike Koelzer, Host: Well, hello, Benjamin. Hi, how's it going, Mike going well, thank you. Thanks for joining us on the show. Sure. Yeah. Hey, Benjamin, for the people that haven't stumbled across, you introduce yourself. Tell us why you're here. 

[00:00:31] Benjamin Jolley, PharmD: My name's Benjamin Jolley. I am a pharmacist. I manage my dad's pharmacy. Um, here in, uh, salt lake city, Utah.

I, somehow , have become a. Resident expert amongst, uh, folks on social media about DIR fees, uh, among other things, 

[00:00:49] Mike Koelzer, Host: I put out a question to say, Hey, who would you like on the show? And I love the response to one of yours that came back. I said, get Benjamin on there and just let 'em talk. so I don't know if that was.

because they wanted to hear you so much or because they didn't want to hear me, but regardless , but regardless that was our command. So Benjamin, give me a picture just of your day. Are you in a store? Are you in an office? What are you doing mostly during your work time? Uh, 

[00:01:26] Benjamin Jolley, PharmD: I work about 25 to 30 hours on the bench and the rest doing management stuff.

Scheduling my people and recently trying to hassle PBMs to give us contracts we've rolled the dice on, uh, deciding to not use a PS a O starting 14 days ago. And it has been, uh, an adventure. Yeah. 

[00:01:47] Mike Koelzer, Host: We're in the same exact boat as you are. I know my son is pretty active on some of the Facebook groups that you're on.

And that has been our adventure too now. Yeah. 

[00:01:59] Benjamin Jolley, PharmD: I, I mean, it, it has gone. Much better than I expected from the perspective of how our patients have taken it. Like, there have been so many folks that have, um, just said, oh yeah, yeah. I will call my insurance hassle 'em cuz a couple of 'em have just said we'll add you some time in the future.

Cuz we left R P S a oh 1, 1, 1. And. It's now 14 days later, and we're sitting here with two of the major health plans in our area we're not contracted with. And so we're not able to bill claims for 'em, but a surprising number of people have, um, wanted to go to bat for us to hassle their health plan, to say, Hey, tell your PBM to contract with Jolly's.

Um, so that's been, um, Gratifying that our patients like us . 

[00:02:59] Mike Koelzer, Host: Yeah. Right. All right. Let's round back on that. You're at the store for 30 hours. You're doing some of your own work in the background, the management stuff, and that, and putting on your gloves with the. PSS and PBMs and so on. When is your social Facebook time?

When are you doing that through the day, or do you have a certain time for 

[00:03:25] Benjamin Jolley, PharmD: that? When I go home at night after the kids are in bed, pretty 

[00:03:30] Mike Koelzer, Host: much that's when you come alive with Facebook, uh, and, and social media stuff. Yeah. 

[00:03:36] Benjamin Jolley, PharmD: And, um, yeah, so I, after the kids are in bed, Hop on there. And, um, and as a result of that, I started getting a lot of people asking me questions.

Um, so many that I didn't really have time to answer them. All right. And so I started a side business of, uh, answering people's questions about this kind of stuff. Nice. Um, and so. I took some inspiration from you actually. And another person that uses Calendarly and set up a, uh, little scheduling page where folks can pay me and buy credit cards.

And then. Then I have time to see them because they're giving me money. . 

[00:04:26] Mike Koelzer, Host: Whoa, that's cool. All right. Let me March back just a bit, when you started on Facebook and that was your intention to blow off some steam or to yeah. or to get, get any advice or to start anything, what, what was your main intention when you started getting more active on the social scene with the all.

DIR crap and all that. What was your first intention? 

[00:04:57] Benjamin Jolley, PharmD: Mostly. It was to figure out how other people were dealing with stuff and then also to blow off some steam. Right. Um, and there were a lot of folks who, and still are today. A lot of folks who have some really fantastic ideas and really know a lot more than me about working the system as it were.

Yeah. But it rapidly became apparent. Blowing up steam and talking to people that there were repeated questions about. Hey, um, how do you guys deal with these DIR fees? How do you deal with this Geer? And shortly after the page that I'm on with a number of other people, the news hit of a number of PS SAOs, um, claw back a huge amount of money from the member pharmacies, um, because of the generic effective rate provisions in their contracts with the BBMs.

Yeah, that, uh, surprised me to say the least. I, I had not heard of a Geer before 

[00:05:54] Mike Koelzer, Host: were those live clawbacks or were those coming later mixed in with the retroactive, like DIR stuff? 

[00:06:03] Benjamin Jolley, PharmD: Well, so the, the moment where I heard about it was when epic pharmacy network mm-hmm um, when they were truing up, I believe it was their Caremark contract.

Um, They somehow found themselves in the position of owing Caremark, something on the order of. 25-30 million, several, several percentage points, OFP. They had no idea what was happening. It seemed that they didn't even realize this was in the contract that they had signed. And Caremark had come to them and said, Hey, you owe us this money.

And they said, what, what do I do? Um, and so there were just all of these stories. Pharmacy's being hit with like, Hey, you owe us $20,000. I'm gonna need it in a 

[00:06:48] Mike Koelzer, Host: week. And that's because the PS a O got hit and thus, they then went to the pharmacy mm-hmm and hit them. Mm-hmm was it one of those where it wasn't even like, defined what it was for.

And, and in fact, was it just divided somehow by the PS, a O and they might not have even known what pharmacy it was for. 

[00:07:09] Benjamin Jolley, PharmD: Yeah. I'm honestly not sure how they handled it on their end. What, what it seems like. Um, based on the fact that some folks got like a 20,000, some folks got like a hundred thousand mm-hmm the most Landish case that caught my attention was one pharmacy was told, Hey, you owe us, uh, like $15 million.

I'm gonna need that money next week. And it's like, if we got that kind of bill, we would be out of business immediately. Right. Like we cannot handle a 15 million retroactive fee. That's 

[00:07:45] Mike Koelzer, Host: on the level of a mental breakdown. I mean, you hear about people going in and well hurting themselves or shooting up places or something like that.

So these audits or these, these letters that come with these huge things that people have no idea coming, they're more than just in my mind, more than just. Saying this is impossible. It's like sometimes it's like life ending. Yeah. You 

[00:08:11] Benjamin Jolley, PharmD: know? Yeah, absolutely. So anyway, so that one I heard about cuz fryer, Levitt, the law firm put out a statement about they had acquired a, um, We call an injunction against epic on behalf of this pharmacy saying, Hey, you can't claw this money back from us until such a time as we've, we've been through this in the court.

Mm-hmm . Um, and that was where I, where I started to dig into this was just what in the world happened there. Yeah. Then I started obsessively researching it. 

[00:08:50] Mike Koelzer, Host: And at the same time, you're pumping out some questions on social to say, Hey, why, you know, you're trying to get more information because you were not in this actual position, but you knew that it could have easily happened to 

[00:09:02] Benjamin Jolley, PharmD: you.

Right. And I was sitting there like, okay, when does the other shoe drop for me? Right then I, um, then I went to the PDs conference. and they had some fantastic speakers, uh, who were former PBM auditors that like started their own consulting company to help pharmacies avoid losing money in audits. Right.

And they spoke about Geer and, um, explained it in a way that was just so incredibly clear. I was like, okay, I see what happened there. Um, I had these two pictures of, um, Basically bar graphs where a hundred wasp zero was 0% OFP and they're like, okay, the PBN pays you ATP minus 25, but the generic effective rate ISP minus 87, this is what they're calling back in the GE is the difference between those two numbers.

And then if they're paying you below that, they're, they'll pay you back that amount. 

[00:10:04] Mike Koelzer, Host: And Benjamin for our listeners, as simple as you can give us what Gear is supposed to be. 

[00:10:14] Benjamin Jolley, PharmD: Sure. So Geer stands for generic effective rate. So it is a term, um, invented by PBMs to define a given discount off OFP for generic drugs.

From my understanding, it began within several years ago, PBMs would use Geer as a, um, contracting tool with their employer end payer clients rather than with their pharmacy partners. Um, and so they would say, Hey Walmart, Hey, whoever we will ensure like. We will accept the risk to make sure that you, the client, pays no more than AWP minus 80% on the average, um, for all the generic drugs that you get.

And of course they manipulate it so that, um, high AWP, single source drugs get classified as brands and don't become part of this calculation for those purposes. And, um, but it's a form of insurance risk, right? where they are saying, I will accept the risk for doing, uh, for managing your drug list, managing the Mac list so that it hits this specific discount off OFP.

And that to me, was enlightening re realizing that, um, end payers that contract with PBMs generally do not think in terms of dollars and cents that are paid out for generics, they think in terms of off. Mm-hmm . Um, I, I had encountered that a couple years before this, um, while I was in pharmacy school, um, I was at a consulting company that, um, end payers hire to basically audit their PBM and make sure that the PBM isn't ripping them off mm-hmm , um, which the fact that they exist tells you something

Um, um, but. They had this, uh, reporting system for their clients in which they would say, yeah, you're achieving this percentage discount off AWP. You're achieving the four generics for specialty drugs for brand drugs. And, um, I remember one phone call with a client at that, at that consulting company in which we said, um, um, yeah, yeah, you client are, are achieving an, uh, An effective rate OF minus 99%.

And they're like, that's fantastic. And everyone starts laughing and I'm just sitting there horrified. And I'm like, how is the name? How do you achieve AWP minus 99 across all of your claims? Yeah. Like that is. That is some aggressive contracts with your pharmacies. yeah. Um, like who can make a profit with that?

My goodness. um, 

[00:13:25] Mike Koelzer, Host: If I heard that in my mind, it's stupidly. So it's like when the car places say we're gonna sell you a car at our invoice costs, it's like, no, you're not, cuz we know something's happening. So when you hear AWP minus 99, someone's gotta figure. Something's up or that's not realistic, right? 

[00:13:48] Benjamin Jolley, PharmD: I, I would hope so, but everyone on that call, the consultants that weren't me, were all just laughing their heads off, um, that they had achieved this incredibly wonderful discount opp.

But so anyway, that, that, that was my first exposure to this. And then I saw more of it later and, um, And what I realized is that the PBMs had just moved the insurance risk that they had with the clients. They just pushed it down to the pharmacies. Um, start, um, down to the PSA was really starting probably two or three years 

[00:14:28] Mike Koelzer, Host: ago.

The risk is not on them. They're they're telling the risk is on the pharmacy for being whatever stupid enough to sign up for the plan. The risk on the pharmacy is we'll sell you everything. ATP minus something. And the only risk for the PBM is if there's an uprising or they get found out, they're just passing that risk along to the next person down the road.

Yeah. 

[00:14:55] Benjamin Jolley, PharmD: I mean it, it's, it's a pretty genius contracting strategy. Actually. You just contract with the client for AWP minus 80 and contract with the pharmacy ATP minus 85, you lock in 5% OFP, profit. Right. And you don't even have to manage back lists anymore. Um, which is how they used to have to do this if they would, they'd set a Mac price for each of the drugs based on invoice costs.

And then they would just try to make sure that on the average. Based on their utilization, that Mac list hit a certain AWP minus. Gotcha. Um, and that, that was how they judged the quality of a given Mac list was what percent off AWP are we achieving here? Gotcha. Anyway, now, now they've just said, okay, Hey pharmacy, we'll just pay Youp minus 85, 82, whatever.

They're locked in there with a given profit cuz they contract with the client at a different Gear than they contract with you at. And so now you, the pharmacy. If you dispense items that you pay, you know, AWP minus 25 for that are like brand new generics and you're getting paid ATP minus 80. Well, it sucks for you.

Um, right. But on the other hand, if you, um, manipulate your dispensing so that you dispense a lot of Onan Atran, um, You will do very, very 

[00:16:19] Mike Koelzer, Host: well. These are some of the drugs that we actually saw. Some advice from pharmacy organizations says to play this route of trying to get the doctors. If they write for.

This drug tried to get 'em to right. Instead for this drug, which has a huge AWP and the actual cost is maybe 5% of that AWP. 

[00:16:50] Benjamin Jolley, PharmD: Right? Where I think the Geer being pushed down to the pharmacies came from. Was PDs and others, um, promoted a strategy with pharmacies of finding drugs that were non Mac items. So they would pay at the contract rate, which typically in PSAO contracts, the contract rate is somewhere like if we don't have a Mac price and you submit a charge higher than this, we'll pay you ATP minus 25%.

Okay. And so there's some drugs where the actual cost is. AWP minus 85%. Mm-hmm they don't have a Mac on it. They pay AWP minus 25% before the generic effective rate was a thing that's fantastic. You just pocketed like 60% OFP on something that has like a $20,000 AWP or something crazy. Right. This, I think, is how some pharmacies ended up with a generic effective rate.

True up to like 20 million. Because they were making like 20 million by billing, these incredibly high spread items, um, between a, B and cost. 

[00:17:57] Mike Koelzer, Host: For example, a dermatologist in town is writing for a certain cream that somehow missed the Mac. Yeah. Viewing, you know, and it got by and there was this big spread.

And so they're trying to maybe press this, that it's probably not a common drug or else it would've been, you know, 

[00:18:14] Benjamin Jolley, PharmD: caught. Right. Exactly. Or, you know, weird strengths of drugs that mm-hmm, like cyclobenzaprine seven and a half milligrams. Yeah. Right. Like these, these bizarre things that it's like, what is the point of this drug existing.

Yeah. Um, and why, why would someone want to prescribe that or dispense that over another? The reason is because it has just this huge spread between AWP and cost. Yeah. I have learned over the last. Year and a half later, uh, when there's something funny going on in the pharmacy, there's probably AWP involved somewhere.

Right. Um, which surprised me cuz you know, in pharmacy school and in talking to pharmacy owners, the joke is it's, ain't what ain't, what's paid. Right. But I keep seeing these stories where again, and again, and again, and again, the reason why there's something funny going on. Is because AWP is involved somewhere.

It has no connection to the real price of the drug that the pharmacy pays. Um, For, for brand name drugs. I should clarify that for brand name drugs, there is a connection. You typically pay a fixed discount off OFP. Yeah. But for generic drugs, it has no connection whatsoever to the real price that the pharmacy pays, um, right.

For brand name, drugs that you whack. Is the like list price that everyone complains about. It keeps going up, right? Branded drugs, the price keeps going up, going up, going up. That's the price that the manufacturer sets, they say, I want $10,000 for this drug. That's the w that they set. And as it turns out because of a legal settlement between, um, first data bank, MediSpan McKesson, and a, a group of unions that sued those three parties, ump for brand name drugs has a defined meaning.

Um, it. And the reason this happened was that they had manipulated it. So that AWP was 1.2, five times whack or 125% of whack, um, so that they could pocket more money. Right. Because if people are paying based on ONP and they're buying based on whack, then if they can increase the spread between the two.

Fantastic. Um, and so as a result of this lawsuit, um, There's now what's referred to as pre-settlement AWP and post-settlement AWP. Um, so the, so the, the lawsuit changed the definition OFP from 1.2, five times w to today it's 1.2 times whack. And so that, that's a defined meaning. If you look at the w for a given drug, Look at it for the Zofran brand.

Look at it for the Lyrica brand. Look at, look at it for any brand name drug w times 1.2 is then. And so finding that out to me was an, uh, eye opener. Um, because now I can just look at a given contract. Um, from a PBM that offers AWP minus a certain percentage and say, okay, well, I'm paying my wholesaler ATP minus this percentage for brand name drugs, I'm gonna be making 1%.

I'm gonna be making 2%. It, it 

[00:21:49] Mike Koelzer, Host: means something 

[00:21:50] Benjamin Jolley, PharmD: again. Yes. So for, for, for brand name drugs, it means something for generic drugs. Usually AWP is the reference brand drug. Um, or like a small discount off of it. So, like, if you look at the, uh, at thep for like RO bend brand on Dan Tron and you look at thep of brand name Zofran, you'll find that those are almost the exact same number.

Um, it's funny, but then you look at, um, The actual cost. And then, the reason I brought up dance Tron is because I pulled into my yeah. I'm an Excel geek. Um, and I went to, uh, the, as, as I was figuring out how this GE thing worked, um sure. Because it's about generic drugs. Like not a brand. Someone said, Hey, does anyone have a list of high AWP drugs that they can, uh, that they can use?

And I'm like, well, I mean, you, you have one in your system, right? You can just suck out of your pharmacy softwares, assuming that it has the right data connections, which most do, um, you can suck out of it, an item by AWP, an item by item, uh, invoice cost of what you last paid for it. Just pull those into.

Divide the one by the other sort by that, uh, division. And you've got an assorted list from top to bottom of highest discount off AWP for you to lowest discount and. The one that popped up at the top of my list was on Tron, uh, eight milligrams, oral tablet, not the, not the earliest disintegrating tablet.

Um, and it was literally like I paid AWP minus 99.9, 9% for that drug. Um, Like, and, and I realized this and some, uh, another pharmacy owner said that he was selling his store and told me that the buyer was gonna buy his inventory based off of the p value of it. And he is like, what should I buy? the, at the same time that I'm looking at this?

And I'm like, well, how about buy? I don't know, a thousand dollars of, uh, ondansetron eight milligram. You'll buy, I don't know, 200,000 tablets or something with that kind of money. And the, your, the value of your inventory on ANP basis will increase. Literally $500,000, 

[00:24:40] Mike Koelzer, Host: someone's gonna buy his store and they're gonna pay AWP minus something 20%, which is fictitiously high.

And so the store owner said, Hey, before I sell this, what can I buy? That's really, really cheap. But has a really high AWP. And so I'm gonna make a ton of money right before this sale by stocking up on a ton of these low price tablets. And then this guy who's coming to buy me is gonna buy these at, you know, just a, just below AWP.

And I'm gonna make a ton of 

[00:25:14] Benjamin Jolley, PharmD: money on that. Right? Uh, I think the terms of the sale was like AWP minus 75%. But even then he's, he's pocketing like a $20,000 profit. On those thousand dollars worth of Antron. Anyway, it was bonkers thinking about that. The game has changed though, basically, of how does a pharmacy make money in today's environment from, okay, where can I find all of these items that the PBM has not set a Mac for?

Well, Mac is basically a lie. Um, because they're just gonna pay me at Geer at the end of the day. Anyways, am I 

[00:25:47] Mike Koelzer, Host: understanding correctly that you should then just find the biggest spread, find the one that has the highest AWP and then I guess the difference in 

[00:25:55] Benjamin Jolley, PharmD: just calculate the difference in cost to AWP and you've won the Geer game, right?

If, if you dispense, if you dispense exclusively on dance Tron, you've. Pocketed a huge profit cuz it costs you like, like I said, like 0.01% of AWP, you're gonna sell it effectively. They'll Mac you at like, I don't know, just above your cost. And so short term you'll get paid basically garbage, but when the true up for the GE R happens, assuming that you're under a contract where it hits the store level, rather than just getting spread across all the pharmacies in a PS, a O yeah.

If it's at the store level, Your store is gonna just get paid ATP minus even 90%. If you were dispensing exclusively on dance that you're on, you're gonna pocket 90%, um, profit margin on those, right. Or more one example of a, a drug that actually, so you, you almost never see, um, a decrease in, um, in AWP. Um, it's almost unheard of and.

On one of the pages that I'm on. Um, someone pointed out that heritage brand Metformin had a huge drop in ITSP, um, from something like five, $600 for a thousand dollars bottle to like 18. Um, and all of a sudden its AWP actually has some kind of relationship to its cost. Mm-hmm it probably costs the pharmacy like 10 bucks.

Right. And so you've gone from paying like AWP minus 99 to like paying. AWP man is like 20 and in a generic effective rate environment that is not beneficial for the pharmacy to buy that drug anymore. Even if it's the cheapest one on the market, right. It sucks for the pharmacy. And so he is like, just go throw the, the person who, um, who was bringing this upset, these, um, heritage brand ones.

I just got screwed. I'm gonna take these, um, Uh, these and just go throw 'em in my trash. Yeah. Cause right. Cuz I'm gonna lose money on 'em too, to be clear. I have been explaining this from the perspective of someone who's trying to win this game of how I stay in business. Right. Um, I would vastly prefer a system that does not pay pharmacies in this way.

Yeah. Um, that there are better ways. Medicaid fee for service, um, has to pay pharmacies on a different basis. They don't pay on ANP basis. Um, some Medicaid fee for service, not, not necessarily managed care where PBM is managing. Yeah. In some states, even those have to also pay pharmacies on this basis, but there's a different basis of reimbursement for pharmacies called NADAC, um, or national average drug acquisition cost.

And it is based on a survey of pharmacies that, um, Medicare centers for Medicare and Medicaid services sends out, um, every week to, um, a selected group of pharmacies and says, Hey, uh, I want all of your invoices from last month. Um, I wanna know what your invoice prices were on all these drugs and. Um, and then they use a company called Myers and Stauffer to aggregate all of that data and publish a per tablet price, um, or per milliliter price.

That is based on the average of all of these pharmacies that submit their invoices. And it. it, it actually has meaning. Right? Cause it's yeah. What, what is on your invoice? Sure. The way that Medicaid pays is rather than paying a pharmacy, just some discount off OFP or some made up price, uh, they call a Mac they're paying pharmacies, the national average drug acquisition cost.

Plus a fixed markup for prescription of a fee for dispensing the prescription to cover the pharmacist's time to cover the overhead. Um, because under thep system, the way the pharmacy makes money is not a professional service fee, um, pharmacies under those under those AWP contracts get paid like a spread on the drug plus like 20 cents, 30 cents, 50 cents.

You can't run a pharmacy on 50 cents a prescription? No, it is not possible. That money is helpful, right? You wouldn't. If someone offered you a, the AWP link contract, plus a 50 cents or plus a dollar all else SQL, obviously you take the dollar, but it's not gonna it. It does not cover the cost of doing business.

No, it doesn't. 

[00:30:54] Mike Koelzer, Host: Paid a blink 

[00:30:56] Benjamin Jolley, PharmD: just in fees that you pay, like yeah. Um, to the switch and stuff. When, when you, when you receive a prescription from Surescripts yeah. Typically pay 'em like a quarter, right? There's half of your, uh, profit gone, right? Yeah. The AWP based game was actually based on cost.

Right. So, like that's a quarter right there. Yeah. You submit the claim to the insurance. You've just paid the switch. 7 cent mm-hmm. If you have to resubmit the claim because you got a rejection, there's another 7 cent. Yes. Just that right there. You've already just made it so the pharmacy can pay their staff based on like 10 cents a prescription.

Pharmacists cost a little bit more than that. Um, yeah, I would hope 

[00:31:41] Mike Koelzer, Host: Even if you just dumped a few tablets out of the 30 tablets into the person's hand, you've already wiped out any fee for the service. I don't even know why they have that still in the equation. 

[00:31:52] Benjamin Jolley, PharmD: What's incredible. Is that like these effective rate contracts now also have a dispense fee effective rate where it's.

I mean, the 50 cents per prescription is basically nothing for the pharmacy, but for a PBM that is money, right? Because if, if they're dis if they are paying pharmacies for, I think last year in aggregate pharmacies to dispense somewhere on the order of 3 billion prescriptions. Sure. If you're, if you're paying pharmacies 50 cents a script for 3 billion prescriptions, right.

Right. That's one and a half billion 

[00:32:28] Mike Koelzer, Host: dollars. Yeah. It adds up for them, 

[00:32:31] Benjamin Jolley, PharmD: right. It adds up big time. And so if you can shave that by 5 cents, 10 cents, 20 cents per prescription, you've just, you've just increased your profit margin by, you know, a good fraction of a billion dollars. Right. I never actually finished the idea with how Medicaid pays pharmacies.

They pay 'em with this actual cost, basically. Uh, typically somewhere on the order of 10 to $20 per prescription. Okay. In Utah, it's $9 99 cents, which isn't really fantastic. Sure. Um, from every survey I've ever seen, it costs a pharmacy somewhere between $11 and $15 per prescription, to be sure. Just cover their overhead.

Right. And so $9 99 cents a script is not great, but, um, Frankly at this point, it's actually better than a lot of the reimbursements that I'm getting under the yeah. Right. DP game, right under that game. My favorite prescription I ever dispensed was one for lisinopril 90 tablets. I was paid 47 cents. Total.

Ridiculous. I can make more money selling Snickers yeah. Than selling less APRI. which can cause horrific side effects, right? right, right. This is why pharmacists are struggling to find jobs. yeah. A number of my friends from pharmacy school, I, I only graduated two years ago and a number of my friends from pharmacy school are already looking for jobs, right.

That. their hours got cut. Walgreens cut all of their pharmacists to like 32 hours a week. That's full time. Yeah. And that's what you get paid off of. Yeah. And your salary. And so if you work more than that, well, that sucks for you. Thank you for your, for your volunteering. Yeah. Like Walmart laid off something like a thousand pharmacists nationwide and yeah.

Right. The, but the reason is that we're getting paid, the pharmacies are getting paid garbage, like 40 cents a script since 

[00:34:31] Mike Koelzer, Host: about, uh, let's say. Let's say like five years ago, maybe longer. I would just tell myself, you know what, don't look at any of this. You're gonna get little headaches along the way. At the end of the day, the whole mix is there.

It's profitable. Stop looking at the individual ones. Well, in the last year or two, now, now the checkbook is, you know, dusty. There's nothing, there's nothing left. And so now it's like, we still are probably not gonna look at individual ones, but we know the whole batch is. Terrible. You know, it is terrible.

Now here's the thing too, is like the wholesalers at PS AOS at PBMs, they all thrive on smoke and mirrors. Cause we're paying in our pharmacy, you're paying X million dollars for the inventory and I would always do this with our wholesaler. At least you can talk to those guys. Usually you still have at least a face behind the name and I'd go in there and I'd say, uh, you know, for example, Bob, tell me how much this bottle is.

Ibuprofen is, and I'd set it down to, you know, 500 accounts. I'd set it down to the table. Tell me how much this is. Well, you gotta, there's gonna be the rebates and then this. And then if you go to the show and do this, and then three months later, we'll do this and blah, blah. I said, I said, you gotta be kidding me.

I'm paying you X million dollars. And I feel like I'm talking to, uh, someone worse than a used car salesman. You know, you can't tell me how much of this costs, and we're still dealing with rebates and games. When, I mean, you play rebates and games maybe to get a customer, but not with a customer that you've been for 20 years and you're buying X million dollars, you know, and, and nobody can give you the answer and that's 

[00:36:16] Benjamin Jolley, PharmD: all planned.

yeah, exactly like the, the whole, the whole pharmacy system thrives on fake prices. Sure. 

[00:36:24] Mike Koelzer, Host: Well, in fact, what you described, if they could throw out everything and start over, what you described with Medicaid is the average wholesale price. That's that's what it was. It was what people are. What a concept.

Yeah. When does the, if, if that's the, kind of the, what you've found now, How long does, does that, does that work? How long, when does the PBM come back and say, no, we're gonna put Mac in place again, or we're not gonna go off of this high AWP or whatever we're used to having dooming gloom at the end of these things.

I, I, we can't just come up with answers that wouldn't be like the industry we've been in. 

[00:37:08] Benjamin Jolley, PharmD: Sure. So I don't think that the PBMs are going. Divorce the GE R concept, unless they're forced to buy lawsuits or otherwise, um, because it aligns the pharmacy's best interest with the PBMs best interest. Cause remember they contract with an employer to say, I will make sure that you, um, that you hit ANP minus X percentage.

Mm. And then they contract with the pharmacy. I will pay Youp minus X minus 2% or whatever. And so that way, the higher thep that the pharmacy submits the better the PBM is. Right. So long as they're paying the pharmacy less than they're paying the other guy, right. Their pocket is 2% of AWP, no matter what.

And so the higher thep that gets submitted. The more money the PBM ranks in it's more 

[00:38:10] Mike Koelzer, Host: actual money. The dollar figure is higher. If the pharmacy can find a higher BP and in theory, they both win, right? The buyer beware or whatever is really the company, the widget. Company with a hundred employees that hired this PBM.

Yeah. They're, they're getting screwed, they're getting screwed. And the only way they find out is then by trying to make their way through the smoke and mirrors and comparing PBMs when they have to, you know, or insurances when they have to sign up again in a year or three years or five years, whatever their contract is.

I do 

[00:38:49] Benjamin Jolley, PharmD: do not think that the PBMs are gonna divorce that concept. That's interesting. It's how they get paid. And so if they can just keep the pharmacies, uh, fat and happy or keep their own pharmacies fat and happy, even better playing this game better offer them. Like I said, whenever I see funny business with pricing in pharmacy AWP every time.

[00:39:11] Mike Koelzer, Host: Um, that's the magic trick. That's the one you can twirl it around because it's already false. Right. You 

[00:39:18] Benjamin Jolley, PharmD: might say, I saw a thing shared on Facebook that was making a big stink about how, um, this pharmacy had dispensed generic Glumetza to somebody for, um, their cost on, it was like $120. The PBM made them, paid them like $150.

So they're happy they get paid a $30 profit on the script in today's environment. That's pretty darn good. Um, and, but then the patient's coverage was terminated. So then the patient's insurance company comes after them six months later and says, Hey, I'm gonna need you to pay me back. What I paid for this drug, the insurance company is not the PBM.

The PBM is not a pharmacy. And so we've got, and, and the insurance C is also not the one who's buying insurance on behalf of this person. Right. So we've got, uh, first party patient, second party, uh, pharmacy, third party employer, fourth party insurance, fifth party PBM. Yeah. In this transaction. And so the PBM pays the pharmacy 155 bucks of which $40 is a copay for the patient.

But then the patient gets a bill from their insurance. Um, six months later for $1,200. Yeah. And I was sitting there looking like this , I'm like, That's weird. Something's going on here. Right? So, I got outta calculator and added up the amount that the insurance was asking for back from the patient, plus their copay divided that by thep for the item.

Guess what? The amount that apparently Anthem paid their PBM for this drug was told to MEP minus 25% on the nose. Isn't that incredible? Like. The largest blue cross blue shield plan in the country somehow pays their PBM for a generic drug AWP minus 25%. And then the PBM goes and pays the pharmacy, you know, P minus 89%.

Pocket's the difference? Like a thousand dollars of spread there for the PBM. You gotta 

[00:41:35] Mike Koelzer, Host: back up for me. I'm a little slow on this. You're good. When you were talking about the PBMs AWP minus percentage and what the pharmacy was buying it for, it seems like you kept saying like 2%, that that 

[00:41:57] Benjamin Jolley, PharmD: was my assumption, but apparently.

It's much better than that with Anthem 

[00:42:03] Mike Koelzer, Host: I see you thought, let's say the pharmacy buys at AWP minus 80 and the PBM pays at AWP minus 75. You thought. The assumption was maybe that Anthem or whoever's paying the PBM was maybe paying them a, B P minus 70. So there's 10% to go around here. Everybody's happy.

But you found it was. P minus 25 

[00:42:35] Benjamin Jolley, PharmD: for this particular claim. Yeah. 

[00:42:37] Mike Koelzer, Host: Here's the question though? Hasn't that been always common knowledge that the PBM is screwing the, the anthems hasn't that hasn't that always been that spread isn't that where that complaint of the PBMs has been. Why does it happen? I know it's shocking, but why does that shock you now?

[00:43:04] Benjamin Jolley, PharmD: I, I had thought that Anthem was a more sophisticated buyer. 

[00:43:08] Mike Koelzer, Host: Tell me the difference between Anthem and a widget company with a hundred employees. Are they the same or is Anthem like another middleman who then sells the drugs to the widget company? 

[00:43:23] Benjamin Jolley, PharmD: Exactly. So Anthem, their business is selling health insurance.

And so they sell a widget company, a health insurance policy, where they will collect, you know, a thousand dollars a month in premiums per person. Gotcha. And then they'll pay out whatever percentage to the PBM, to the mm-hmm physician, to the hospital, whoever, and. Then theoretically whatever's left. They keep, they're not 

[00:43:57] Mike Koelzer, Host: charging the widget company per prescription.

And so on. They're just hoping that there there's profit left insurance 

[00:44:04] Benjamin Jolley, PharmD: companies. Complex. Um, and there's a lot of different ways that they can contract. Gotcha. 

[00:44:09] Mike Koelzer, Host: Right. Does the widget company ever skip Anthem and go right to a PBM? 

[00:44:14] Benjamin Jolley, PharmD: Yeah, absolutely. So I've done a lot of reading about this. I've been very fascinated by a group that calls themselves the health Zeta, um, which basically their thesis is that the cost of healthcare, like actually providing services, has not gone up in the last 10 years.

Interesting. And so what has gone up is the price point that everyone in the system tries to take. So a sophisticated employer. Whoever hires smart benefits advisors can design a health plan that will bring their healthcare costs down to 2010 levels. Um, yeah. Right. And. They see it over and over and over and over and over again, because we've been talking about the fake prices in pharmacies, but the whole healthcare system's full of fake prices, for sure.

It's the whole game, like a hospital has their charge master that says that, uh, A ibuprofen costs $20 a single tablet. Um, yeah. And then they negotiate with the PPO and say, we'll give you 50% off charge master or 60% or 70%. Yeah. But it's the whole charge, a crazy high price. Give you a great discount off of it.

That's exactly the same game that we're playing with AWP in the pharmacy. On the health plan side. Yeah. They're playing the exact same markup and discount game. That's something that actually, some of these guys that I've been following have said is like, look. I will give you a 99% discount on anything you want so long as I set the starting point yeah.

[00:45:53] Mike Koelzer, Host: Yeah, 

[00:45:54] Benjamin Jolley, PharmD: exactly. Right. I'll give you a 99% discount every single day. If I get to set the starting point for it. yeah. That's life. What amazes me is that employers and other end payers, Medicaid plans, Medicare plans keep paying. On these just discounts off of fake numbers. 

[00:46:12] Mike Koelzer, Host: Here's why they're sitting around a boardroom and nobody wants to get out a list of a thousand drugs and say, OK uh, Mr.

President, we bought this one for $2.99 and, and we're gonna get this one for 2378 instead of, you know, 26.95 And. Nobody's doing that. What they want to hear is they want to say Smothers give me your report. Well, uh, we're buying it for 99% off of cost. Oh, great. We'll give you a, you know what I mean? Yeah.

It's like, it's just easier then people fall for it. 

[00:46:43] Benjamin Jolley, PharmD: Right? 

Exactly. Their whole thesis though. Is that like the underlying costs, paying physicians, paying pharmacists or providing healthcare services, hasn't really gone up. No. And. if you're smart about it and you make sure that your employees go to the right hospital, that has a reasonable price point for this mm-hmm um, for the service, even if you pay them a hundred percent of their price for it.

Yeah. You're gonna save money. Yeah. Um, because hospitals have incredible price variation for the same exact procedure. Like you. Okay. I wanna know what the price point is for doing open heart surgery to repair, like a quadruple coronary bypass or something like that. Yeah. If you look at a sample of 10 hospitals, you could find a price between like, I don't know, $30,000 and $500,000.

Yeah. And so if you get 50% off of $500,000, you're still paying like. 25 times too much. Um, yeah. Right. And so if you just make sure that your employee goes to the $20,000 hospital who cares. And so, the idea is that they build a plan in which if the employee asks where they should get care before they go and they follow the health plans advice, they don't have a deductible, they can go wherever they want, but they'll have to pay their deductible.

And. You have like a $2,000 deductible for, for the average person in the country, that's a lot of money. Right, right. And so if they can pay $0 by going to the $20,000 hospital, instead of paying $2,000, by going to the $500,000 hospital, the health plan, that's a, like the employer, that's a, that's a that's money in the bank, right?

Like I'm not gonna have my employee pay $2,000 because I just saved like a hundred thousand dollars. By not sending them to that hospital. And so right. Anyway, I I've, I've been following these guys and they, they talk a lot about the incentives that the, um, that the major health carriers have like blue cross blue shield, United Cigna, Aetna, Humana, all of these big carriers under, under the Obamacare law.

And this relates back to that story. I was told that thep N is 25. What, what I realized is that, um, Anthem is a sophisticated buyer of pharmacy services, and I think they're deliberately paying Caremark or whoever their PBM is. I think it's Caremark. Um, I think they're deliberately paying them a P minus 25.

It's not a mistake. I don't think it's that. Are just stupid and not buying drugs cheaply because they're stupid. I think it's because they have a different, um, profit model than most people think. So unknown to us, unknown to most people who aren't in health insurance, right. 

[00:50:00] Mike Koelzer, Host: Unknown to you, or do you 

[00:50:01] Benjamin Jolley, PharmD: think, you know, no, I, I think I know.

I, I, I think I know what's going on Obamacare put into place a rule called the medical loss ratio. Which most folks haven't heard of, and if they have heard of it, they think it's a great thing. It says that if you are a health insurance carrier, um, you have to spend at least, uh, 80% of the premiums that you collect on actual care rather than on, um, administration in the, in the health plan or on profit.

So in pharmacy terms, we would call that remaining 20% the profit, the gross profit margin. Yeah. And then you, you pay for your overhead out of that and your net profits whatever's left. Sure. But what that does is it means that any way that I, as a health plan can conceal administrative costs as though they were care provided mm-hmm, the better off for me.

Sure. Right. Because if I pay out more dollars, then I can raise premiums next year and make more money because it's still 20%, 20% of a higher number. I make more money. Gotcha. And so if I can conceal some of those, some of the administrative costs that I have, like, you know, paying a PBM is an administrative cost.

The PBM is an administrative function. Not really a care service provided. Hmm. But if the PBM, if I pay the PBM, um, based off of, uh, spread on drugs and I never see the true price for the drug. It looks like I'm paying for care. Does that make sense? 

[00:51:45] Mike Koelzer, Host: It looks like you're paying for, for 

[00:51:48] Benjamin Jolley, PharmD: care for care provided right.

For actual medical costs, not for administration. Yes. Um, and so they pay Caremark or whoever their PBM ISP minus 25 on generics that lets Caremark have a substantial profit margin. And then Caremark doesn't have to charge Anthem an administrative fee for the services that they offer. Where, if they paid, if they paid Caremark in a more reasonable way, which like, if I were designing a health plan, I gotcha.

I would pay Caremark or my, I probably wouldn't pay Caremark. Um, I probably choose some small PBM and I would pay them like $10 per member per month to write. Just pay out the claims. And then I would say, and I want you to just send me the costs for the, like the exact. And then I'll yeah, I'll pay the pharmacy exactly that amount.

[00:52:41] Mike Koelzer, Host: Let me see if I have this. If I may, with the Obama law Anthem, the most gross profit they can have is 20% and their net profit gets cut down of that 20%, the more admin fees they pay and the more stuff they pay, that's going to eat away at that 20% and maybe leave them with 5% if they can put. Into the AWP only minus 25%.

The PBM is happy because they got enough money. They don't need to actually line items out. They might line item a few things, but they don't have to line item out all of the profit they wanna make from Anthem. And then Anthem can say, oh geez. Out of the 20% gross profit PBM only charges us to 1%.

Instead of, you know, 15 or whatever percent they would want to charge them. Right. 

[00:53:42] Benjamin Jolley, PharmD: And in addition to that, like, there's the other side of it, right? Where if they're paying the PBM as though it is care provided, that means that they now have, rather than having to pay them 5% of the 20% as admin fees, that 5% is now part of the 80%.

Of care provided. And so that 20% is now a bigger number. They can lock in an incredibly high profit margin for the PBM, um, on just spread on drugs rather than on administrative fees. You 

[00:54:17] Mike Koelzer, Host: didn't say this Benjamin, and I'm not saying it, and we're not saying Anthem is doing this by any means, but there could be some players in the market.

Are getting some rebates or something back from this AWP only minus 25. There might be some coming in the back door back to them. 

[00:54:43] Benjamin Jolley, PharmD: I mean, that, that's something that I have wondered a lot is we know that PBMs negotiate formulary rebates with branding manufacturers. They say, Hey, I'm gonna cover Ozempic rather than covering, uh, Tru.

So Haptic, I want 20% of the price that I paid you for it back, um, that I paid the pharmacy for it back because I chose your drug over the other one, or I want 50% back. Yeah. And I have wondered a lot, um, whether those rebates are accounted for in this medical loss ratio. 

[00:55:20] Mike Koelzer, Host: Gotcha. If that's part of that 80, 20, or where does that, where does that show.

[00:55:25] Benjamin Jolley, PharmD: Like, where does it show up? Does it show up? Yeah. Above or below that 20%. 80% line? Yeah. Or does it show up at all or is it just fun money that just appears in the bank account and no one, no one accounts for it. Right. Um, anyway, the, the whole, the whole system is just based on these fake prices that we all discount.

And then we hit, you know, When we hit the discount, everyone's happy. Except the person on the very end receiving all of these prices is the widget company or the hotel company or whoever. 

[00:56:04] Mike Koelzer, Host: We don't think it's the insurer. They've got some reason for this. Maybe it's someone on that far end. Right? And 

[00:56:11] Benjamin Jolley, PharmD: So this is, this is what bugs me about playing all of these Geer games as a pharmacy and playing all of these games as anyone in the healthcare system.

We are making a profit by helping the PBM make a profit by making the carrier make a profit on the backs of blue collar workers who are making widgets and who are seeing their premiums and their deductibles go up every single year, 5%, 10%. Yeah. And. That what bugs me about this whole thing is that right?

If we, as pharmacy owners and pharmacy and pharmacists buy into this game and play the PPMS game, we are screwing over all of our neighbors. Right? Who pays the PBM at the end of the game? Yeah. A lot of pharmacists think, oh yeah, I'm gonna screw the PBM. I'll do this, this, this, this, this, you're not screwing the P.

That's the bottom line for me is that it's never ever the PBMs gonna make a profit. They're going to take their spread. You are not screwing them over by playing these games. You're screwing over your neighbor. And that, that's what bugs me about this whole thing. You're not taking the money out of the PBMs pocket.

Pharmacist. Pharmacists always, always act that way. Like, oh yeah, well, they don't treat us as right. So I'm gonna treat them crappy, but they're never the one that's actually paying for it ever. It doesn't come out of their 

[00:57:40] Mike Koelzer, Host: pocket. No, it's the owner of the widget company who then has to lay off some people or make their prices go so high that then they can't go on vacation or lose their job, whatever.

Yeah, we have to get to work. Yeah. 

[00:57:53] Benjamin Jolley, PharmD: we have pharmacies 

[00:57:53] Mike Koelzer, Host: to run. Golly, this was so interesting. How can people eat? Get a hold of you at least to see who you are and, and your wonderful ramblings, I guess we'll call 'em. But 

[00:58:11] Benjamin Jolley, PharmD: Those are the guys who asked us to do this show was saying, is, can you just let him ramble for an hour?

But those were his exact words. That's what I guess we've done. 

[00:58:21] Mike Koelzer, Host: Did he say ramble? Ramble on Facebook? He said ramble. I didn't wanna say it, but Benjamin, if people wanna just get to know you a little bit more, they'd probably look you up on Facebook, right. That's probably a good 

[00:58:34] Benjamin Jolley, PharmD: place to start. 

[00:58:35] Mike Koelzer, Host: Yep. See some of your, your ramblings, and then we're gonna get you back on.

I want to hear more about some of your consulting stuff, and I know you've got some recorded information coming out. We'll get you back on for that. For right now, head to Facebook. Until we get you back on Benjamin. Thank you for everything, for what you're doing for the industry and it's fun, huh? Yeah.

Yeah. But that's some great information and I appreciate all you do for everyone and thanks for spending time with us today. Absolutely. Thanks. Thanks Benjamin. We'll talk again soon.