PBMs Must Come Clean | Antonio Ciaccia, 46brooklyn

Speech to text:

Mike Koelzer: Antonio, for those that haven't come across you in the past, introduce yourself to our listeners. 

Antonio Ciaccia: my name is Antonio Ciaccia. I'm the CEO of 46brooklyn Research, which is a nonprofit organization dedicated to public education around our convoluted prescription drug supply chain. And I'm the president of Three Axis Advisors, a consulting firm that works with state attorney generals, state auditors, employers, benefits consultants, provider groups, Industry disruptors to help find even more things in our convoluted drug pricing system that may not exist within publicly available data. 

Mike Koelzer: [00:02:00] Antonio, I've got to think that with the way the PBMs do things, that's pretty good job security on your side because I think they're always one step ahead of us. How's business?

Antonio Ciaccia: Business is good. And I genuinely Like, as I say that, in some ways, I don't like saying it. When we started doing what we did, you have to understand, for those that, gone through the back catalogs of Business of Pharmacy podcast, I worked with the Ohio Pharmacists Association, and if you know anything about, state pharmacy associations, it's not a fast track to getting rich by any stretch. And in many states, pharmacists get what they pay for. And in many instances, 80 percent of the profession join nothing. As a result, state pharmacy associations are usually very under equipped. But from that perspective, I would compare it in a way that's, I'm going to regret the way I'm going to say this, but [00:03:00] my first job as a quasi adult was washing dishes at a nursing home in in Westlake, Ohio. As a result, the jobs always get better. And at my time at the Pharmacists Association, I certainly wouldn't put it on that level, but I want to borrow the theme in that, business is good and it was always going to be good when you grade on a curve. But the thing that's never sat well with me is that while I believe pharmacists are incredibly important value adds to our healthcare delivery system, in many ways, I think the prescription drug transaction It isn't worth the amount of complexity that is currently saturated it. And what I mean by that is, is, that I shouldn't have this job. At least as it is today. You have a known medicine that we can identify at an NDC level. We have a known quantity of pills or tablets or capsules. In that bottle, we have a [00:04:00] label, we have a bottle itself, we have a lid, We can quantify the prices of all of those things and thanks to things like NADAC or other publicly available benchmarks We actually can come up with a good idea of what the underlying cost of medicine is When you add on top of that that we have cost of dispensing surveys across the country that show That in general it costs a pharmacist anywhere from the low end of seven dollars You All the way up to 15 to break even on a transaction. When you throw all that together, this should really be a very easy transaction. But as we all know, it is not. Hence, perpetual job security. But nothing would enjoy me more than to not have a job doing the things that I'm doing today. Because it would mean that a lot of the problems that we work to eliminate have been fixed.

Mike Koelzer: years ago the PBMs came to corporations and said, you need us because [00:05:00] pharmacy pricing is all over the place.

And you need us for the transactional. Nuts and bolts of the data and all that through the phone lines and things like that. If I'm hearing you right. All the indexes and all the information we have, part is not needed by them anymore, but I think they're holding onto it still so they can do some shenanigans with their own pricing.

Antonio Ciaccia: Without question. PBMs are paid a lot of money in the supply chain for a number of reasons. Some of it is that truly value added service of just interacting within benefits designed to ensure that things are covered when they need to be. Ensure that, prices are right on both ends. The problem is that eventually when you cede so much power to an intermediary and allow them the liberty to set prices on either end of a transaction. as a non fiduciary, they can become incredibly [00:06:00] exploitative. And so, I've often referred to PBMs as the arsonists and firefighters of high drug prices. High drug prices existed before PBMs came along, be clear, but understand that the, because of the way that they contract within this drug pricing ecosystem, as it is, they actually incentivize and exacerbate even higher prices than we otherwise would have. So much of their perceived value is putting out the very fires that they are responsible for creating.

And so I agree a lot of the leash that has been handed to them when it comes to inventing pricing, isn't necessary and in fact, should be taken back because of so many instances that we've seen where they've taken too many liberties with the leash that's been granted to them.

Mike Koelzer: You and I had talked earlier and we talked about where five years ago. didn't even know what a PBM was. , [00:07:00] I'm thinking of the wizard of Oz with the guy behind the green curtain, 

. You had to explain to people, Hey guys, there is a green curtain over there. That was step one, step two, there's someone behind it, 

pBMs now, they can't just sweep something under the deeper you get, the deeper they have to get with their excuses, let's say. Seems like they try to stay one step ahead of everybody's jargon in the industry. are you seeing? I mean, obviously that ramped up from five years ago, from this is a PBM to where we are now.

So where is that battle taking place now in general?

Antonio Ciaccia: When I was at the Pharmacists Association in Ohio, I would argue that we were, miles behind PBMs. If you look at the policies that pharmacists were advocating for back in those times, look,

back at them and say, wow, you know like talk about small ball, right?

Like we [00:08:00] just weren't even scratching the surface of some of the more deep rooted fundamental issues that needed to be addressed and not just for pharmacists sake, but for the system at large. When I look at where we are today, certainly I don't think we're, right on top of them, right?

But I'd like to think that we're just a few steps behind at this point. PBMs are no longer enjoying, uh, the beautiful anonymity that they once had. Six years ago, we're trying to teach people what a pharmacy benefit manager is. Now people know what a PBM is. And in fact, they now understand that PBM actually stands for perfect business model. And so 

Mike Koelzer: Yeah. 

Antonio Ciaccia: now we're just showing them what that business model is. And, look, I think from a results perspective, if I'm a pharmacist and I'm sitting there saying what has really changed about this industry, I'm still getting hammered, the way I was, or maybe in different ways, but you know, the environment is not materially better for me. When I look at pharmacy data, what I see are [00:09:00] tales of haves and have nots. Um, and some states where they have gone through Medicaid reforms and they're moving to cost plus pricing with a, professional dispensing fee. Those pharmacies have it a little bit better than others. If you're a pharmacy that's working within the 340B program, you're going to have it a little bit better than others. So what we're learning more about is there are certain things that policy can do to change, the fortunes. A pharmacist, but again, if I'm zooming out, because as much as I place importance on what happens to pharmacies, you and I both know this is bigger than pharmacy, right?

There is a, there's a system wide problem with many stakeholders that are adversely impacted by the way that PBMs operate today. And through that lens, I can start looking at more optimism, that includes pharmacy, as being, partial beneficiaries of this change.

More and more states are changing the way that they pay for Medicaid, [00:10:00] no longer allowing PBMs to set prices and seeing great results in doing so. We're seeing the Federal Office of Personnel Management instituting New transparency measures. They just announced a big audit of the Postal Workers Union and saw Express Scripts holding such a 40 million in rebates, that just got exposed a couple weeks ago. You have the Federal Trade Commission, which is constantly evolving. the nature of their inquiry into PBMs. In April of this year, you have the Office of Inspector General announce that they're going to start a two year investigation into vertical integration of health insurers and PBMs as a result of our investigation that we worked on with the Wall Street Journal on in the fall, looking at the massive markups of PBMs. You have the White House doing a listening session this year on PBMs and the impact they're having on the drug [00:11:00] supply chain. In some ways, just to show you that I'm, not painting with ridiculous optimism, I think it's a little bit ridiculous that in the year of 2024, the White House is having a listening session on PBMs.

What were they doing for the last six years? Were they just

stuffing their ears? but I think, You see employers throwing PBMs to the curb. Tyson Foods, just tossed their PBM to the curb. Blue Shield of California fired CVS Caremark for, allegations of, misalignment, if I'm putting it as nicely as possible. Um, there's just so much happening right now. It's an unprecedented amount of pressure. And I listened to one of your more recent podcasts with Greg Rybold from APCI, who uses this line all the time, pressure bus pipes. And you're seeing PBMs contort in ways that we've never seen before, and I think that there's a lot of optimism that the necessary catalysts are in place [00:12:00] to start changing the way that this marketplace works for the better.

Mike Koelzer: Antonio, If I had to paint this with a real big brush, and if I said, what happened in the last five years, of course, a lot of things come to my mind, the internet just what we're doing now, face to face from across the country don't know, social media maybe. News not having to go through the big three news stations, being able to come to people in different ways.

For me, it kind of seems like a communication thing maybe more than anything, what do you think are some of the, real broad reasons for this happening? In this five years versus 2030 versus 2005,

Antonio Ciaccia: Yeah, I

would argue that the liberation of drug pricing data and information has been An unmistakable catalyst to this wave of change and

[00:13:00] pressure. 

Mike Koelzer: Where did that come from? 

Antonio Ciaccia: Well, you're putting me on the spot and I'm not going to like my answer because I'm going to think it's other things. But I look at our work and say that we have unearthed virtual dust collectors off of CMS's website and used

 Reimbursement data and combined things in ways that just have never been done before. When I worked in pharmacy, uh, and I'm sure you know this, Mike, because, pharmacists do this all the time. On social media and beyond is the screenshot, the screenshot is a time honored tradition of independent pharmacy owners of look what happened here. The problem with screenshots is that they are just as that is.

Screenshot is a one time experience. Those one time experiences are necessary. There are crumb trails, if you will, of larger system wide problems. But the beauty of access to things [00:14:00] like database, the State Drug Utilization Database that CMS houses, the availability of Cache Pharmacy data, Mark Cuban's Cost Plus Drug Company data, the availability of Medicare formulary files, Plan Finder, all these things, you start pushing them all together and before you know it, I've used this metaphor before.

In my house, I have four kids, all under the age of ten. If you pulled out a box of puzzle pieces, alright, you will find many of them missing. Many, okay? Drug supply chain is very similar in that there are missing pieces of the puzzle. The difference is my kids accidentally lose them under the stove and under the refrigerator and under the couch, in our world, drug supply chain members are purposely pulling pieces out so that you can never see them. I view our job in this world as taking all the puzzle pieces we do have, slapping them down. And then knowing that we're missing [00:15:00] pieces, there is value in building the pieces around it, because

you may not Ever get that missing piece, but you'll have a better idea of what it looks like when you surround it, okay? And I think a lot of people, not just us, have done a better job putting more puzzle pieces on the table that have begged more and more questions from those who are supposed to be governing the system.

Mike Koelzer: Any of that information come to you where somebody didn't know they were giving it to you? Like when you first said, I think the word you used was the crumbs and I'm thinking we're getting into an FBI, you know, like a Watergate kind of thing here.

Was any of that information truly scraps like off of some, I don't mean necessarily a garbage bin, but some data that, was out there and nobody thought you would do anything with. that until, somebody on the other side coming from another direction, same as you [00:16:00] or whoever's looking for this said, Oh, Hey, we're over here flashing the light and you found out that this information meant something.

Was any of it really scandalous?

Antonio Ciaccia: I would say yes in some ways, and this is going to be a small trip down memory lane, but I'll, I remember when we uncovered the spread pricing scam in Ohio. back in 2018. I'll tell you exactly how it started. It was pharmacists sending me those screenshots saying, Antonio, I bought Generica Billify for this price.

I got paid 50 below my cost. And I remember walking through to the lawmakers saying, look, You can't run a system like this. The pharmacy's getting paid 50 below its cost. And in some instances, that would work, they'd be very compelled. Others would say, well, business, sorry, well, everything changed when we could see the other end of the transaction, and this is a sad thing, I think, for pharmacy owners to grapple with sometimes because I know there's a debate like, shouldn't we be just be telling our story? Why isn't our story enough, [00:17:00] right?

Why don't people care about protecting the pharmacies? We could

sit here and debate ways to be successful there. Or we could say, you know what, we have to move on, at some point, you may not be able to convince people of the value of pharmacy, So, when you zoom out a little bit, and say, look, what happens to the pharmacy matters, but what if I told you that this drug that pharmacists bought for 100 got paid 50, what if I told you the state of Ohio got charged 200 for it? Well, shit. That's when things start to change. And that's exactly how we got the spread pricing problem diagnosed in Ohio. It was, I'll never forget, I was sitting down at a pharmacy with my wife. Mark Kratzer, who recently passed, um, great man, former Kroger pharmacist and iron worker. Um, he became he left Kroger, opened his own independent pharmacy in Wilmington, Ohio. He had sent me some screenshots saying, Antonio, I'm getting way underpaid on this claim. He was [00:18:00] one of many pharmacists at the time that were getting run out of business by the massive underpayments within our Medicaid program. He had examples of underpayments in Medicaid. But he also had examples of underpayments within the commercial sector, and he found a local plant sponsor who was on the other end of a transaction that he was underpaid for. And I was sitting in a room with two lawmakers at the time, it was Senator Bob Peterson and Representative Cliff Rosenberger. They sat down, he said, look, I bought this drug for, this example was around 130 bucks, he got paid 60. And it was like, wow, this is awful. How do you run a business like that? And then the employer who paid the claim is in the room and says, I got charged 160 more than what he got paid. And both lawmakers looked up and they're like, what is going on here? I will never forget. Cliff Rosenberger was like 34 maybe at the time. He put his phone down because he was sitting on his phone and he said wait, repeat [00:19:00] this to me. And that's what opened it all up. Cliff Rosenberger became Speaker of the House shortly thereafter. He made this a top five issue. And then all of a sudden, the PBM audit was created and boom, we were off to the races. But back to what you're saying, those. Data points is small and as pixelated as they might be, those are the crumbs, and they don't always create a longer trail, sometimes we can explain away, sometimes it is an anomaly, but sometimes those are the clues that lead you to a path where you can uncover hundreds of millions of dollars. the latest scheme that is plaguing the industry.

Mike Koelzer: Is that a relatively new phenomenon where the. the corporations buying this stuff can see the individual claims I think DIRs were about that too, because you couldn't go to a pharmacy and say, what did I get paid for this?

Because the DIRs in there, no one really knows. it new where the [00:20:00] corporations can see this?

Antonio Ciaccia: So good question. I do think that the climate has changed somewhat. I use a recurring joke that everyone says hey you go to pharmacy and you buy a pack of bubblegum They'll give you a receipt that's you know, three feet long, right.

You spend millions of dollars with them as a plan sponsor They'll happily send you a PDF file, one page, one side of the top 50 drugs that you spent money on with

No readily identifiable information, except the aggregate amount that you spend on the drug name.

 That is commonplace within the PBM sector. The reflex to request for transparency from a plan sponsor perspective. is always some bogus slide deck or bogus PDF file that gives you the top 50 drugs. That tells you absolutely nothing. And over time, some of that has changed. Some PBMs are more forthcoming and granular with information than others. The [00:21:00] passage of the Consolidated Appropriations Act seems to create more pressure on PBMs to be more forthcoming with information. I'll tell you that we've worked with plan sponsors before who say, we know we're getting ripped off. We want your help. The PBM finds out that they're working with us and they refuse to send, the necessary data for analysis purposes, but understand every so often there are success stories state attorney generals can subpoena this information. State auditors can get this information. If you're a large plan sponsor. And the PBM needs you, they'll give you the information too. One of, one of our clients, we do work with Mark Cuban's Cost Plus Drug Company. One of the things that Cuban gets often is data from commercial employers that isn't always as granular as it should be, but is granular enough such that we can make comparisons and say, here's what you were getting charged. And here's what the cost would have been [00:22:00] under the Mark Cuban experience. And here's what the cost would have been under a NADAC plus 12 model. And more often than not, they come out as significant savings. So I say all that because data availability is not a yes or no. It's more of a spectrum. Are you getting everything you need, or are you getting some of the information?

And unfortunately, the status quo is you're getting partial little bits and pieces.

Mike Koelzer: It's amazing to me that the corporations didn't get that information because even up till, let's say, I don't know, five years ago, before I started doing this more, I'm always like, Well, maybe they don't give the exact information because they're not paying for each drug, it's kind of insurance.

And there's a big kitty and more like a capitation , I'm thinking all this stuff like, well, maybe they don't deserve the information, but a corporation, the way I understand it now, [00:23:00] speaking to wise guests is that the corporation pays. Down to the penny for every drug that the PBM has through the system.

It's unbelievable that they're not getting, I mean, I got that on my damn phone bill back thirty-five years ago when, I would ring Margaret at 11 PM To mean I love her and she would ring back, a certain thing, because your parents were seeing the phone bill and you wanted to keep costs down and things like that.

That was thirty-five years ago on the phone bill. It's just unbelievable to that corporations aren't getting it down to the penny since that's what they're paying for. Yep. 

Antonio Ciaccia: blame there, I think part is, we've given employers a lot of power to ultimately get major tax breaks in exchange for offering benefits. In some ways they've proven To be ineffective at managing that at a true fiduciary level Some of that is their own fault their own apathy Right their lack of investment [00:24:00] in the right amount of internal and external staff to hold not just drug pricing But all health care spending accountable Maybe if I was taking their perspective, they would say it's become too hard to control right regardless I think they've done a pretty bad job up to this point, and I think that that apathy is translated into an autopilot that has ceded a lot of ground to the intermediaries who, again, are given the ability to set prices on both ends. But I do think that there's an awakening, the Johnson and Johnson lawsuit from earlier this year is considered to be a first of its kind and that there will be many employers who will likely be held a task for allegations of, not doing their fiduciary role. Benefits consultants are the easy scapegoats for employers though. They say, look, yeah, we know this stuff is really complicated because of that, we have to hire out two benefits [00:25:00] consultants who help us through that. Unfortunately, benefits consultants get their own kickbacks often in exchange for placing business with large insurance carriers and PBMs. So, regardless of the rationale or the reasons, the system is Obviously designed to fail as it constructed today.

Mike Koelzer: I was just going to bring that up. I guess the word I use is brokers. That's kind of the same 

Antonio Ciaccia: Yeah. 

Mike Koelzer: where, they're going to go in. if a corporation maybe got an inkling of something, the first thing they're going to do is confuse the matter. And they're going to say, yeah, but this is a 40 percent discount off of this and that.

And, on and on. And, they're not telling them that, the pharmacy is not allowed to sell a hundred dollar generic instead of the 500 brand name. And I think a lot of it's with those brokers. I think there's probably a lot of trust put in those men and women. and maybe they could argue that they were blind to some of that.

And I guess everybody wants to blame somebody, [00:26:00] but seems like the. Chasm between two is a nice smile from somebody and a bunch of details that nobody wants to go over. And you put those two together and you're like, all right, fine.

Antonio Ciaccia: I think there's poor assumptions made by the plan sponsor. And what I mean by that is, is that when I go to a gas station, I don't price shop the gas station, I assume that there's enough of a competitive environment to ensure

that, that the prices are all going to be pretty

similar.

From one publicly traded gas company to another. I

bet employers feel the same, like,

is it really going to be that different from one to another? What kind of liberties would they really take? Benefits consultants do the same. Benefits consultants and brokers In my experience, spend more time on the golf course than in excel spreadsheets, okay?

And so they're in the business of selling, I

spend every waking hour Studying [00:27:00] drug pricing information and I have a team of people who do the exact same thing We don't even have all the answers, so why would we expect salesmen who again not don't mean in a bad way, but like not drug pricing experts But really good golfers To build relationships with employers and guide them to a better reality. In a sea full of publicly traded companies, not just PBMs, the entire drug supply chain has layers of publicly traded companies And we're supposed to rely on these benefits consultants and brokers who get their own kickbacks From insurance companies and PBMs. This is how we're supposed to navigate this system.

Of course, it's not going to work, and I

think again, I think that's why You know, the cash pharmacy explosion that we're seeing, the independents that are pulling out of the system, the press that Cuban gets, the press that GoodRx even gets, they're showing you prices that most people have [00:28:00] A, never looked at, or B, never even thought would be that significantly lower than what an alternative reality could be.

Mike Koelzer: And the gas stations, to the point of transparency, they've got three feet high, Numbers of what the price is every second that it goes up a 10th of a cent or something like that.

So there's trust there, but with the drug stuff I mean, golly you're, spending your whole life on this. And they tried to throw you, I mean, this isn't grandma pulling with in her 2000. on her car, getting gas once a year. This is tricky stuff.

Antonio Ciaccia: The prices matter, man, and I love what you just said about the trust, like, say what you will about the gas industry. I don't know enough about it to say either way, but like, these are some of the largest corporations in the world. And when you pull up, the price is sitting right there, right?

And, and in the drug world, it's not even [00:29:00] close.

We're running, we're doing an analysis right now, examining the prices of medicines within Medicare Part D, and we found one PBM for one drug across the country. They set 616 prices over the same time period. Okay. You should, you roll up to Freedom Pharmacy in Pickerington or Blueberry Pharmacy in Pittsburgh.

There's

one price, so yeah, there's some significant financial engineering going on. And it's being done by non fiduciaries, which means distrust and verify.

Mike Koelzer: When I think of the brokers and so on steel manning their position, they can say, well, every business. Has reasons, and maybe it's every sales person's goal to show here's the standard, here's the deluxe version. You go across the board on any product, you're trying to get more money out of somebody inside of your head.

You're thinking it might be a better deal. And that is why I think a salesperson with a [00:30:00] good conscience can kind of upsell. I suppose the brokers could say that too. Problem is, when one out of 20 people say to them I trust you. I just want to see for myself what this and that is.

That's the problem. That's where it breaks down because at one out of 20, do that. And just thinking out loud now, I would argue that the broker would rather get rid of that one person out of 20, then have the chance of getting the 19, finding out the true value too.

Antonio Ciaccia: Absolutely. And this is, look, if I have one bias, , it is a bias against complexity. I believe that we shouldn't have to trust the ethics of publicly traded companies, , to navigate to a fair drug pricing experience. Furthermore, even if they're not publicly traded companies, conflicted actors, whoever they are. Right. I shouldn't have to [00:31:00] trust the ethics and not just the ethics, the expertise. Because it's

one thing if they don't know it, in fact, I would wager a bet that most

people don't know it, So if you could simplify it and make drug pricing information more accessible and understandable, this is why we do what we do at 46 Brooklyn, is we're giving everything we can away. Because you shouldn't have to hire us for the answers. You shouldn't have to hire other people for the answers. I want to give all this information away, every little bit that I can, such that you as a payer, whether it's the individual patient or a plan sponsor or a government program, whoever it is, , the on ramp to drug pricing understanding shouldn't be nearly as long and as arduous as it is.

Mike Koelzer: Michigan passed some laws and the first draft we saw was nothing close to what came out. I mean, obviously some PBM, somebody took someone to [00:32:00] lunch. And my guess is that they may be pointed at a few things on there and said, Oh, that doesn't look quite right.

Change this. And now I'm, downplaying the importance of the state board looking at this, but let's just say that they're underqualified to fight back to the PBM representative. In your case now, Antonio, Now that this stuff has been brought to light and knowing that the PBMs are always trying to stay one step ahead.

At some point, it seems like curve starts to get parallel and get closer and closer with somebody as brilliant as yourself, what kind of argument could they. Try to pull the wool over somebody. If you were on, TV having a debate and the people at home could vote on their cell phone, things like that.

Who made a better argument? Would they still have something they could pull over on the [00:33:00] public? And even on the wisest of the wise, or is it simply just time before it's easy to prove that we're on the right side of history,

Antonio Ciaccia: If I was on the PBM side, I would do a lot of what they're doing today, which is look how much money we save, and so, what they argue is, if you get rid of us, look how expensive it would be. And it presumes as though, that if we got rid of them, the system would be built exactly the same way it is today, which is obviously not true. I've used the metaphor of the of the Bed Bath Beyond coupon, every time I go home, my mom's got a stack of them. It says hey, 20 percent off if you need it, they mail these things every month, and they never expire like they'll honor them forever So eventually everybody has a Bed Bath Beyond coupon that'll give them 20 percent off of whatever it is that you can buy there. If I was The purveyor of the coupon, I would say, look how much money I save. Like, without [00:34:00] us, what would you be charged? Well, it presumes as though Bed Bath Beyond isn't calibrating their prices to make up for the fact that they're shaving 20 percent off for basically everybody who walks through the door. The same thing occurs within our drug supply chain, where drug companies raise their prices higher and higher.

Pharmacies raise their usual and customary prices higher and

higher. And both and drug makers say, Those aren't real prices, those are fake prices, Everyone says, like, don't pay attention to those prices. Even

though that they're setting them higher and higher, we in the industry know that those are bogus prices.

PBMs, when they come in and they say, Look how much money I saved you, They're bogus. They say, look how much I saved relative to the bogus list prices that drug companies charge and the bogus usual and customary prices that pharmacies charge. But in both instances, if you had even a dash of the necessary [00:35:00] context, you would say, well, the drug maker's prices and the pharmacy's usual and customary prices wouldn't be sky high if not for

the distorting impact of the way that PBMs contract in this marketplace. I always go back to Nate Hucks here in Ohio, Freedom Pharmacy. He owns Pickerington Pharmacy. And he owns Freedom Pharmacy right next to it. Pickerington Pharmacy accepts insurance, Freedom Pharmacy doesn't. So, is he just Dr. Jekyll and Mr. Hyde, I'm evil on one side and good on the other? No. Both businesses are a reflection of the incentives that are created by their customers. On

one end, the pharmacy serves PBMs as the customer. On the other building, Patients are the customer. Patients want and incentivize lower prices. PBMs do not.

Mike Koelzer: I had Nate on the show and you're absolutely right You had to set up two businesses he's from Ohio I think 

Antonio Ciaccia: Yep. 

Mike Koelzer: and I asked what did the state board said? He's like I [00:36:00] explained it to him. They're okay with it, you know So I've got two businesses next door to each other And in fact, I think he's got a wide opening between them and he can kind of straddle both of them to have the pharmacist in both stores.

He got permission for that Antonio Now you do know that Bed, Bath Beyond went bankrupt, right?

Antonio Ciaccia: I did know that. Yes.

Mike Koelzer: So they must not have risen up to 20 percent that they should have to make up for those coupons, 

Antonio Ciaccia: They should have raised the prices and created bigger coupons. 

Mike Koelzer: Right! There you go. Well, here's the thing though. I don't know if you remember this, but JCPenney about, I'm gonna say 10 years ago, maybe more, maybe less they hired somebody in who was going to Clear up things and not have the coupons anymore. And it was going to be an honest value and this and that.

And the guy lasted about years, I think, before they booted them out and then came back with all these percent off things. And thought it was a good idea, but it just didn't work. And then you look at the the cars we buy and you [00:37:00] knew back then when they were saying, invoice price, all this gobbledygook, you knew that wasn't right.

I think it's a deep seated American, at least psychological thing where, even JC Penney couldn't pull out of it and they're trying, and I think even the brightest of the bright still get suckered into that, where they say we're the PBM and we're saving you the percent and It's almost like asking a car lot come on guys, show me the real invoice.

And tell me how many times the manufacturer took you out to golf and all these things combined, but it's smoky. And then when it's smoky people, I think resort to the 40 percent off thing.

Antonio Ciaccia: I agree. The more inaccessible a true value assessment is to the buyer, the more effective that, uh, a perceived discount will be. Meaning that, if I walk into a JCPenney or a Macy's or whoever, any one of these big, stores that engages in [00:38:00] discounting practices, we as the consumer don't have an under a good understanding of what the quality of the fabric or the brand is that we're buying,

We substitute in our brains that it must be a really high value product if the sticker price is so high. And then we make a value assessment like, look, oh my God, I'm getting this really high quality thing at a very big discount. 

Well, I believe very strongly that the value of one pharmacist will be different than another, sometimes

better, sometimes worse, right? I think most people

Don't really identify with that, they don't really perceive to be a distinguishable value from one pharmacist or pharmacy versus another.

And if they

do, it will be a, be based upon more superficial things like hours, convenience, things like

that, 

that's a sad reality for a clinical profession, but let's just accept it as reality for this conversation. Well, within that framework, if I'm getting something for 4 at one. At 10 versus [00:39:00] another, that will be a much easier assessment, 

especially

if I'm a plant sponsor, but I'm not getting that type of information. I'm not getting that degree of granularity often. And I don't often understand the trade offs from one pharmacy or one drug versus another. Again, the lack of an understanding of what the actual underlying value is of the drug, its service provider, etc. Is a great enabler that lulls people to sleep to say, well, I got a better discount this time than last.

Mike Koelzer: Antonio. It seems kind of archaic that you said their best pitch is Yeah, but we're gonna save you a rebate can tell my kids, like, when they're going out, like, don't fall for that. Buy the one that's 30.

Don't get the 70 one for 25 off. if that's their best argument, it seems so archaic. And I would say the answer is, and I think you would agree that stuff to the light, [00:40:00] making it easy to see it, making it accessible making it in plain English, don't overwhelm people, all those kinds of things. Is that simply the way then to beat that argument?

Antonio Ciaccia: I think that is part of it. But I think you have to accept the fact, which I think involves a little bit more convincing, is Would the prices be as high as they are if not for the PBM and the way it behaves today? And so we're we look at it and we look at the system as designed today and say how can I save more money?

Right. That's what everybody's asking. I would like to advance the conversation and say Stop thinking about saving money in the system as designed today And say how much lower would the prices be? And how much like yes, maybe we could save more money relative in the system that we have today But I long for a system where quote savings is a lesser factor meaning That we have lower prices to begin with, rather than more and more bloated prices and bigger [00:41:00] discounts.

Mike Koelzer: Part of that issue is playing on the PBMs field and they're the ones causing, well, if you want to be victim, whatever, they're the ones causing the fight. Pharmacies then to raise their prices up way beyond that to hit the UNC and the limits and all that kind of stuff.

Antonio Ciaccia: Yeah, let's put numbers behind that, so we did a a study with the Oregon Pharmacy Association about just over a year ago, where we looked at the pharmacy reimbursement trends for a number of pharmacies in the state, examining how PBMs compensated them. When you take all their claims, And you boil them down to essentially a hundred, meaning that you're taking, 80 pharmacies worth of data, all their claims over three years and boiling them down as if they were percentiles. The first 18 percent of the claims that you look at, pharmacy's being paid below NADAC. Okay, so they buy a [00:42:00] drug, they're getting paid less than the cost of the drug. Well then they start making some money, but it's like a penny or two pennies, five cents, etc. Well, eventually, they start making enough margin over the cost of the drug, Not the service, the cost of the drug, but they finally dig their way out of the hole. That isn't until the 75th percentile of claims. So

Percent of what the pharmacy does, okay, when you factor in the underpayments versus the margins, now you've gotten breakeven on the drug. But pharmacies need more than covering the cost of the drug, so once you get past the 75th percentile, now pharmacies start making profit. While many pharmacies would focus on the 18 percent of claims that were paid below NADAC, I'll tell you what I was focused on. 5 percent of pharmacy claims account for 62 percent of their profits, okay? So there are 5 percent of the claims that for our conversation are [00:43:00] wildly overpaid to pharmacies relative to what you or I would say is probably reasonable, 

so if you're a pharmacy, You're stuck with the underpayments, you need the overpayments in order to basically keep the lights on. Well, now let's talk about how the PBM plays into this in terms of incentivizing the higher prices. What do we know about PBM contracts? PBM contracts say we will never pay you Any more than your usual and customary price. Furthermore, we will pay you based upon a lesser of methodology, all right, where it will include MAC, WAC, whatever the hell they want to put in there, and

or your usual and customary. So when you're dealing with an over consolidated marketplace, right, where three PBMs basically are going to create the experience, they say that they'll never pay you [00:44:00] more than a UNC, 

and they're gonna pay you at a lesser of blah, blah, blah, blah, blah, and UNC.

Well, if they underpay you on so much, if you were to lower your usual and customary prices to a reasonable rate, you're chopping off your lifeblood

right now.

You're stuck with all the under, all the underpayments. And none of the benefits of the overpayments.

And when we did that analysis in Oregon, we found one pharmacy that was charging what I would consider to be, relatively speaking, much lower UNCs relative to the aggregate. And guess what? That pharmacy just so happened to be one that closed over the course of our study.

So so yes, PBMs, if you're viewing it through their lens are providing significant savings relative to those bogus UNC prices.

Okay. But if the PBM contract provisions that incentivize those higher prices in the first place, think of what a [00:45:00] different universe this would look like.

Mike Koelzer: They basically gave the pharmacies the rope to hang themselves and then the PBMs will turn around and blame that part on the pharmacies. 

Antonio Ciaccia: Yeah, Look at it

charging! 

Mike Koelzer: Yeah. Look what they're charging and look how much they're charging over their costs, but they put us there.

Antonio Ciaccia: And here's the really, here's the thing that drives me absolutely insane. Now I'm getting fired up, okay? So,

you had, You have my good buddy Greg Reibold on the other day, all right, and he mentioned a study that we worked out with them called Unraveling the Drug Pricing Blame Game. This is probably my favorite study that we've done. What it did is it said, we looked at over a thousand pharmacies and just simply asked, how are PBMs setting prices? Because PBMs are running advertising campaigns all over America right now saying drug companies and drug companies alone set the prices of drugs as if they have no role in setting prices.

So we said, okay, let's [00:46:00] open up the pharmacy files and see who's creating the price at the point of sale. We can do this because In NCPDP standards is a field known as basis of reimbursement, in that field, the PBM designates what basis they use to pay the pharmacy and thus create the price at point of sale. In our study, we found that essentially over 80 percent of generics were done using MAC, okay? What's MAC? PBM created price, okay?

Even on brand drugs, we saw PBM setting wildly differential prices. On brand drugs same PBM setting different prices for the same brand drug at the same time period But here's the most jacked up part on one.

We found one drug where one pharmacy dispensed it Uh nine different times on the same day So the exact same ndc the same pbm paid them five different prices Okay, [00:47:00] the low end was 9. All right, it went all the way up to over 90. So same drug, same day, same pharmacy, same PBM, five different prices at a range that is 10 times the difference of the lowest. In that study, what we found was that the drugs that were the most undesirable from the pharmacy's perspective, meaning the biggest losses, those same NDCs matched up as being the most overpaid drugs. at the same time. What that means is that the drugs that are responsible for the most financial harm to pharmacies, 44 percent of the time, were also the drugs that created the biggest wins for pharmacies. So again, what happens if you lower your usual and customary prices? A PBM is choosing to wildly underpay you and wildly overpay you on the same drug. If you lower [00:48:00] your usual and customary prices, you just get the underpayments.

Mike Koelzer: Antonio, take that one step further. Why do they do that? Why, if I'm a PBM, how come I'm not paying everything at 9 and then making a spread, saying I paid a hundred to the company. Why are they having all those different Macs

Antonio Ciaccia: You can't move dry cement. Mike,

What I mean by that is, is that if the numbers aren't fungible, there's no way to engage in arbitrage. You see your contracts with a PBM, what does the PBM contract say?

It'll say on multi source generics, we'll pay you AWP minus. Let's just say 85%, no dispensing fee. Well, if I was paying you for something, Mike, and I said, Mike, I'm going to pay you five bucks, that's my guarantee, [00:49:00] and on everything else that we do, it'll average out to five bucks. Why on earth over the course of the year, would I say, I'm going to pay you three. And this time I'll pay you four, next time pay you seven. Business is benefited by being efficient. What would be the most efficient thing to do? Set the price at exactly what the contracted rate is. That's not what happens at all. We see this on the plan sponsor side too. They'll have a contract that says we're going to guarantee you AWP minus 85 percent. Then why aren't they billing AWP minus 85 percent? Set it and forget it. Every claim adjudicates at that same rate. Because if they can't manipulate what happens at the point of sale, their scheme of buying low and selling high becomes a lot easier to pin down. The most efficient thing to do would be to have one price. The most inefficient thing to do would be to [00:50:00] have 616 prices.

They choose the latter. 

Mike Koelzer: let me see if I got this, Antonio, you said that there's five different Mac prices from Greg's, 

Antonio Ciaccia: From our study, 

Mike Koelzer: what Greg said last week and from your study, let's say there's five different Mac prices for one drug.

Antonio Ciaccia: this was Duloxetine.

Mike Koelzer: All right. Are you saying that the PBMs Cause if I'm a PBM, I'm going to say, let's say it's nine to 90.

If I'm a PBM, I'm just going to say, ah, I'll just pay everybody nine. Are you saying that they have all these different prices just to make it confusing for the company that's purchasing this? Is that why? Because if I'm a PBM or is it different contracts that people signed with me, that the different employers, why wouldn't I just sell everything for 9 instead [00:51:00] of 90?

 Why wouldn't I reimburse every one of those prescriptions at 9 versus 90? Why the difference? I understand the difference, 

Antonio Ciaccia: Yep. 

Mike Koelzer: the difference?

Antonio Ciaccia: There are different contracts and different plan sponsors that have different controls on the PBM.

There's non spread contracts, there's spread contracts,

there's rebate heavy contracts, there's rebate light ones, right?

So, like, you have a lot of different types of agreements that are operating in a lot of different types of programs and environments, right?

So, the reason that you don't have one price, Is because you can benefit by creating multiple prices. so if it was straightforward, they would say look the price is nine bucks You'd go on cbs's site. You'd look up deloxitine. They'd say boom nine bucks, but they want to they say look, we're as transparent as they come don't look at mark cuban's price He's a gimmick, that's what they're saying. Well They want to say that because they [00:52:00] need to protect their ability to set hundreds of prices on the same drug and provide different prices to all those different plant sponsors they're charging.

Mike Koelzer: whatever reason, the one that they pay 90 on to a pharmacy, they might do that because some other little twist their contract says they're going to get, double that on some class of drug or some exclusion. I mean, whatever the hell imagination they have.

It only works if they can manipulate all of them. We'll give you 90 on this one, but that's just because you signed this a year ago and we're going to get you a double on this because of this reason. But this other contract that was written who wanted, discounts on all green tablets or something, they're going to do this and we'll make it work out, but that's why they have to be different prices.

Antonio Ciaccia: Yes, and look like it starts to become absurdly ridiculous when you look at the rhetoric that they give right in every

state At the federal [00:53:00] government level. What do they say? We PBMs are the only ones in the drug supply chain working to secure the lowest prices, right?

it begs a question if you set five different prices on the same drug at the same day at the same pharmacy

Which one Was the lowest?

Was it the 9 one, the 30 one, the 50 one, the 60 one, or the 94 one? Um, I think that speaks for itself, there is one low price. They chose

not to give it to the other four.

Mike Koelzer: Pharmacy is not a commodity, but when you take the commodity of a drug that. All these drugs are safe with the pink, with the green band around them, whatever, that's the commodity part.

There's no reason those should be different prices. Especially because the service isn't going to be different in those situations. And it's not going to be different because contractually you have to give delivery to the person if you're giving it to someone else and so on.

Antonio Ciaccia: That's exactly right. That's, and that's the point that we tried to make, back when we uncovered the spread pricing phenomenon, it was, [00:54:00] Look, we know the pharmacist's cost to do what it is they do. Granted, there will be sometimes differences in the degree of care that a pharmacist will provide to one patient for another, versus another.

But at the end of the day, contracts don't account for that. They pay the pharmacy the same no matter what, the dispensing fee is the dispensing fee. And so the question that we begged was, if the average claim is hitting at around a 2 or 3 margin over NADAC, which is what was happening under the Ohio Medicaid managed care program, back in 2017. We said it's okay, we're not even going to argue whether that's fair or not, but if the average claim is yielding two dollars in profit, then why is Generic Gleevec churning out four thousand dollars in profit per claim? Do tell us what the specialized service is that is

being offered, On

this drug that justifies that degree of overpayment.

Mike Koelzer: Antonio, does it come down? To a matter of trust that people trust [00:55:00] Mark Cuban, they trust Antonio Chacha they trust don't know. I don't know who else is out there to trust. Take me off the list, A guy like Cuban is mainly outside of the industry, A, who doesn't need the money and B doesn't have a dog in the fight with the pharmacy and so on. I don't know how you overcome that pressure from the brokers and the PBMs.

Yeah.

Antonio Ciaccia: There's a famous quote, in God we trust, all others must bring data. And so, what I would say is that look, you know, I've worked with Alex Oshmiansky and, Mark Cuban for a couple years now. And I would say, look I, in general, trust what they're trying to do. And I trust their motives. But I want to be. I want to be true to my belief and that is trust no one. Okay. Trust absolutely no one. Whether they're publicly traded or whether they're, the nicest, kindest, independent [00:56:00] pharmacy that you'd ever imagined, Right.

Trust no one, especially when it comes to your health.

So the question then is, what does trust look like? That's

most important. I want to, I want accountability. above superficial trust. And so what does trust look like? To me, trust looks like, I understand your incentives, I understand how you make money. I know how much you charge. What your price is for me, and I know whether or not it's different for somebody else whether people trust mark or not One of the things that I love about what he's doing is he sends a very clear message that at the end of the day We're selling trust and to me, I think that it's unbelievably and depressingly distinguishable in this marketplace because nobody Is selling trust because trust [00:57:00] has never been earned now You could argue whether or not it's been earned by him or not But what at least what he does is he publishes his prices and tells you how he arrives at them. It's funny in march David joiner at cbs care mark paid a bunch of money over to I think was fortune magazine in order to get an op ed placed and in that op ed he proceeded to Talk about cuban as a gimmick and he you know blamed all drug pricing problems on drug

companies You 

Mike Koelzer: your share on that.

Antonio Ciaccia: And, I just found it funny that, someone in an institution of that degree, a Fortune 15 company say that they're transparent, right?

And it's claimed that others are not while not publishing their prices online, often withholding data from their clients from charging differential prices within different contracts, and then when they launched their cost vantage program, they didn't tell you how they arrive at the cost of the drug. They didn't tell you [00:58:00] what the markup was. They didn't tell you what the management fee was. Well, not giving those kinds of details,

especially with the track record that they have. Again, it speaks for itself, it's one thing to say you're transparent. It's a, it's one thing to say that you're trustworthy. It's another thing to hand over enough information such that other people can make those assessments on their own. That's transparency. That's opening yourself up to accountability. And unfortunately, in the system as designed today, I can point to a few cash pharmacies, a couple very small PBMs and market players, who are even close to playing in that philosophical pool. Everybody else is operating With bogus inflated prices and sleight of hand underneath. Um, to me, the system as a whole needs to be better.

Mike Koelzer: It speaks for itself, but it doesn't. I mean, I'm reading his stuff, that article that, I saw on that. Was it fortune or Forbes 

Antonio Ciaccia: Fortune, [00:59:00] I think, yeah.

Mike Koelzer: I'm reading that and I'm like, nah, of course I don't trust this guy. I know where he works and I know what his title is, but I'm looking at it and the average Joe, the average HR person's not gonna understand it or.

Take the time even to look at it. Of course they trust the big three. They're the big three, just like I trust, whatever big three there are. So, guess it helps when. It helps when there's somebody in the ring. Like I hate to put too much trust in Mark and Alex because, they don't do healthcare, they really haven't deserved it, but they they don't seem to have the dog in the fight and 

they're on our side, I guess, when Mark goes in front of the Congress and, breaks it down and uses a cuss word and things like that. You don't hear that from the PBM. So I kind of like that.

And I like your Italian ness that you have. boy, I don't know 

Antonio Ciaccia: Yeah again, it's not my job to tell people to trust anybody, like

it's [01:00:00] my job, it's my job to say what trust looks like.

Um, And again, I think they've demonstrated a lot of the necessary components, much like a lot of the cash pharmacies. The independents are doing things today, I think, in similar fashions. You have other PBMs, I know CapitalRx, talks about their single ledger, approach to,

You Pharmacy benefits. I know some smaller PBMs that operate with similar philosophies.

Again, a lot of those smaller PBMs also rely on rebate aggregators that are owned by the big three PBMs, etc.

So, I mean, I think it's important to not necessarily contextualize trust as being one or, yes or

no, or

black or white, Right.

It's degrees of trust.

 I know what trust looks like. And the predominant experience in pharmacy benefits management today is not trustworthy. Both on

track record and on details that have been supplied.

Mike Koelzer: Well, and what I kind of like when I go through [01:01:00] software, I want to compare stuff. Or the standard version versus the super version of a software. I like going down and seeing the red checks and the green checks and things like that, and, let them teach me this and I suppose the cool thing now is that before.

When things were so obfuscated, you didn't even know what the damn terms were when there was DIR and all this kind of stuff. Now, at least we're maybe understanding the terms more. And you put out a cool dictionary yesterday, I think I saw it Antonio of all the terms, that's cool because now you can at least know what a green check means a category versus a red.

X on a simple app website. Transparency, communication that's king because then the rest of the world can join in with their opinion.

Antonio Ciaccia: Absolutely. Again, the layperson doesn't know what the price of a drug should be. So the

question then is, how do we give them enough information to better sobriety check the prices that are being charged? [01:02:00] We know that the prices that are being charged at every layer of the channel, From pharmacy to wholesaler to drug company to PBM are not necessarily set in a sober marketplace Where

you know, there's true competitive forces that are driving the prices that are being charged down instead It's a negotiated net experience Well, how do we have a better understanding of what a truly fair net negotiated experience is? When the people setting the prices on either side of the ledger are taking advantage of the asymmetry of information.

I loved baseball cards. They used to have a magazine called Beckett. It would tell you essentially the going rate of every single baseball card that you had. In absence of it, you'd walk into a baseball card store and they could take you to the cleaners, Right. So you had no concept of what the marketplace is. So once you have benchmarking, once you have other transparent data points telling you what things are, what they should be, what incentives there might be behind the person selling you something at an inflated price, well, now all of a sudden you're [01:03:00] better equipped to navigate a marketplace.

That in a way that's not going to leave you susceptible to being taken advantage of. I believe it's incumbent upon us and everybody in your community and others to put more cards on the table such that bad actors in the supply chain have more pressure to become good actors.

Mike Koelzer: Antonio how do people connect with 46 Brooklyn?

Antonio Ciaccia: Yeah, you can find us online at 46brooklyn. com and 3axisadvisors. com. You can find me on social media platforms at Antonio Chacha, C I A C C I A, just like you thought it was spelled. how 

that's usually the first stab.

Mike Koelzer: Hey Antonio, I appreciate you being here. You have a lot of stuff on your plate and a lot of places you could be besides with us. So I appreciate it. And I look forward to talking to you next time.

Antonio Ciaccia: Mike, thanks so much for having me. I always love to be with you.

[01:04:00] You've been listening to the Business of Pharmacy podcast with me, your host, Mike Kelser. Please subscribe for all future episodes.