Part 2: Cheryl Larson on Balancing Employer Needs, Controlling Cancer Costs, and Future Goals

April 19, 2020

In the second part of a 2-part preview interview in advance of this year’s virtual 2020 Community Oncology Conference, The American Journal of Managed Care® speaks with Cheryl Larson, president and chief executive officer of the Midwest Business Group on Health, about how she is helping employer organizations navigate their pharmacy benefits managers and manage employee expectations.

See part 1 of this interview here.AJMC®: You're also helping to lead Midwest's National Employee Initiative on Specialty Drugs. Can you tell us more about this initiative?

Larson: Sure. We started this about 11 years ago when our board of directors said to us, which is [something] all employers said, "We see biologic and specialty drugs. The prices are getting out of control. We're really worried about it." And 11 years ago, they were not even what they are today. So we started looking at what we could do to educate the employer community. We have an employer task force that drives the direction of the project.

We started out being focused on doing national employer surveys. We created an online toolkit that any employer in the country can have access to. And we provided checklists and things to ask your health plan, things to ask your PBM about making sure that you have the right plan design. And over time, we realized that there was little movement or willingness to change by PBMs and other intermediaries in the market. And so we started creating reports and changing what we were asking vendors, to get them to do things that would be more transparent and ethical.

And as you may know, a lot of the plans and PBMs have merged, and that's just really kind of solidified their ability to not be transparent, to not have to change. There are some employers, especially the large and jumbo, that are getting more transparent contracts, doing some unique things. I'll share a little bit about that in a second. But employers absolutely need education on how to effectively manage specialty drugs and biologic drugs and now biosimilar drugs. So we have focused on education and some small research projects and creating reports to tell the truth.

This year alone, we're going to focus on genomic medicine that I've already talked about; and again, biosimilars, as there are more and more coming into the market. We're going to focus on drugs that are running through the medical benefits, because for a lot of employers, that's a black hole. They can see what's running through the pharmacy benefit, but not through the medical benefits, because they're often told "We can't share that data with you. That would expose our provider contracts.” Of course, that's not necessarily true.

Last year, we launched an initiative, and it was years coming for our employer members, called EmployerRXEvolution. And the program helps employers address a lot of the conflicts of interest and misaligned incentives that are so prevalent in pharmacy benefits today. So we are working with some consulting firms who are helping our members to actually clarify and remove certain responsibilities from the PBM contracts. They're clarifying the language in the contract to benefit the employer instead of just the PBM, and then they're removing certain responsibilities from the PBM and the other intermediaries so they can achieve actual transparency and allow for more flexibility.

We do this because the No. 1 reason employers can't get traction in their pharmacy benefits is that their PBM contracts, as I said earlier, mostly benefit the PBM. So we've got to change that. And we're removing the roles, responsibilities, and functions from the PBMs that cause these misaligned incentives. And that includes things like carve outs, for example. A lot of PBMs want you to use their specialty pharmacy because they want to control what goes on formulary to maximize the rebates they get, and proactively managing formulary for employers is key.

There's a lot more going on in this space that I could go into, but there are things that finally employers are doing, and quietly some of the PBMs are allowing for it. How large you are matters, but we're making this solution available to the midsized employer. And it's working, which is exciting.

AJMC®: In your view, what are some employer best practices geared toward managing specialty drug costs that can help to manage employees' benefit expectations of their cancer care coverage?

Larson: In addition to the things I talked about a minute ago, some of our members are also doing direct contracting with retail pharmacies to better manage costs. They're using independent [pharmacy and therapeutic] committees, and they're also carving out for prior authorization, clinical review, and mail order. And these have all been things that have traditionally been done by the PBM. Those are some of the things that we're taking back because they haven't been managing them well.

But one of the biggest things that we're trying to do is help them by offering guidance and an understanding and knowing what to do with genomic testing. And again, should they be covered in advance of certain oncology drugs that are prescribed? No one is guiding that. Not the provider or the carrier or their PBM. Hopefully, maybe the provider knows about the drug test or the genomic test, but they don't always.

It's been kind of common for oncologists to prescribe drugs that aren't going to work in that person. That's what the genomic testss are for: to ensure the drugs will work in that person. So you've got an employer paying a lot of money for something that's not working or, worse, could even be harmful to that patient.

I'll give you another real quick example about oncology. We recently conducted an employer meeting on specialty drug management. And I looked at what the employers had to say about oncology and the challenges that they faced. And so the 2 things that kind of rose to the top were the lack of transparency and the lack of data, that employers need more knowledge about how to use the data they do have. They're concerned about how they can help the next employee who has cancer or another expensive diagnosis, especially with some of the drug treatments coming out at half a million to $1 million dollars and more.

And in terms of oncology drugs, we're recommending that they go to their carrier and make it the carrier's responsibility to determine where they're going to get that drug and how much they're going to pay for it. But this has to be a transparent relationship. That carrier can't go and contract for the drug and add a lot of the cost onto it, you know, 10% to 30% to 40%. It has to be transparent. Employers believe that intermediaries or, as we often call them, middlemen have a right to make a little money, but not the type of money that they're making.

When a pharmaceutical manufacturer sells a drug to an intermediary, they're assuming they're going to make a little money, but not the amount of money that they're actually making. And those discounts/rebates from the manufacturer are often not being passed on to the employer. So employers have to be aware of all drug prices and know exactly what's in their PBM and health plan contracts when it comes to biologics and specialty drugs.

We launched a report 2 years ago about the top 7 things that PBMs do to increase employer costs. And they're all related to adding additional fees on to not only employers, but health plans that are covering costs for the fully insured. Even pharmacies are paying these extra fees. PBMs have figured out a way to be very profitable, and I always say while employers were busy complying with the ACA [Affordable Care Act], PBMs and other intermediaries were busy figuring out a way to make more money.

Secialty drugs, which are given to about 2% to 5% of patients across the country, are now costing employers up to 50% of their pharmacy benefit spend. And that is jumbo employers. And a lot of the specialty drugs that we're talking about today also run through the medical benefits. And, because it's separate benefits, pharmacy on one side, medical on the other, and they don't even know what they're paying.

In fact, a lot of oncologists in the past made millions of dollars and lived high lifestyles because as oncologists, they were conducting buy and bill. They were buying the drugs at a reduced cost and billing the health plan or the PBM, and making tremendous amounts of money. But the government did step in, and that is far less prominent today. But PBMs, for some reason, the government has not stepped in. They have with other areas, but not with PBMs.

AJMC®: This was absolutely amazing. I want to thank you so much for your time today.

Larson: You're welcome