Managed Care Innovator: Jane Lutz - Part 2

First Report Managed Care recently sat down with Jane Lutz, PBMI’s executive director, to address the group’s most recent findings, and get her take on what they mean for managed care stakeholders. Ms Lutz—a 24-year veteran in the pharmacy benefit management space—told us about PBM customer satisfaction, attitudes towards financial transparency and goal alignment, where PBMs can step up and assume a leadership role, and more. 

Let’s turn to a specific group of specialty drugs that get the lion’s share of attention—hepatitis C medications. 

Drugs in this category hit the market like a tsunami. Costs were off the charts. PBMs have done a good job of negotiating discounts with the manufacturers mainly through formulary exclusion. Our data shows that of plans that have formulary exclusion in place, 60% employed them for hepatitis C medications in 2017, vs 47% in 2016. So, costs are being managed. 

As you mentioned earlier, some specialty drugs are curative, and hepatitis C medications appear to be a great example of that. There tends to be sticker shock associated with their cost, but what about the long-term cost efficiencies gained by curing someone? 

You’re asking the right question, and organizations are asking the same thing—to be shown outcomes data that justifies the cost and validates coverage. But it’s too early to know for sure. 

What are the hurdles? 

Health plans and PBMs are starting to look at using value frameworks.  The problem is that different stakeholders may define value a little bit differently.  How do you validate value?  What data do you use to validate it, and what missing measures are needed to determine it?  There is a lot of interest, but in general there hasn’t been rapid execution. We see some organizations selecting specific therapeutic classes in which to try value-based frameworks. 

A big part of the problem is the lag on the medical benefit side. It’s hard to show a quick ROI because of that lag. Pharmacy is real time, so you get that information immediately and that makes it
easier to determine value. Not so on the medical side. 

Usually when PBMs are discussed you can bet that the issue of price and financial transparency come up, or the lack thereof. 

You are right. I’ve been in the industry for 24 years and transparency is certainly not a new concept. The market has always demanded more of it, so it is an area where differentiation can matter. In our 2017 customer satisfaction survey we asked respondents to rate their overall satisfaction with the financial transparency of their PBMs. The average rating was 7.2 out of 10.  That’s okay, but I think there’s room for improvement, which has the potential to reap rewards.  

Our data shows that plan sponsors whose PBMs offer complete financial transparency rate their likelihood to renew with that PBM near 9 out of 10. Those whose PBMs  offer no transparency rate the likelihood closer to 5. 

This begs the question, why are PBMs not more transparent? 

We don’t know exactly why. I can guess that some PBMs make transparency a central part of their business model, whereas others do not. Different PBMs have different goals. That’s why it is important for plans to ask the right questions about pricing and definitions, financial terms, transparency in rebate arrangements, and access to data.  

What else is important to plans in
this regard? 

Alignment of goals is key, and definitely another area where PBMs can differentiate themselves. In our survey, 84% of respondents said that the PBM’s goals were aligned with their goals. That tells me it is imperative to find common ground and work toward the same end.  Defining and aligning goals from the beginning can help position the PBM in a better light. It signals that the PBM is
open to greater transparency in the overall relationship.

Do you have insights on the lackluster impact of biosimilars on pricing and spending?

Biosimilars hold the promise of taking care of the specialty drug cost dilemma. That’s how they’ve been positioned in the marketplace. But it’s not that simple. They’re coming to market more slowly than anticipated. They follow a different process for approval, and they’re definitely not coming in at the discounted prices we had hoped for. 

What are plan sponsors saying about that?

In our surveys, we asked plans and employers about what types of strategies they prefer in the area of biosimilars. We heard that it is not yet top of mind to make this a big strategy. We’re hopeful that that’s going to change as more biosimilars
come to market and the potential impact becomes greater. 

Anthem recently created its own PBM, and now Cigna has announced plans to buy Express Scripts. Do you see others doing the same—either creating their own PBM or acquiring one? 

The supply channel is always evolving, but this time it feels different. Every health plan is looking at their PBM relationship because cost per drug is rising, driven by specialty medications. Specialty medications crossover from the pharmacy benefit, and are forcing stakeholders to look differently at their supply chain and ask if there is there a need for a new model in this space. Time will tell what comes of it.   

What does your data say about the impact of direct-to-consumer (DTC) advertising on drug spending? 

Nearly 9 in 10 respondents to our specialty drug survey said that they think that DTC advertising moderately or greatly increases pressure on physicians to prescribe a specialty medication, even if it’s not the best choice. It also increases the number of patients seeking care for previously undiagnosed conditions.

On the plus side, 43% said that such ads increase the patient’s understanding of treatment options. Still, 40% believe that is has no impact, while remainder said it decreases patient understanding. We saw similar numbers when we asked about the quality of patient conversations with their physician. 

Any insights about depression—what plans are using and what else they may want? 

We surveyed employers on drug benefit design last year. Seven in every 10 said they have at least one program in place to manage depression. We were surprised to find that, in general, employers would like to see additional programs in place. We see this as an opportunity for PBMs to help meet a growing perceived need. 

PBMs tend to get a bad rap, sometimes deserved but sometimes not, as your data shows. How would you sum up where things stand and what the future holds? 

PBMs provide core functions that employers aren’t able to easily do on their own. I am not suggesting that the job stops there and that everyone in the world of pharmacy management is happy. As mentioned earlier, there’s great opportunity for PBMs to stand out by doing something unique and different in the area of specialty medications. No one is leading the way to help both sponsors and clients tackle this huge driver of cost.

But the stage is set, and I think we’ll see an evolution in the market to help give the plan sponsors what they’re looking for.

For part 1, click here.

For articles by First Report Managed Care, click here

To view the First Report Managed Care print issue, click here