Podcast series

Pharmacy Insights Podcast

Listen to our resident experts discuss critical pharmacy industry challenges and the solutions you need to control rising drug costs.

Hosted by Scott Draeger

Season 4(1 Available)

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March 3, 2025

21 minutes

New solutions to help bend the cost curve

The Pharmacy Insights Podcast is back! For the first episode of the fourth season, host Scott Draeger and guests Sid Sahni and Mike McGinnity examine how plan sponsors can benefit from the wave of innovation reshaping pharmacy care services.

Guests: Mike McGinnity, Optum Rx Senior Vice President of Growth and Retention, and Sid Sahni, Optum Rx Senior Vice President of Strategy and Innovation

Playback Speed

0:00 / 21:03

Scott: One of the trends we're hearing a lot about in the marketplace and that's the need for transparency. Mike, can you tell us how Optum Rx approaches this?

Mike: Transparency is an important and often misrepresented or misunderstood subject in our marketplace.

Given the fiduciary responsibilities of plan benefit sponsors, it's important for us to equip and enable our clients with the data and information they need to uphold their obligations. At its essence, transparency is about access to information. This includes information for all stakeholders within the pharmacy benefit ecosystem, including members, pharmacies, providers, clients and consultants.

For our clients and consultants, transparency is access to our independent Pharmacy & Therapeutics (P&T) Committee, allowing them to see the decisions we make about which drugs should be on, could be on, or should not be on a formulary. They have full audit rates, so all of the terms and conditions within our contracts can be validated through independent third parties.

For our members, transparency includes access to all sorts of information through the client portals, including which drugs are covered and the price of the covered drugs. Does their drug require prior authorization and what are those requirements, and can they initiate it? It includes knowing which pharmacies they can go to, and which pharmacies

offer them the best deal. We provide them with all this information online and guide them around things such as copay cards. So, if there are manufacturers sponsored ways for them to reduce their out-of-pocket costs, they can get that information as well.

For our providers, one way we provide them with transparency is through PreCheck My Script (PCMS), which gives them formulary and utilization management information right in their workflow. It provides real-time cost information and covered medications. This information is similar to what members would see in the portal. It shows if a prior authorization is required and it can be initiated immediately through the electronic prior authorization system. It also lists clinically appropriate alternatives to a given drug, so a provider can choose to prescribe a different therapy that doesn't require prior authorization and circumvent that entire process.

Scott: Sid, could you follow up and add if there are any new transparency solutions plan sponsors should be aware of?

Sid: A commitment to transparency is not new or transient at Optum Rx. It is the core of how we choose to operate the next step in our ongoing commitment. Importantly, in January we announced that we will pass through 100% of the rebates we negotiate with drug manufacturers to our clients by 2028. That’s up from the 98% that we do today. This should help eliminate any lingering doubts about the alignment of PBM financial incentives.

When it comes to how clients pay for medicines, we have many transparent market offerings. Cost Made Clear is a great example. We launched it last year and it provides clients a choice of a fee-based pricing structure that is independent of drug costs. More recently, we launched Clear Trend Guarantee, which aligns our clients and our interests in controlling changes in pharmacy costs in a value-based structure.

In addition to the transparency that we provide to clients, transparency to consumers is just as important. Our digital tools enable members to search for the price of a prescription and see lower-cost alternatives. One innovation, Price Edge, automatically incorporates lower off-benefit prices into a member’s pharmacy benefit so they don't have the burden of searching themselves. So, this is an area where we continue to innovate, and we expect to bring a lot more forward as 2025 goes on.

Scott: Outside of transparency, the topic that seems to be coming up quite a bit now is GLP-1 medications, which are primarily used to treat diabetes and obesity. Mike, what are the macro trends surrounding this drug class and are there any specific pain points that plan sponsors are facing that are spurring the need for innovation here?

Mike: Yeah, there sure are. Our clients need help to ensure they're providing access to critical medications for the members, but they also need guardrails to promote proper use.

Today we see that 77% of the traditional drug trend is being driven by these GLP-1s and they are accounting for 42% of the overall trend. More than half of US adults are already eligible for these products. In addition to diabetes and obesity, these drugs are gaining new indications for such things as sleep apnea, heart failure and chronic kidney disease. We have clients that need help deciding what they should cover, for whom and with what protections and parameters.

Scott: Sid, what can plan sponsors do about this today and how is Optum RX helping clients navigate this critical space?

Sid: As Mike indicated, the key challenge surrounding GLP-1 medications is that the list prices set by pharma are just too high, especially for a drug class that has such broad use. That’s why we negotiate with manufacturers to bring those prices down.

Beyond that, we also offer a comprehensive solution called Optum Rx Weight Engage for our clients. Part of this is utilization management, where we ensure that the medication is given to those who meet a drug’s clinical criteria and is getting to those who need it the most. In addition, we offer a behavior change program for patients and this helps support them on their medication journey. We're proud to offer many different options that clients can choose from including one that is provider guided and one that is member driven.

GLP-1s are an area where we remain restless. We understand how big of a challenge this is for our clients and members. There’s a tremendous amount of energy focused on this inside Optum Rx and you will see us bring forth new solutions in 2025 that help address this need.

Scott: Mike you are out in the market, every day. Outside of the GLP-1s, what other key market dynamics and client challenges are you seeing?

Mike: I talk to consultants on a daily basis and right after GLP-1s, we’ll talk about the impact of biosimilars entering the market. Pharmacy benefit sponsors need help navigating high WAC products, low WAC products, the impact to rebates and the impact to net cost.

Another area where they need help is with cell and gene therapies. These are critical medications and incredible advancements in medicine, but a single gene therapy can cost over $3,000,000 for a one-time treatment. So, plan sponsors need our help to limit their financial risk while maintaining critical access. And it’s not just gene therapies, there are now approximately 160 medications that cost over $250,000 a year.

One more thing we talk about quite regularly is the regulatory environment. There are multiple pieces of legislation, both newly signed and emerging, that impact the industry in big ways. Some of these include steerage limitations and rules about home delivery versus retail as well as pricing pass-through regulations that limit plan sponsor choice. All of these can increase costs for plan sponsors. There are also changes to Medicare Part D from the Inflation Reduction Act (IRA) including a mandate to offer the option to pay out-of-pocket costs in monthly payments instead of all at once.

Scott: Sid, what about from your perspective?

Sid: We're certainly watching the orphan drug and gene therapy pipeline and finding ways to provide clients protection against volatility. As Mike noted, our Gene Therapy Risk Protection provides coverage for these multimillion-dollar therapies for a small per member per month fee. We're also exploring innovative financial models and value-based arrangements where plan sponsors would pay for gene therapy over time.

More broadly, specialty medications continue to pose challenges. Our portfolio of specialty medication management solutions enable clients to forecast trends, ensure best site of care, and provide ongoing review to ensure the spend is appropriate. We tie all of these elements together to work cohesively in our unique Optum® Specialty Fusion™ offering. This solution integrates management of medical and pharmacy benefits to determine optimal coverage, simplifying care for patients with complex conditions and lowering the cost of expensive specialty drugs. Also, our specialty pharmacy runs Savings IQ which automatically matches eligible patients with saving opportunities and has saved over $2.5 billion dollars in 2024. So, our approach to managing specialty medications is quite comprehensive.

And finally, Mike mentioned the prescription payment plans under the IRA. The Medicare Prescription Payment Plan is a great example of where we spotted a market need early and crafted an innovative product. We are proud to be the only major PBM with an end-to-end solution for health plans so that they can remain compliant with this mandate and offer their members the benefit of spreading out their out-of-pocket costs. This drives affordability and adherence, things that we’re very passionate about here at Optum Rx.

Scott: Most of what you have pointed out so far is really from the perspective of a plan sponsor. Can you talk a little bit about some of the biggest challenges facing consumers?

Mike: Yeah, the top of the list of concerns for consumers is cost and that is closely followed by cost again. One in four Americans struggle to afford their medications. One in five adults actually skipped their medication as prescribed, versus one in 10 in other developed countries.

And if cost and cost weren't the only two issues that members had to face, they're bombarded with advertising every time they turn on the TV. There’s a miracle medication that's going to cure their ailment or make them feel better. And while many of those medications are very good, members don't have all the information they need about what's the right drug for them at the right time.

Sid: So first and foremost, we negotiate with pharma and pharmacies to lower the cost of prescription drugs. We also offer a suite of programs that are both provider and consumer-facing to help drive savings. Earlier, Mike mentioned PreCheck MyScript and the transparency benefits of giving prescribers real-time drug cost information. It also unlocks cost savings for the member who can save an average of $119 per prescription when switching to the lower-cost alternative drugs suggested to the prescriber by PCMS.

Another big step in member affordability is the Optum Rx Critical Drug Affordability program. It offers low or $0.00 cost-sharing on more than 170 essential medications. As a result of this program,98% of all Optum Rx consumers have access to insulin for $35 or less per month.

And finally, I'll mention Optum Home Delivery, where 51% of the prescriptions had a $0.00 copay last year. We're looking to continue to innovate in these areas, enhancing current solutions and of course, developing new ones.

Scott: Sid, can you give us a sense of innovation as a discipline? How does Optum Rx think about future innovation and making it a sustainable process?

Sid: It's very tempting to get attracted to the latest shiny object. Instead, we take a very disciplined and methodical approach to innovation that is focused on outcomes for our members and our clients. Today we have 30 to 40 products at various stages of development. Now, not all of these will come to market, but we have a healthy pipeline that addresses the varied needs that our constituents have. So, I would characterize our focus in five key areas.

First, is around improving consumer affordability and experience. Second is around controlling specialty costs. Third is around transforming the pharmacy benefit — the core of what we do on a daily basis. Fourth is innovations that go beyond pharmacy and consider the total cost of care and helping people get well. And fifth but not least is around advancing emerging frontiers. These are the new, the innovative, the shiny things that we want to keep an eye on but will bring to market only once we have confidence in the value that the solution creates.

Some specific examples that you will see us come to market with here in 2025 include the expansion of GLP-1 solutions and new specialty solutions, both of which we know are top of mind for our clients. You will also see solutions in oncology, Women's Health and behavioral health, to name a few. So, it's a very exciting time here at Optum Rx!

Scott: Mike, any thoughts about emerging solutions and what might be around the corner in the not-so-distant future?

Mike Well, first, I want to say it's a pleasure to work with Sid and his team and be able to roll all these solutions out to the marketplace that are so beneficial for our clients and their members. A couple that comes to mind right now.

From a member and provider experience perspective, we're working through and have launched low-touch, no-touch prior authorizations. This eliminates the need for providers and their administrative staff to go through lengthy clinical questionnaires. Instead, it's automated clinical data retrieval and approval right through the EHR workflow of the provider and electronic prior authorization connectivity. For providers, it reduces the burden by eliminating duplicative clinical documentation. For patients, it expedites access to their medications.

For our clients, we're currently rolling out Optum Rx Benefit Central. It's a reimagined, simplified client portal experience. It's an intuitive design and self-service plan management with a new user-friendly interface. Really, at its core, we're allowing access to automated plan builds with flexible, accurate information and enhanced client reporting. Without reporting, our clients are flying blind. This gives them dynamic real-time data and actionable insights when they need it without having to rely on contacting their account teams. This is just one of the many examples we talked about today of innovating to provide transparent access to information for all stakeholders when they need it and how they need it.

Season 3(2 Available)

November 21, 2024

20 minutes

The State of Pharmacy Regulations

In this conversation, learn the implications of new pharmacy legislation and rulemaking, and how you can manage your benefits effectively. Speakers: Sara Strothman, Optum Rx Vice President of Policy, and Marissa Schlaifer, Optum Vice President of Optum

Playback Speed

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Scott Draeger: Marissa, it seems policy makers are currently focused on the PBM business model. As much as possible can you give us a brief outline of the increased interest in regulating PBMs and why?

Marissa Schlaifer: The PBM regulatory landscape continues to evolve rapidly at both federal and state levels. There is tremendous pressure on Members of Congress, state legislators and administration leaders at both the federal and state level to deliver on promises to lower the cost of drugs.

Policymakers are being fed a constant narrative that PBMs are the problem — that PBMs are somehow responsible for high and ever-increasing drug prices — when in fact it is pharmaceutical manufacturers that set the list prices for the drugs they develop and bring to market.

What PBMs do is offer tools to help employers, unions and government plans manage the cost of providing pharmacy benefits. PBMs are the only player in the pharmaceutical supply chain focused on lowering the cost of drugs and of prescription drug benefits.

To be clear, the pharmacy supply chain is complicated and while legislators have stated goals that are admirable, because of the complexity involved, legislation can have unintended consequences or even have the opposite effect of what is intended.

Scott: Hearing that it seems there is overlap with some of the stated goals of federal and state policymakers and the guiding principles of Optum Rx which include increased competition, lower drug prices for plan sponsors and a better member experience. Sara, can you talk about the intersection of the two?

Sara Strothman: Let’s take transparency as an example. Federal and state legislatures are focused on PBM transparency measures based on a belief that increasing PBM reporting requirements will translate to lower drug costs.

Optum Rx believes in meaningful transparency for payers, prescribers and consumers:

Payers should have visibility to all of the information they need to make decisions about designing their benefits and managing their costs.
Prescribers should know how much a drug they prescribe costs, what utilization management requirements may apply to the drug and whether there are lower cost alternatives.
Consumers need to know where the drug is available and what they will need to pay for it.

However, too often transparency mandates are not tailored in a way to protect confidential and proprietary information; rather many of these laws require costly reporting of excessive information to government agencies without any explanation of how that information will be used.

Expansive transparency mandates pose serious concerns that the information, if it does not remain confidential, will upend the competitive landscape that exists in arms-length negotiations between PBMs and pharmaceutical manufacturers and PBMs and retail pharmacy chains, PSAOs or independent pharmacies, which will result in higher, not lower, pharmacy benefit costs.

Scott: As we noted earlier, our industry is regulated at both the federal and state levels. Marissa, can we start at the federal level? Recently, we’ve had the implementation of the Inflation Reduction Act and some very consequential judicial decisions. What are the big, impactful events of the past year and what do you anticipate mattering most for plan sponsors as we head into 2025?

Marissa: That’s correct Scott, the Inflation Reduction Act, the components of which have various effective dates, makes several changes to the Medicare and Medicaid programs.

Already in effect are insulin cost-sharing limits for Medicare Part D and penalties for pharmaceutical manufacturers if Medicare Part B and Part D drug prices increase faster than the inflation rate.

Beginning in January 2025 is a new $2,000 out-of-pocket spending cap for Medicare beneficiaries and an option for beneficiaries to pay out-of-pocket prescription drug costs spread across monthly installment payments. And, come January 2026, the first government negotiated drug prices for select Part D drugs will go into effect, with negotiation on Part B and additional Part D drugs slated in future years. These prices negotiated by CMS are built upon the negotiated rates obtained by Part D plan sponsors and their PBMs in previous years.

Since the time of enactment of the Inflation Reduction Act at the end of 2022, Congress has continued to focus its attention on health care costs and in particular high drug prices but their focus has shifted from pharmaceutical manufacturers to pharmacy benefit managers.

Over the past 18 months, Congressional committees in both the House and Senate have also acted on legislation aimed at prohibiting certain pharmacy benefit management tools and contracting methods. Congress has been referring to this legislation as PBM reform legislation but it’s important to recognize that the legislation would impact employers, unions and other PBM clients because it’s how payers manage their prescription drug costs that is at stake.

Pharmacy benefit reform is one of the few policy areas where consensus exists across both political parties. The legislation being considered could again impact the Medicare and Medicaid programs, but also could impact commercial benefit plans, including self-funded plans. Congress is expected to package various legislative provisions together and advance them on some other moving legislative vehicle such as the legislation needed to fund the federal government for the next fiscal year which will be considered in 2025.

Some of the provisions that may find their way into a future package include provisions that could dictate what reports and information payers receive from their PBMs and impose a ban on one pricing methodology widely used by payers. A concern with this legislation is the federal government taking away choice and flexibility for payers to use pharmacy benefit management tools in the way they want to decrease their costs in providing pharmacy benefits to their members.

You also mentioned consequential judicial decisions and we don’t want to miss an opportunity to talk about an important case that could affect plan sponsors’ ability to structure their benefit plans in a particular manner and to have uniform benefits nationwide. Many self-funded plan sponsors rely on a federal law referred to as ERISA (Employee Retirement Income Security Act of 1974) to manage their employee benefits. ERISA allows employers to manage consistent benefits across state lines, without having to make modifications to comply with each state’s unique insurance regulations.

PCMA v. Mulready is a case on appeal to the United States Supreme Court. At issue is an Oklahoma law that restricts a plan’s flexibility in designing their pharmacy network, specifically preventing plans from using preferred pharmacy networks and prohibiting offering discounts to individuals to use mail order and specialty pharmacies.

In this case, PCMA (Pharmaceutical Care Management Association) is representing prescription benefit managers and acting to safeguard how payers design their prescription benefits. The most recent ruling on the case by the 10^th Circuit Court of Appeals was in favor of PCMA, finding that the Oklahoma law network provisions govern a central matter of plan administration and are thus preempted by federal ERISA law.

The Supreme Court recently announced that it will decide in May of 2025 whether to hear the case on appeal after considering the Solicitor General’s views on the matter.

Scott: Sara, same question but at the state level. We know that there are literally hundreds of bills introduced each year in legislatures across the country. Obviously, you don’t have to analyze all of them, but are there certain overarching trends you have identified that people need to be aware of?

Sara: State policymakers are very active in this area. For several years now we have seen the introduction of over 500 bills each year by state legislatures that would impact pharmacy benefits. The overarching theme of this legislation is government entities dictating how PBM clients’ pharmacy benefits should be managed. There are a range of different topics that fall under this theme. I will highlight three topics that are especially common:

A ban on traditional or spread pricing arrangements
Restrictions on how pharmacy networks are designed
Mandated pharmacy reimbursement

Some health payers may choose a traditional network where the PBM bears the risk that it can deliver a pharmacy network at or below the cost it has contracted with the client. This is called traditional or spread pricing. Other payers may choose a pass-through network where the payer pays what the PBM pays the pharmacy for every dispensed prescription.

Whatever the choice, we believe payers, whether an employer, union or government payer, are in the best position to decide how to pay for drugs dispensed through their pharmacy network based on their unique circumstances and needs.

Several states have enacted legislation that prohibits traditional pricing arrangements between PBMs and clients which prevents payers from having a choice in how they contract with PBMs and forces them to accept pass through pricing as the only way to pay for dispensed drugs.

Anti-steering laws vary but commonly prohibit payers from requiring the use of a specific pharmacy in order to obtain a specific drug or the use of a specific pharmacy to receive a reduced copay or higher quantity limit of a drug. This could be a requirement to use a mail order pharmacy rather than a retail pharmacy. Or this could be a requirement to receive specialty drugs from a certain specialty pharmacy.

Some legislation also applies to the practice of white bagging. White bagging is where:

A health care practitioner prescribes a medication to a patient.
The medication is shipped by a specialty pharmacy directly to the facility where it will be administered to that patient.
The specialty pharmacy then bills the health insurer directly for the medication.

White bagging is a practice that saves payers money when compared to the provider practice of buying the drug and billing the insurer for the cost of that drug. Legislation aimed at white bagging restricts a plan from requiring physician-administered drugs to be dispensed by a particular pharmacy and shipped to the physician for administration.

The issue we saw emerge this year as a top trending issue as compared to prior years is mandated pharmacy reimbursement.

With increasing frequency, states are considering legislation that would require PBMs to pay pharmacies a minimum reimbursement amount based on a cost benchmark plus a mandated dispensing fee. For example, the legislation may require a minimum reimbursement amount based on a nationally published benchmark or on the pharmacy’s actual acquisition cost and a dispensing fee based on the state’s Medicaid program dispensing fee which is typically over $10 per prescriptions.

This type of legislation removes any incentive for pharmacies to look for the lowest possible price from wholesalers. And, mandating dispensing fees at amounts that are many times more than a payer’s current dispensing fee will cause pharmacy benefit costs to skyrocket for that payer.

We expect to see these same trends in next years’ state legislative sessions.

Scott: Before we go, Marissa, I wanted to dig in a little more on our advocacy efforts – both some of the work we do as an organization as well as the work we do in partnership with others. Also, if anyone would like to support us in these efforts, how can they get involved?

Marissa: Our focus is on how we can continue to inform policymakers of potential positive and negative effects of legislation. Both federal and state policymakers want to find a way to lower drug costs – our role is to make sure they understand the positive and negative effects of the legislation they propose and to help provide concepts for the legislation that will achieve policy goals to lower the cost of prescription drug benefits and maximize health outcomes.

We do this work in partnership with our advocacy partners. Our message is simple: employers, unions and other health plans deserve to have meaningful choices in how they offer prescription drug benefits and manage the costs associated with those benefits.

While Optum Rx and our industry coalitions share the facts with policymakers, payers in the pharmacy benefit space can be some of the most influential voices. Whether it’s copays, rebates, reporting, pharmacy networks, payers, along with their benefit consultants, can educate legislators that they need the flexibility to manage the benefit as they and their consultants determine to be best.

For those responsible for managing pharmacy benefits, you can share your expertise with federal and state policymakers in meetings, letters or phone calls, depending on what works best for you.

If you are an Optum Rx client, please let your account management executive know that you want to work with us to protect your ability to manage your benefit as you know best.

February 13, 2024

33 minutes

The new drugs plan sponsors need to watch for

Find out which trends are expected to make noise in 2024 including the ongoing obesity drug dilemma facing plan sponsors, the impact of the profusion of biosimilars on drug costs, and some noteworthy drug candidates currently advancing through the pipeline.

Guests: Michelle Kamprath, Optum Rx Vice President of Trend Insights & Analytics, and Bill Dreitlein, Optum Rx Senior Director of Drug Pipeline & Surveillance

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Scott Draeger: Michelle, why don't we go ahead and get started with you to set a baseline. Can you give us a sense of where we are right now in terms of both specialty and traditional drug trend?

Michelle Kamprath: Yes, of course. So, right now we're at a very interesting time with drug trend. I've been looking at pharmacy trends for over 15 years and we've been talking for this whole time about the growth of specialty medications. We've been telling clients specialty is going to reach over 50% of your pharmacy spend by next year and for some clients that already happened a while ago.

But when we look across our entire commercial book of business, 2023 was the first year where we actually did see that specialty surpass traditional drugs in spend. However, at the same time that that happened, a class in the traditional space that everybody's talking about called GLP-1s really started to take off.

So, shortly after specialty trend surpassed traditional, the GLP-1s caused traditional trend to really start to pick up. Now, not only did traditional drugs flip back to account for more than half of the spend, but for the first time, at least since I've been tracking trend, traditional trend is higher than specialty trend.

Scott: Another big development we saw in 2023 was the arrival of a slate of biosimilar drugs in the inflammatory drug class. These are drugs that treat conditions such as rheumatoid arthritis, psoriasis, Crohn's disease. Michelle, what does the data tell us now that we have these new alternatives to branded products like Humira?

Michelle: The first biosimilar for Humira launched at the beginning of last year. So, we're kind of at this one-year mark of the biosimilars for Humira. And as we stand here today, there are 10 approved biosimilars. So, we now have a lot of biosimilars to Humira and there's more in the pipeline too. This is a moment that we've been waiting for a decade. Humira has been the reigning queen of worldwide pharmaceutical sales for about 9 years, and it took a global pandemic for the COVID-19 vaccines to surpass Humira in worldwide sales in 2021. That was the first drug that had surpassed Humira in 9 years!

Even though Humira today still has the lion share of the market between it and its biosimilars, that doesn't mean the biosimilars aren't doing their job in bringing the cost down. When the biosimilars came out, they created competition in the market, which we all know drives down prices and we've seen the net cost of Humira come down by over 20% since they started coming out. In the end, competition is good.

We're looking forward to more biosimilars entering the market this year. Some of them are going to include more interchangeable options and a high concentration biosimilar, which are two things that just don't exist yet in the market. So, it's still an exciting time for biosimilars and more to come.

Scott: The other big trend we saw come to the forefront recently is the increased utilization of the GLP-1 drugs. These are medications that were initially approved to treat type 2 diabetes, but later received approval for the for the treatment of weight loss. As you are well aware, utilization and cost of these medications are a top concern for a significant amount of our plan sponsors. Michelle, based on your analysis of the data, what should plan sponsors consider as they approach this class of drugs?

Michelle: Glad you mentioned diabetes, Scott. When you talk about GLP-1s, you really have to separate the ones that are approved for diabetes, which most of the plans cover today, from the ones used for obesity, which have historically been more of a choice for plan sponsors.

I think the biggest question that some of our plan sponsors are struggling with right now is whether or not to cover GLP-1s for weight loss, period. And for those who already do cover them, it's how can we continue to afford them? While they're driving cost, driving trend up so much, at the same time the plan sponsors are getting pressure from their members to cover them. Some employees are even finding that coverage for GLP-1 drugs for obesity is a benefit that can help retain their workforce. Like the members, the employees see it as a benefit that they have to have.

The problem then becomes at what cost do they cover them? As they stand today, GLP-1s are just priced too high here in the U.S. We pay 10 times more than what they cost in Western Europe for the same drug. And we also know that only about one third of patients who started on the drugs are still taking them after a year. Plan sponsors are smart. They see the data and they're starting to think more creatively. They are thinking “OK, I can pay $1,000 a month for one person to take this drug. Or is there another way I can spend that $1,000 a month to help my members lose weight and get healthy?”

So, plan sponsors are just in a really tough spot right now. They have to manage their plan to a budget. I'm not saying these are bad drugs or saying they don't work. But I can confidently say based on both our internal analysis as well as a very reputable external source, ICER, that these drugs are not cost effective at their current price.

Bill Dreitlein: Scott, I'd like to kind of pick up that thread a little bit. I agree that we're in a really interesting, perhaps uncomfortable, spot with these drugs right now. There's a natural tension between two very important components of the business of health care. One is the clinical aspect of do these drugs work? The GLP-1s clearly have a benefit on lowering A1C very potently for diabetes and then they help weight loss. But at the same time, there's also the cost of the treatment. How do we manage it so that the people who need these medications can get them while also ensuring that they take it long enough to realize the benefits of it? As Michelle mentioned, adherence and persistence with these drugs can be very difficult.

Scott: Bill those are some interesting points. This is obviously a very dynamic class. When you look where we are today compared to just two years ago, the market is just totally different. Today, Wegovy (semaglutide) and Zepbound (tirzepatide) are the only two GLP-1 products approved for weight loss. How do you see this class evolving over the next several years?

Bill: Yeah, I think we're just at the beginning of this. I think the evolution in the GLP-1 class will come in probably three forms or three waves.

One, is the expansion into new indications. Semaglutide and tirzepatide are each approved for diabetes and weight loss. They're both now looking to increase their footprint a bit into areas that are connected to both of those disease states.

For example, semaglutide is being studied for chronic kidney disease, which is relatively common in patients with diabetes. the question is if you treat the diabetes with the GLP-1 like semaglutide, does that have beneficial effects on chronic kidney disease? It might. We're looking for that data sometime this year and that will give us a little bit more information about the true impact of these drugs beyond just lowering A1C.

Another example is sleep apnea, which is commonly associated with being overweight. We know that there's cardiovascular implications to that condition. There's additional data coming forward this year about tirzepatide to see if that drug can help with sleep apnea. So those are just two examples of how we could see new indications or new areas that are related to how GLP-1 drugs are used today.

The second wave is in new mechanisms of actions. We have multiple drugs in the pipeline that are looking to build on the backbone of semaglutide and tirzepatide and add some additional components to either boost the efficacy or increase safety.

A good example is retatrutide. It's a triple incretin agonist, so it targets the glucose-dependent insulinotropic polypeptide, glucagon-like peptide 1, and glucagon receptors. By adding that extra action of targeting glucagon, there may be more potent weight loss. The early signs are that it does seem to be associated with the pretty impressive weight loss, maybe a little bit more than what we see with the existing dual agonist treatments. But we'll have to wait and see if the side effect profile is any better.

And then there's another drug CagriSema. It’s a combination of cagrilintide, an amylin analog, and semaglutide. That extra mechanism of action could potentially enhance efficacy for diabetes and obesity. It's still early with both of these drugs, but the initial findings from phase two trials are encouraging. We're hoping to get more solid data within the next year and I'm eager to see whether the tolerability is even better with these agents.

And then the third wave or area is how GLP-1 drugs affect such a broader range of organ systems. As we learn more about these drugs for diabetes and obesity and their tangential conditions, we're going to continue to learn more about their use in other diseases.

There's great interest in using these drugs for nonalcoholic steatohepatitis or NASH. It’s a common condition. NASH really means a fatty liver. When there's a build-up of fat in the liver it can lead to fibrosis and damage to the liver down the line. In turn, this could lead to liver transplants. So, the hope is that if you can attack that disease at its source, then maybe you can have the beneficial downstream effects of preventing liver failure or liver transplant.

There's also a lot of interest in using GLP-1 drugs for things like Alzheimer's disease since GLP-1s target receptors in the brain, that activity in the brain. The hope is there may be other actions in the brain that could help with Alzheimer's disease, and it would be a whole new area for these drugs. That said, we are still in early days for this, but the potential impact could be fairly large.

Michelle: Bill, it's absolutely fascinating how much development is going on, but also how easily some of those terms just flow off your tongue. You definitely have it down to a science.

Bill: Thanks, Michelle. Looking at the pipeline, it's really grown. It seems like every manufacturer is trying to get into the game either with molecules that they already have in-house or by acquiring somebody that has a promising drug in development in that particular space.

It's a just really dynamic space right now. We know some of these will ultimately not pan out, but some of them will and some of them may be surprising. That's just the nature of the pipeline. So, we watch for that and if we see the signals, then we look a little more deeply and try to understand what the potential impact might be. And then we plan accordingly.

Scott: Bill, moving beyond GLP-1s., as you look at 2024, what are the other consequential FDA approval decisions or trends that are you expecting this year?

Bill: One trend that we have seen is that rare disease products have outnumbered non-rare disease products for the past four years in a row. Now, the development pipeline has swung in a different direction and many of the ones that I'm watching are not in that rare disease realm at all, but really more for mainstream type of conditions with larger populations. Since I like to think in threes, I’ll give you three products in different areas that I'm looking at for this year that that I think could be interesting and impactful.

The first one is resmetirom for NASH. We spoke earlier of potentially using GLP-1s for NASH, but resmetirom could be the first drug ever approved for that indication. It's an oral product, so it's very convenient and it seems to have some data that supports it where other drugs have failed. So, I'm looking forward to that one. We could see an approval in March.

The second one that I'm watching is a drug called ensifentrine. It's an-anti-inflammatory but it's not a steroid and it's used for chronic obstructive pulmonary disease or COPD. COPD is one an area we really haven't seen a whole lot of development in recent history. It's given via nebulizer, so it's not like a metered dose inhaler where you take a few puffs. It's probably going be used more in people who have severe disease. So, it's interesting in that it's the first new mechanism of action that we've seen in a long time in this disease space. And if it works there, then certainly they we could eventually see it expand into other areas like asthma. We expect this one could be coming out mid-year, possibly in June.

The third one I'd like to highlight is called KarXT. It’s a combination of two drugs and it's used for schizophrenia. The first drug gets into the brain, and it works on the symptoms of schizophrenia. But the problem with that one chemical is that it causes too much toxicity in the rest of the body. So, what the company did was they paired it with a drug that doesn't get into the brain but counters all of those side effects in the body. This enables KarXT to be used in high enough doses where you can actually get benefit from the product. This is a totally different mechanism than the existing treatments that we have for schizophrenia. Importantly, it's not associated with the same degree of weight gain.

That's been one of the huge problems with the typical antipsychotics used for schizophrenia and bipolar disorder. Those drugs can cause changes in the metabolic patterns of the body and people can put on a tremendous amount of weight. This is an area of mental health where there's been a great unmet need and this new drug could provide an effective therapy that’s more tolerable as well.

So, one drug for a metabolic condition, the second for a pulmonary lung condition and then the third for mental health for 2024. For anybody looking further ahead, there's a drug called VX-548, which is a new pain reliever. But the interesting thing about that drug is that it does not work on the opioid receptor and it's not an anti-inflammatory drug like ibuprofen. And so it seems to be better than placebo. Not quite as good as an opioid, but there has been a great need for new pain relievers that are non-opioids because of the addiction crisis we have here in America. If all goes well, it wouldn't be until 2025 that we might see this drug, but it's an important one. So, you heard it first here on your podcast, Scott.

Scott: Thank you, Bill. Michelle, in a similar vein, are there any trends specifically that you think plan sponsors need to pay close attention to as we progress through 2024?

Michelle: So a couple of things come to mind with that. If Bill thinks in threes, I think in twos. The first one that comes to mind is drug shortages, and the second one is reformulations.

With drug shortages, there have been shortages in several classes, including GLP-1s, by the way. One area where it's really affecting plan sponsors from a trend perspective is in ADHD. There are shortages of generic Adderall and more recently generic Vyvanse. This means that patients may not have the choice to even fill a generic when they go to the pharmacy counter, even though there's one that's approved. So, it's really preventing the full effect of the generic savings to be realized by the plan, at least until these shortages are resolved.

The second trend that we've been seeing is drug spend shifting from the medical benefit to the pharmacy benefit. To be fair, we sometimes see a shift from the pharmacy to the medical benefit, but that really hasn't been the overarching trend that we've observed. And this is happening in several different classes.

For example, over the past several years we've seen this general shift in oncology as more and more cancer treatments have been approved as oral formulations. This makes it easier for patients to take them. It also means that the prescription will more likely be processed and paid under the pharmacy benefit. More recently, we've seen this trend in specialty asthma. There's a handful of drugs for asthma that used to be administered in a provider's office, and then they were reformulated as self-injectables. Now people are filling them at the pharmacy counter.

As a result, we've seen the trend in specialty asthma go up. There were also a couple of reformulations that were approved late last year in the inflammatory class. So, we might see some of those shifting over to the pharmacy benefit. It's also happening in the rare disease space. There were two newer oral formulations to treat ALS and this type of shift isn't necessarily a bad thing, but it's something to be aware of because specialty spend is increasing. It might be partly a shift rather than just an increase in utilization or cost.

Bill: I'd like to pick up on that last one, Scott, because reformulation is now a really big area of the pipeline. Manufacturers are looking at products and trying to reformulate them and find new ways to take advantage of the delivery mechanisms we have today and make them better. And so sometimes you see that shift from the medical to the pharmacy. If you're managing the pharmacy benefit but not the medical, all of a sudden you might see this drug appear on your and radar and say “whoa, where did this come from?”

Scott: Thank you Michelle and Bill really appreciate your time and expertise today.

Michelle: Thanks, Scott. It was a pleasure.

Bill: Thank you, Scott.

Season 2(1 Available)

November 9, 2023

23 minutes

Preparing For The Gene Therapy Era

Gene therapies represent a true revolution in the way certain genetic diseases are treated. They are also the most expensive drugs in history. Learn what measures plan sponsors can take to prepare as these formerly rare medicines begin to be used for more diseases.

Guests: Nick Cashman, Optum Rx Specialty Clinical Consultant, and Arash Sadeghi, Optum Rx Clinical Pharmacist for Pipeline & Drug Surveillance

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Scott: Arash, let's start with the science behind these therapies, what are gene therapies and how do they differ from other drug classes on the market today?

Arash: It’s helpful to start with an overview of how your typical drug works. So, the typical drug such as small molecule drugs and even more complex biologic products, work by interacting or binding to specific targets in your body. And those targets can range from receptors in your cells to proteins or other molecular targets. This is an oversimplification, but by interacting with these targets that are thought to be related to a disease, drugs can provide symptom relief for altar disease causing processes in the body.

What these drugs don't do is alter the patients actual genetic code. In the case of inherited diseases or genetic conditions, your standard drug isn't going to be treating the underlying cause of the disease. Also, since these traditional drugs aren't fundamentally changing a patient’s genetic code, the benefits are typically temporary. So, your typical drug has to be used continuously or even for a patient's entire life if it's being used to treat a chronic condition.

Gene therapy, and sometimes these are referred to as genetically modified cellular therapies, are treatments that directly modify a patient's genes or genetic code in order to treat or cure their disease. Gene therapies are usually evaluated in conditions where there is a very high unmet need and where we don't really have any other treatments currently available because your standard treatment can't treat the underlying genetic defect.

There are two major categories of gene therapies that have been approved so far. The first are chimeric antigen receptor or CAR T cell therapies. These are used to treat certain types of cancers and the way they work is by modifying a patient's immune system by genetically engineering their T cells, which are immune cells, so that they can produce a special receptor that targets cancer cells. And when the modified T cells interact with these cancer cells, they activate an immune response, which can lead to the destruction of a patient's cancer cells. So, that's kind of one big bucket of gene therapies.

The second category, which is what most people probably think of when they think of gene therapies, are the non-oncology gene therapies that are used to treat diseases caused by genetic defects. Genetic defects can lead to a lack of production or a mutated version of important proteins in the body. The way your traditional gene therapy works is usually by gene addition. It basically provides a patient a functional copy of a gene so that they can produce their own proteins or enzymes. There are a lot of different delivery techniques for this, but the most common is using some type of viral vector or carrier to deliver the gene to a patient’s cells.

A great example of this difference between your more standard type of drug treatment versus gene therapy is how we treat hemophilia B. So, hemophilia B is a rare genetic bleeding disorder. It's caused by a deficiency of clotting factor 9, which is a blood clotting protein. Historically, the standard of care has been factor replacement therapy. This is basically giving patients a synthetic form of clotting factor to replace their missing or deficient factor. And these patients typically will have to be on chronic, lifelong factor replacement to prevent bleeding episodes.

But last year, the FDA approved the first gene therapy for hemophilia B, Hemgenix^®. This therapy works by introducing a functional copy of the Factor 9 gene into the patient’s cells so they can produce their own clotting factor. It’s administered as a one-time dose and the goal is to either eliminate or significantly reduce the need for patients to be on chronic factor replacement therapy.

And I think that's the key point here, that gene therapies intended to be used as a one-time dose and the benefit is hopefully going to be sustained. The hope is that you're going see long lasting or even permanent benefits. However, that's also the great unknown with these treatments because we just don't have enough long-term data to know how long these treatments really provide benefit to patients.

Scott: Arash, the first gene therapy was approved in 2017. From your perspective, how was the market evolved since then?

Arash: I think a couple of things really have changed from where we were in 2017 to where we are now.

First, most gene therapies that were initially approved in those first few years were CAR T cell therapies for cancer. If you look at 2017 to 2021, we had five CAR T therapies approved compared to just two kind of true gene therapies for genetic diseases. Those two were Luxturna^®, which was approved in 2017 for a very rare genetic eye disease. And then in 2019, we got Zolgensma^®, which was approved for spinal muscular atrophy, which is a rare neuromuscular disease.

CAR T therapies have a lot of similarities with other gene therapies, but they are substantially less expensive. They cost about $400,000 to $500,000 for a single treatment. In a vacuum this is very, very expensive. But it's still a fraction of the cost for a gene therapy for a rare disease.

Over the last couple years, and really over the last 12 months, that balance has shifted. In 2022, we saw the beginning of what we anticipate being a wave of gene therapy approvals for rare disease. We had three approvals in late 2022 and then we’ve seen three more products gene therapies approved for rare diseases this year already. So, we went from two of these true gene therapies in 2017 to now having eight of them. By comparison we've only had one additional CAR T therapy for cancer that's been approved in the last two years.

The other evolution I would say has been around costs. I mentioned CAR T cell therapies are less expensive relative to true gene therapies. Yet, even among the non-oncology gene therapies, there's been a real shift in terms of cost. When Luxturna was approved, that was $850,000 for a single treatment course. When Zolgensma was approved in 2019, the cost was $2.1 million. And at the time, that was the most expensive drug ever approved. But today, looking at the gene therapies that have been recently approved, they all hover around about $3 million. For example, Hemgenix is $3.5 million, which is currently the most expensive product in history.

So, there's been a real increase in price for gene therapy products that probably exceeded even what most of us thought was going to happen for these drugs we all anticipated to be expensive. Even relative to our expectations, they ended up being even more expensive, at least the most recent products.

Nick: I agree with Arash. When Luxturna was approved it really represented an expansion of the applicability of gene therapies. They're no longer just focusing on the treatment of cancer. So, in my mind, it was a major turning point. Soon, the FDA started to prioritize and establish frameworks, policies, and guidance documents for gene therapy development. That put us on the path to today and into the future as well.

Scott: Nick, I like to stay with you and really kind of pick out a theme that Arash just mentioned, that's the cost of these therapies. You and I spend a lot of time in the marketplace and plan sponsors are clearly concerned about what type of impact they can see with these therapies. Do we need to think differently about how we pay for gene therapies, at least in the context of how we pay for traditional drug classes today?

Nick: Absolutely. Actually, I think the logic starts even further upstream than the payment. Plan sponsors have to start thinking about how they adjust their business planning practices related to drug spend and risk modeling to better inform, analyze, and predict potential gene therapy exposure. This is something that everybody needs to be doing. Now, the implications are just too high from a financial perspective. We really need to have a clear sense on this.

And to touch on the point about payment, we've seen the emergence of outcomes-based agreements, warranty type agreements with manufacturers. They represent an innovative approach and certainly promote positive outcomes for both members and the payer to some degree. But these outcomes-based agreements don't really adequately shield the plan sponsor from all of the financial risk.

The other piece that that represents a risk for plan sponsors is employee turnover. The plan sponsor may pay the one-time, catastrophic cost for a gene therapy and expect some return on that upfront investment with the improvement to the member's quality of life and maybe an offset of some ongoing chronic therapy costs. But if the employee leaves that plan sponsor for a different company or opportunity, that plan sponsor still footed the bill while another entity reaps the financial benefit going forward.

So, how do we mitigate some of those risks? Ideally, you're able to link the price that you pay to therapeutic outcomes. We've got the mechanism to do that through outcomes-based agreements, and contracts with manufacturers. One unknown I will touch on is that we're still figuring out how we're going to reliably collect data to inform those outcomes-based agreements.

Another thing I do want to call out as an important risk mitigation option is spreading out the risk and supplanting it with monthly, predictable costs. We're seeing risk protection products entering the market and those do a much more effective job of shielding the plan sponsor from the unforeseen and potentially catastrophic claim for a gene therapy.

Scott: Nick, do we have a sense of the likelihood a plan sponsor would incur a claim for a gene therapy in any given year?

Nick: Optum has done work to model this out. As Arash touched on, we're going continue to see these therapies come to market. When it comes to probability analysis, it certainly depends on the size of the plan sponsor. For example, for 10,000-member group, your probability of incurring at least one gene therapy claim by 2025 could be 7%. By 2029, with expanded patient populations, it might be as high as 33%. If you're a really large group with 250,000 lives, the probability of a claim by 2025 is at 84%. Then by 2029, a 100% probability of a claim is what our model showed.

So, I mean these risk protection products are really critical to consider. For some of the simulations we did with risk assessments, we looked at a 50,000-life group. It demonstrated significant cost avoidance after premiums and deductible payments related to gene therapy risk protection.

Scott: Those near-term probabilities you just quoted are pretty staggering, I'm sure, for plan sponsors that are listening to this. What advice would you have for a plan sponsor concerned about paying for gene therapies?

Nick: Yeah, I think plan sponsors should be concerned. I mean this is a big consideration in the marketplace now. As I think about this, there's three hallmark points I would make.

The first is to address it now. Lean on your PBM, on your consultant partners, to educate you on the risks and the strategies that you have in your toolbox to help mitigate some of this.

The second one it would be to understand risk protection policies. If you're hearing these things for the first time today, you've got some homework. Read up on these. Understand and be sure that the policies you are considering for your plan are comprehensive in terms of the coverage criteria. Also make sure that you've got seamless utilization management processes to prevent avoidable disruption to members and providers. Most risk protection products will define their own coverage criteria and utilization management processes in the policy that the plan must agree to use. So, you really got to ensure that alignment of those criteria. It's critical and represents a major contingency in determining if that product is right for you. One other comment I'll make is that it's common to see pre-exclusion criteria in these risk protection policies with varying degrees of scope. It is imperative to understand these criteria and the implications that they have on member-specific coverage. So really, do your homework on this and understand it.

The final point is to temper your expectations. It's easy to categorize these gene therapies incorrectly as long-term cures for the conditions they treat. It’s probably better to view that as the exception to the rule. Depending on the product, durability of response can represent a major contingency when interpreting the potential clinical and economic value.

Scott: Arash, I'd like to conclude our discussion today with a question for you.
As a member of our pipeline and drug surveillance team, you're the guy with the crystal ball. Let's take a look ahead. What does the future look like for gene therapies?

Arash: Just looking at the immediate term, what's going to generate a lot of attention will happen in December, when we have two highly anticipated FDA approval decisions for gene therapies for sickle cell disease. We have lovotibeglogene autotemcel (lovo-cel) from Bluebird Bio and exagamglogene autotemcel (exa-cel) from Vertex Pharmaceuticals and CRISPR Therapeutics.

This is notable because sickle cell is the largest disease state that will actually have a gene therapy available. Sickle cell disease effects over 100,000 people in the US, which is still a rare disease. But if you compare it to other diseases that have gene therapies, it's much more common than your typical gene therapy.

I will say that that number is a little bit misleading. Of that 100,000 people, only a small percentage of patients with the disease will be eligible for treatment because you have to meet certain criteria in terms of severity of disease, age and other things. So, it's probably around 10 to 15% of that overall population who are eligible. Still, that’s a large population relative to other gene therapies that have come to market where they may be treating less than 100 people.

The other interesting aspect of these decisions is that exa-cel is potentially the first gene therapy utilizing CRISPR-Cas9 gene editing. Gene editing is different from your traditional type of gene therapy in that as the name implies, involves modifying a patient's existing genes within their genome. Whereas, your typical gene therapy works through gene addition, where you are basically adding a functional gene to a patient's genome.

When you compare gene addition versus gene editing, both have potential advantages and disadvantages. But we do have more history with gene addition, with several gene therapies that have been approved using that technique. So, it's more of a known entity in terms of the efficacy and or maybe even more importantly, safety. CRISPR-Cas9 is just newer and so it will be really interesting to see how that review goes from the FDA. In some ways it may set the precedent for how future reviews go for other gene therapies that are utilizing CRISPR-Cas9 technology.

If you look out further into the big picture, there are potentially 10 to 15 more gene therapies that could be approved between 2024 to 2025. I mentioned earlier that we have eight gene therapies that have been approved so far. This number could potentially double or even more in the next couple of years. Gene therapies are just going to be a growing area of the pipeline. So, I think people need to be aware of that fact that this flurry of approvals that we've had recently are not a blip. This is going to become a continuous stream of products that are going to be approved.

As Nick alluded to this earlier, individually, I don't think any of these products are going to have a significant impact or, on an individual basis, carry a huge risk. But it's really the aggregate. When you really start to see 10-15 and as they start to grow even more, that's when you start to see the potential risk that a plan may actually incur a claim for these patients.

I think what's also interesting is that there will be some competition in this space. Right now, the gene therapies that are available, they're basically a one off – you have one gene therapy that treats one disease. However, there are some conditions like sickle cell disease, beta thalassemia, hemophilia, and Duchenne muscular dystrophy, where we actually are going to start to see competition potentially. It’s always good to have multiple options from a clinical perspective. It gives us an opportunity to evaluate which product may have better efficacy or safety, but also the hope would be that maybe it brings down the net cost for these products.

Looking beyond 2025 and farther ahead, it's important to realize that gene therapies are also being studied outside of genetic diseases, outside of rare conditions. There is development for more common conditions. A great example of that is for retinal diseases. In particular, wet age-related macular degeneration or wet AMD. It's one of the leading causes of vision loss for the elderly. There are now multiple gene therapies that are in development for that disease state.

So, I think the risk that is currently present is only going to grow. Right now, it's really only for rare disease, but gene therapies could grow into addressing more common and chronic conditions. This obviously provides a great opportunity from a patient perspective. These treatments would be one-time treatments. It's also going increase the challenge to payers in terms of “how do we cover these products once they expand out beyond just rare diseases?”

Scott: Nick and Arash, I really appreciate the both of you joining our podcast today to talk about this exciting topic.

Season 1(2 Available)

November 21, 2022

14 minutes

The Risky Business of Alternative Funding

Many self-funded employers are exploring the use of “alternative funding” to make their employees and dependents eligible for “free” medications. Hear about the financial, clinical, and legal risks this strategy entails.

Guest: Michael Einodshofer, Optum Rx Chief Pharmacy Officer

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Scott Draeger: Welcome to the Optum Rx Pharmacy Insights Podcast. In this forum, we'll discuss the latest and most impactful events in pharmacy benefit management. Today's episode will focus on alternative funding vendors and the type of risks these companies may present for payers and members alike. I'm your host, Scott Drager. Today I'm joined by Mike Einodshofer, Chief Pharmacy Officer at Optum Rx. Welcome to the podcast, Mike.

Michael Einodshofer:

Thanks, Scott. It's great to be here again.

Scott: Mike, we've been fortunate enough to have you join the podcast before. For the audience members who maybe haven’t heard any of our previous episodes, can you share with us a little bit about your professional background and what you're ultimately responsible for at Optum Rx?

Michael: Certainly Scott. So, I'm a pharmacist. I started my career in retail and hospital practice. I currently serve as the chief pharmacy officer with Optum Rx. So, my role at Optum Rx is really to focus on how do we keep pharmacy benefits affordable and sustainable for plan sponsors, and assure that members who need access to drugs, especially focused on high cost specialty drugs that members who need them have a way to afford them? And have a way to have the best chance possible for them to succeed on their therapy.

Scott: All right. Thank you for that, Mike. Let's really start from the beginning. What is an alternative funding vendor and when did they start to pop up? Is this a relatively new phenomenon?

Michael: Yeah, so it's a really fascinating, this is a bit of a complex topic. So, I think before I can even get into what an alternate funding vendor is, I think we need to level set on how drugs are paid for today in the United States. And if you think about it, most people are covered for drugs under one of three ways. You're either in a Medicaid program, a Medicare program, or employer sponsored health care, which is what we call commercial sector funding. A lot of people listening to the podcast probably have their health care benefits through their employer, and within those health care benefits is a pharmacy benefit. The pharmacy benefit then is when you go to the pharmacy counter, and you give the pharmacist your ID card. They're billing a claim through the PBM for that drug coverage.

Now, on the other end of that transaction, there's an employer and most employers of medium to large size are actually the ones that are ultimately paying the bill for that prescription. Some employers, especially small ones, they'll do what's called fully insured benefit, which means they'll pay a premium to an insurance company. Their risk or their cost to provide that benefit to their employees is fixed because they're paying the insurance company premium. And the insurance company takes the risk for what claims happen over the course of a year within that benefit. But again, like I said, for most mid and large size clients, they're what's called self-insured. So that if you go to the pharmacy and get a drug, your employer ends up getting a bill for that drug and they end up paying ultimately through the PBM, the pharmacy, for that drug.

And in that case, the PBM is hired to administer the benefits, coordinate the formulary, help facilitate the exchange of payments between the employer and the pharmacy, and a million other things. But the important thing to remember is at the end of the day, the employer is the one that's paying the bill. So, what I just walked through, like Medicaid, Medicare, and commercial, there's a very important segment. About 8% of people don't have any insurance. And for that 8% of the United States population, we're making good progress. I mean, just a few years ago in 2016, it was 9%. Now, 6 years later, we're down, we're down to 8%. Still 8% is a pretty big number of the United States population that is uninsured. And that doesn't even begin to touch the number of patients that are functionally underinsured.

So, what pharmaceutical manufacturers have done especially those that bring to market expensive specialty therapies, treating very serious, complex conditions like rheumatoid arthritis, cystic fibrosis, et cetera, they work with charitable organizations. There's lots of charitable organizations in the marketplace today. Pharmaceutical manufacturers will work with those organizations and sometimes very specific organizations to make sure that when a member or a patient or someone out there in the community doesn't have insurance for a drug, they have access to a charitable program that provides coverage for that drug for the patient. And so, they work with these charitable organizations. They set up eligibility criteria that determine a patient doesn't have insurance coverage. And then the charitable organization, which many times gets its funding from pharmaceutical manufacturers and others – manufacturers are a key source of funds for these charitable organizations – they end up then covering the drug for the patient that doesn't have insurance. So that's a very long background to get to your question.

What's an alternate funding vendor? It's in the practice of administering benefits for employers, municipalities, unions today, the PBM, who PBM serve in the commercial sector. Over the last few years, there's been a crop up of different organizations that are going to employers and pitching them the ability for them to change or manipulate their pharmacy coverage so that the benefits they offer their employees don't cover certain specialty drugs because those specialty drugs have a charitable organization that the member may have eligibility for. That way the employer doesn't have to pay for the drug. So, this is obviously just a moral concern that we have because essentially what's happening is we have individuals sensing a business opportunity to tap into charitable funds that are intended for underinsured and uninsured patients in the United States, and then commercializing it, and then packaging it to an employer with a promise to lower their specialty drug costs without the employer, in my opinion, understanding how those programs ultimately work in the marketplace.

Scott: So, Mike, the pharmaceutical manufacturers provide some type of dollars to charities to help patients who don't have insurance coverage subsidize the cost of the drug. Do pharmaceutical manufacturers know that these third-party vendors exist, these alternative funding vendors exist? And if they do know what's their reaction to all of this?

Michael: It's changing. So, a couple years ago when these programs first started to make a name for themselves, it really started with smaller employers. Manufacturers were, from what I could tell, weren't aware of these happening. And the charitable organizations, they're being, presented these consulting organizations I mentioned, right? They're representing the patients. The patients are forced to sign a release that allows these vendors to go represent them on their behalf. They apply for the charitable funds. And frankly, when the charitable organizations, when this was being done at small volumes, they simply wouldn't have been able to tell the difference between a patient that doesn't have any drug coverage versus a patient whose drug coverage has been selectively manipulated to make it appear that they don't have drug coverage for this particular drug.

I would say since the programs have increased in their popularity, manufacturers are now becoming aware of the phenomenon, and many of them are asking themselves, how can we properly structure our policies and procedures around charitable eligibility so that we make sure that patients who truly need this sort of financial assistance have access to it?

Scott: Mike, can you provide some context for our listeners and how commonly are these types of vendors utilized by employers today? Any idea?

Michael: There’s a good report from Pharmaceutical Strategies Group or PSG. About 8% of plan sponsors use an alternate funding program, today. The concerning thing is in their survey, in their latest annual report, they report about 31% of employers are considering one of these programs. Now, I'd say within those numbers, there's probably alternate funding might mean different things to different people that are responding to the numbers. But the numbers line up with what I'm seeing in practice too. I mean, how many times I get questions about this now from clients as opposed to a few years ago, it is markedly more in demand today.

These programs are hitting a tipping point where manufacturers are paying attention now because the proliferation of these vendors that are popping up, there's some 20 now vendors that are in the market trying to sell this type of service. I think that we're at a point where awareness is getting very high and if we don't find a fair solution – and 31% of employers actually do adopt these programs – ultimately that jeopardizes the charitable funds that are available in the marketplace for patients that truly need them. And let's face it, it ultimately puts pressure on drug pricing as manufacturers start to scramble to see how they can continue to fund charitable organizations while at the same time meeting all their other financial obligations.

Scott: Any idea how these alternative funding vendors are enumerated for their services?

Michael: Well, there's some public information out there. Adam Fein has done some really good work on drug channels.net on an article that he put out about a month ago called The Shady Business of Specialty Carve Outs. I'd highly encourage anybody to go to drug channels.net and take a read. I think he did a really good job of exposing a number of practices that these programs do and then AIS Health or, MMIT more recently, a couple weeks ago, they had a nice article also. So, according to both of those sources, these consultants or vendors are taking 20 to 25% of the charitable funding that they collect in lieu of the payer having to pay for the drug. They are then billing the employer 20 to 25% of that theoretical cost that the employer would've otherwise experienced. So that's a lot of money. Just to frame that up, if it’s a hundred thousand dollar drug, let's say – and that’s not uncommon for some newer cancer agents – if it's a hundred thousand dollar drug and 25% of that charitable funding would go to the vendor that's a $25,000 payment to the vendor.

Scott: Mike, you talked about the, the ethical questions obviously here. Are there any other risks that an employer would have to think about either for themselves or for their members?

Michael: Yeah, from the legal counsel that I've spoken with – and I'm certainly not an attorney; this is not legal advice – but I'd highly encourage any employer considering a program to do a lot of diligence on this because there is a concern a lot of these charitable organizations have means testing for the program, which means that based upon certain income levels you may or may not qualify for the program. And there's some concern from a compliance standpoint that that raises, that should be thoroughly understood. And that's kind of just scratching the surface, Scott, but again, I'd advise a very thorough legal counsel review prior to anybody considering one of these programs.

Scott: Mike can you talk a little bit about the patient experiences? What is a patient experience whenever one of these alternative funding venders are part of the equation?

Michael: That’s one of the most important questions, Scott. Thank you for asking it. I’m concerned with it a great deal. Were adding another layer of significant complexity to a patient getting on a drug, oftentimes, that time is of the essence to get on it. Think about a newly diagnosed cancer patient who now has to go through an entirely other administrative layer of which they have no knowledge of how it works. That has to coordinate between the specialty pharmacy, the physician. The patient might have to provide financial information, tax documents in order to qualify for this program. It adds a tremendous amount of stress and uncertainty into the patient experience. I’ve seen it delay access to the initial fill byseveral weeks. There’s stories out there in the marketplace that are a lot worse.

Scott: Great. Mike, I really enjoyed our conversation. Thank you very much for spending some time with us today.

Michael: You're welcome, Scott. Thank you.

Scott: Thanks for listening to the Pharmacy Insights Podcast. I'm your host, Scott Drager. Tune in again for more discussions as we examine the most important issues in pharmacy care services.

September 14, 2022

16 minutes

What’s Happening in Specialty Pharmacy?

As specialty medications, including gene therapies and other new advances, continue to drive prescription drug spending upward, we discuss what separates specialty from traditional spend and how to mitigate costs.

Guest: Michael Einodshofer, Optum Rx Chief Pharmacy Officer

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Scott Draeger: Welcome to the Optum Rx Pharmacy Insights Podcast. In this forum, we'll discuss the latest and most impactful events in pharmacy benefit management with a focus on the emerging solutions needed to control costs and ensure quality of care. I'm your host Scott Drager. Today I'm joined by Mike Einodshofer, Chief Pharmacy Officer at Optum Rx.

Mike, can you share with us a little bit about your professional background and exactly what a chief pharmacy officer is responsible for?

Michael Einodshofer: Oh, sure. Thanks, Scott. And thanks for having me today. So, I've been in health care about 25 years as a pharmacist, across a lot of different aspects within the industry. I started as a retail pharmacist working with a large chain down in Winston Salem in North Carolina, after graduating from the University of Pittsburgh Pharmacy School. After a few years of doing that, I decided I wanted to go back to graduate school.

So, I pursued a business degree, came out and worked for a health system, actually a regional hospital, for a period of time. And so, my first, 6 years of my career were in direct pharmacy practice in retail and in hospital settings. I then worked within a health plan called UPMC Health Plan in Western Pennsylvania, which was a great experience over a number of years I spent there, which is where I really started to learn how health insurance benefits work. I started to really understand specialty pharmacy and began my career after about 6 years at UPMC at Walgreens Specialty Pharmacy, which was one of the largest specialty pharmacies in the country. I spent a number of years at Walgreens Specialty Pharmacy in a leadership role, a number of years after that at a private equity backed, mid-tier company, a health care services company. And then about a year ago, I joined Optum as a chief pharmacy officer.

So, what does the chief pharmacy officer do? Well, I’m incredibly proud of the work that all of our 15,000 pharmacists and other clinicians across the enterprise due to promote pharmacy, both coverage and care for our patients. We cover about 60 million plus lives within the United States across many different lines of business, including commercial, Medicare, and Medicaid. And then we have a large segment of our business, which is what we call commercial. These are largely employers, local municipalities, unions, all groups that come to us to help them provide a pharmacy benefit to their employees and their beneficiaries. My job is to help all of those constituents, whether it's Medicare, Medicaid, but especially the commercial plan sponsors, to understand the types of pharmacy programs that are available and what would work best for their members therapy.

Scott: Mike, as you look back at your career, 25 plus years in the industry, what do you see as the biggest changes within the profession since you first started?

Michael: Oh, wow. You know, it's very different now. When I started, a lot of drugs were mainstream primary care disease, drugs, right? If you've been around long enough, you remember the purple pill, right? You remember Lipitor. These were drugs that treated esophageal reflux disease and high cholesterol, right? And they were very heavily direct marketed at consumers. There were commercials. And they treated diseases that affected a large swath of the population. Those diseases haven't gone away, but what's happened is in the last decade or so for the majority of primary care diseases with maybe diabetes as a small exception, which still has some brand drugs, a lot of the drugs in this category have gone generic and become much, much, much more affordable than when they were branded.

But that's how the system's designed to work. Pharmaceutical manufacturers have a window of time where they can be the sole main sole producer of the drug in the United States. And then after that time, multiple manufacturers come into the market. The patent no longer applies, and you see the price typically drop precipitously over time as more manufacturers enter the market. So, the biggest thing that I see different, Scott, is that you have many of the primary care diseases like high cholesterol and esophageal reflux disease, you see those drugs now very, very affordable for most patients. But you see specialty drugs, right? Drugs that treat very rare conditions like cystic fibrosis, those didn't exist 20 some years ago, and now they are the fastest growing segment of pharmacy. And this creates a couple of changes.

Number one, it's an immense improvement to the human condition. These drugs are treating conditions now that otherwise had a tremendous amount of despair or even were fatal in many cases, way beyond a normal lifespan. Now, they’ve become chronic diseases. And so, that's a great testament to the science behind all these developments, but they also treat small populations and are therefore very expensive. And so, the big change here is how do the benefits evolve so that members and patients that need these high cost therapies can afford them, right?

Because a lot of these are biologic and a lot of them are relatively new to the market, which means, you won't have that sort of competition that'll come years down the road. And so, we need to make sure that the benefits are designed in a way that plans can afford them, their benefits and members can afford them, when they need access to them.

Scott: Early on, you also talked about treatment of chronic conditions and how the marketplace has evolved with the induction of more and more generic medications. Are there generics available for specialty medications? And does that help blunt these high prices that consumers are seeing?

Michael: Yeah. There absolutely is, Scott. And so, the main diseases in specialty, it's oncology or cancer, it's cystic fibrosis, it's rheumatoid arthritis, it's multiple sclerosis. And then there's lots of other, very rare genetic diseases that have really, really, really small patient populations. By and large, the ones I just walked through, the top four, cancer, CF, rheumatoid arthritis, multiple sclerosis, they all have generics in them. And there's other inflammatory conditions besides rheumatoid like psoriasis and psoriatic arthritis, which all kind of get lumped together in a general category of inflammatory diseases. They all have some version of generics. I'd say the biggest development on the horizon and the one that doesn't have generics is rheumatoid arthritis. And that's because that category is largely biologic in nature, which means it's not a typical drug that treats those.

Most of the drugs in the inflammatory space are injectable. And they're actually complex molecules that are made not off a conveyor belt, but they're made in these big bioreactors. They actually use a biological mechanism to manufacture the drug. And so, traditional generics, both from regulatory and from manufacturing point of view, that is different. In the biologic space, you have, what's called a biosimilar. Biosimilars in the United States started to emerge several years ago. Most of the drugs, however, to date are on the medical side. So, they're infused products. Starting in February of next year, it'll be a very big event because the world's largest drug, which treats inflammatory conditions like psoriasis, rheumatoid arthritis and Crohn's, a drug called Humira®, will start to face biosimilar competition.

And this is a really important development for the entire industry, because it'll now introduce direct competition for Humira®. And as we know, and as we've seen across not just in the biosimilar space, but just in general, competition increases as more competitors enter the marketplace and prices tend to decrease over time. And we're very optimistic that as that biosimilar market for Humira® develops early next year, that we’ll start to see some much-needed cost competition emerging within the inflammatory space.

Scott: Mike you mentioned rheumatoid arthritis and specifically Humira®. For our listeners, can you provide some context? What would a typical payer today pay for a prescription of Humira®?

Michael: Well, I don't want to maybe highlight any one particular drug, but, in general specialty drugs can range anywhere from a few thousand dollars to upwards of a hundred thousand dollars or more per prescription. The average specialty patients can ballpark it around $50,000 a year, but again, there's some that can span into the millions.

Scott: So Mike, how do consumers afford these medications?

Michael: That's a great question. This is one of the most hotly debated topics that you see in the political circles today. And it's a really, really, really important topic I want to spend some time on. We really need to focus on how healthy is the insurance benefit designs within the marketplace that we all participate in? Not just the cost of the drug. A lot of the research out there supports over $3 billion for a true novel new therapy to make it to the marketplace. So, the answer isn't just, “well, the drugs should be cheap” because then you'd have no innovation in the marketplace.

Where we have to look is how do we access affordable programs for members and patients that need these drugs? If you have a $10,000 drug, which is roughly the price of an oral oncology, an oral cancer medication, if it's $10,000 and you cut the price by 80%, it's still not affordable to most U.S. citizens. And so, again, back to the answer, we have to look beyond just the drug cost. And yes, PBMs wake up every day to hold manufacturers accountable for affordability of the medications they bring to the marketplace. That's one of the main jobs that we do, and we do a really good job at it, but at the same time, we have to find solutions within the coverage side and protect patients from what we call financial toxicity. So, they can get the drugs that they need.

Scott: Mike, you outlined some of the challenges from the patient perspective. What about the payer perspective, the clients that you talk to day in, day out, what type of strategies are available to those in those entities and what do they need to think about or what should they take into account when adopting these strategies?

Michael: Yeah. That’s a great question. So first, it’s not even about specialty. The first thing I speak to an employer about is what does their non-specialty coverage look like? Cause what we find, Scott, is most employers that we talk to are concerned about specialty because it's grown 8 times more than the non-specialty side over the past 13 years. The traditional side of drug costs has risen largely in line with inflation, especially costs have risen significantly higher than that, about eightfold higher. So, of course now about 50% of the employer spend is on specialty drugs. But again, as I said earlier, that 50% is coming from 1 to 2% of the population. So, employers are rightfully a little concerned around what's the long-term view on being able to afford this type of benefit.

The answer is first look at your non-specialty side because we still see employers that will cover just certain medications – acne creams that cost thousands of dollars each that have the same ingredients in alternative formulations that are very, very, very affordable, like down in the $10, $20, $30 range. So, number one is let's address all of what we consider to be the waste within the benefit today. And that frees up some additional funds that are then available for the more expensive therapies. Then, when you look at specialty, it’s looking over the long term and you have to keep two things in mind. One is we want to make sure that every patient that has a medical need for one of these drugs has access to it – to do that and keep it affordable for the employer. We have to find affordability solutions. Number one, of course, is a medical necessity process, unto itself, recognizing that not all physicians practice against the same best practices and within the medical literature and FDA approvals. So, that's where the prior authorization process comes into place – just to make sure that patients that are prescribed these high cost therapies wouldn't be better matched with a different, or even no therapy at all in the case that sometimes we find a serious drug interaction that makes the therapy that doctor wants to prescribe not medically appropriate for the patient's particular individual situation.

The third thing is to look at things like how do we find other affordability solutions that lower the overall cost through the benefit design? You want to have that ability. You'll hear the term rebate thrown around, right? And essentially all a rebate represents is the PBMs’ ability to talk to a manufacturer and have the manufacturer provide a discount for that particular drug when it's approved for a patient. This is what drives substantial affordability for our plan sponsors because absent that solution, manufacturers would be able to charge whatever they want in the marketplace. There'd be very little control over the medical necessity requirements to access a particular therapy, and cost would rise significantly because of both of those things, because again, manufacturers would not have this checks and balances process that PBMs have in the marketplace that require them to not only show evidence of how their product is going to work, but also negotiate with us on the price in exchange for their position within our formulary. If two drugs are available in the marketplace and they both are clinically doing the exact same thing, we will negotiate with each manufacturer to number one establish a relationship with the one that we feel is the most affordable option for most patients, always knowing, Scott, that there's an exception process that exists when a patient can't benefit from the drug that benefits the most.

That's why we have a very robust exceptions process. We take very seriously to make sure that those individual patients' needs are accommodated also.

Scott: Mike I really enjoyed our conversation. Thank you very much for spending some time with us today.

Michael: Thank you, Scott.

Narrator: Thanks for listening to the Pharmacy Insights Podcast. I'm your host, Scott Drager. Tune in again for more discussions as we examine the most important issues in pharmacy care services.

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