This episode of the FutureHealth Podcast Series covers the evolving prescription benefit landscape and takes a deeper look into how plan sponsors can navigate important decisions in coverage and access.
The increase in spending for prescription drugs has been a major driver of annual increases in employer healthcare costs for many years. Over the last decade, the issue has been exacerbated by the growth of specialty drugs. Managing coverage and access is often beyond the scope of the average self-insured employer. With the introduction of new high-cost drugs, like GLP1s, the complexity of managing the pharmacy benefit is expected to increase.
To discuss this topic, we are joined by Vaughan Reele. Vaughan is a Certified Employee Benefit Specialist with 35 years of experience in the benefits industry. He is currently a Pharmacy Benefit Management Consultant at USI Insurance Services. Vaughan has provided strategic advice and support to plan sponsors on all aspects of employee benefit plans, and more recently he has focused on PBM risk management consulting.
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Hi. My name is Charles Rhyee, TD Cowen’s healthcare technology and distribution analyst, and welcome to the TD Cowen FutureHealth Podcast. Today’s podcast is part of our monthly series that continues TD Cowen’s efforts to bring together thought leaders, innovators, and investors to discuss how the convergence of healthcare, technology, and consumerism, and policy is changing the way we look at health, healthcare, and the healthcare system.
Spending for prescription drugs has been a major driver of annual increases of employer healthcare costs for many years, and more recently, over the last 10, 20 years, exacerbated by the growth of specialty drugs. In particular, the increasing popularity of GLP-1s for weight loss has created a new challenge for employers given the cost of these drugs and the potentially large number of people that could qualify for coverage.
To help us discuss this topic, I’m joined by Vaughan Reale. Vaughan is a certified employee benefit specialist with 35 years of experience in the benefits industry. He’s currently a pharmacy benefit management consultant at USI Insurance Services. Vaughan has provided strategic advice and support to plan sponsors on all aspects of employee benefit plans, and more recently he has focused on PBM risk management consulting. Thanks for joining me today, Vaughan.
Well, my pleasure, Charles, looking forward to the conversation.
Maybe to start, if you can give a little background of yourself and USI, and maybe a little bit more about what you do.
Sure. So I am an employee benefits pharmacy consultant, part of the national pharmacy practice at USI. For folks who are familiar with USI, we are one of the largest brokerage and consulting firms in North America. In fact, we have over 3,000 self-funded plan sponsors, which puts us in a unique position to really talk and address a lot of the topics surrounding pharmacy benefit management that we’re going to address today.
Personally, as you mentioned, I’ve been in the industry for over 35 years. I’ve been in senior management with the health insurance carrier with both underwriting, provider relations, sales, group and member support, all with dotted line reports to me. I built a middle market consulting agency and sold it.
And as you mentioned, for the past several years, I’ve really done a deep dive into the pharmacy benefit management space, having worked for a PBM and then exclusively for a small PBM consulting firm, and now for the past several years with USI, managing their Northeastern and New England regions.
So we’ve got a pretty hot topic, as you mentioned on the GLP-1s, particularly as it relates to consumerism because this is really, I don’t think it’s an exaggeration to say this, the biggest challenge that employers have faced relative to RX spend pretty much since this started. So I’ll go back 30 years.
Yeah, and I know that’s a topic we’re going to dive deep into in a moment here, but maybe to start, can you give your perspective then perhaps on how pharmacy benefits has changed over the last, I don’t know, 10, 20 years, particularly about managing specialty? I remember when I started in the industry a while back, specialty was only single digit percent of drug spend. Right now it’s over 50%. So maybe some perspective on that topic.
Yeah, absolutely. If you look back just 10 years ago, as you indicated, specialty drugs, they were still roughly 0.5% To 1% of the total volume, but they were literally only about 3 to 4% of your total spend. It wasn’t a significant number, maybe 10% if you were running hot. But in the past 10 years, with so much R&D being pumped into the marketplace by big pharma with great results, great outcomes for members, the cost of specialty drugs has ballooned.
Now what we’re seeing is the average volume is still between 0.5% and 3%, but the percentage of total RX spend is now pushing 50% on average. The benchmark that we use is if you’re between 50 and 55%, you’re okay, but once you’re above 55% of your total RX spend being specialty, we need to look under the hood, try to identify the drivers and make corrective actions.
Now, the other part of specialty is employers and plan sponsors, whether they’re Taft-Hartley, whether it’s a plan sponsor that’s standing alone, whether it’s a not-for-profit or for-profit, everybody needs to be paying attention and putting the guide rails in now, because once your specialty spend gets out of control, it’s very difficult to take corrective actions without getting a lot of member noise. So it’s a balancing act for the plan sponsors. They’ve got to manage expectations by their members and by their employees as well as the specialty plan cost, and it can be a trick.
So let’s jump into the main topic here, and maybe first let’s talk about obesity in the US. How big of a problem is it right now?
Obesity is a significant problem in the US and it’s been exacerbated by the CDC’s guidelines on who exactly is obese. If you look at the CDC guidelines, anybody with a BMI above 30 is obese. Well, you could have somebody that works out four times a week in a gym that could look like a middle linebacker and their BMI is going to be a 30. That doesn’t really mean they’re obese. But they also tack on that you could have a BMI of 27 and just have one comorbidity. Well, heck, that could be an Olympic sprinter with hypertension quite literally. So that person’s not really obese.
But when you look at it right now, by all estimates, one in three American adults meets the definition of obesity, of being obese. The condition currently drives almost $173 billion of claims through the healthcare system, and treating obesity and all of its related conditions, it’s a tremendous economic burden on the US. Currently, there’s over 230 comorbidities associated with being obese, not to mention any social or psychological impacts of being obese.
But even modest weight loss has been proven to be effective in helping to reduce the impacts of these comorbidities and the associated spend, which is part of the reason why so many people are looking at these weight loss drugs, the GLP-1s, with such promise. So it’s being obese is almost ubiquitous, and now we may be at the stage where we can almost say to somebody, “Here, take this pill and you don’t have to worry about it.”
Yeah, obviously it’s a huge problem, and this is something that everyone’s talking about here. But interestingly, GLP-1s weren’t invented for weight loss, right? They were invented to treat diabetes. I know we’re not doctors here, but maybe in layman’s terms, maybe you can help listeners understand what do GLP-1s do?
Yeah, it’s a great point, Charles. So the GLP-1s, as you mentioned, were originally formulated to address type 2 diabetes, and in doing that, the GLP-1s, for lack of a better term, essentially throw a head fake at your body. And the way that they do that is they stop your liver from producing too much sugar and it also at the same time slows your gastric emptying level. And what that simply means in layman’s terms, it makes you feel more full.
It also helps the pancreas create more insulin, and based on all three of these combined effects, it helps produce weight loss, particularly the slowing of the gastric emptying levels. Oddly, it’s one of the complaints now with people saying, “Well, I don’t want to eat anymore.” Well, that’s exactly what the drug is making you do, it’s making you feel full.
So the GLP-1s, they impact your body in that manner, so they’re very effective at helping members lose weight. But there are, like anything, like any other drug, there are side effects. And what we’re seeing with this particular drug is what we call label creep. So the biggest label creep has been moved from treating type 2 diabetes over to treating weight loss. And again, the drug really originally wasn’t designated to treat weight loss.
And certainly when we look at something like Ozempic, that’s the case. I think Wegovy though is indicated for weight loss. Am I correct?
Great point. So Ozempic is actually the same exact drug as Wegovy. Wegovy is just about, depending on your body weight, one and a half to one in three quarters of the dose of Ozempic. So it’s the exact same drug. And what happened, you may remember this, in October of 2022, I think it might’ve been the Grammys, I think it might’ve been one of the Kardashians came down the red carpet and somebody said, “Geez, how’d you lose so much weight?” And she goes, “Ozempic,” and we were off to the races.
Now, even though Ozempic is the type 2 diabetes drug and Wegovy is the weight loss version, what we have seen is a large, not a large, an overwhelming subscription to both, and it’s not because you have more type 2 diabetics. It’s because you have plans that might not cover weight loss, and what the doctors are doing is they’re writing the Ozempic, what we call off-label, in order to address the weight loss.
Obviously, these drugs have been around for years, and then it’s only in the last year or so, the popularity related to weight loss has come. How have employers responded so far to this increase in demand?
Well, before you had Wegovy approved as a weight loss drug, right around 50% of employers covered weight loss drugs because there are non-GLP-1 weight loss drugs, phentermine. There’s also other treatments for weight loss, bariatric surgeries, which include gastric banding and gastric bypass, things of that nature. So about 50% of the payers and the plan sponsors were covering weight loss and weight loss drugs.
However, once Wegovy hit the marketplace, we’ve now seen that increase to the 60 to 75% of all plan sponsors and payers are now covering these weight loss drugs. The important thing about it is though, nationally, only 33%, and that number’s decreasing, have unfettered access to these drugs, meaning that most plan sponsors have wisely put in prior authorization criteria or step therapy criteria to try and make sure that the members have tried other methods of controlling their body weight prior to just jumping into an injectable with the implications that a GLP-1 has.
What are the costs? What is the cost impact of, if you were to really try to control this? How much does healthcare cost rise or expect it to rise if you don’t really try to manage this kind of access?
Well, if you put your faith in the congressional budget office, which I’m not sure how many people do, they actually said if 50% of the people who would be eligible under the definition of obesity actually started taking these drugs on Medicare, they estimated that it would double the cost of Medicare. Now, I don’t buy that.
What I can tell you from the data that we’re looking at, it appears that the GLP-1s, in and of themself, do have the real potential to increase RX spend by close to 10 to 20%. I would tell you the data that I’m seeing right now solidly says 8 to 12%, but that’s what we believe. We believe we’re on the upswell here. We don’t think this is crested. We don’t think this has peaked. We think we’re at the beginning, particularly because most of these drugs are injectables.
The only one that’s not injectable is the RYBELSUS, which is an oral, but that is for type 2 diabetes. It’s not for weight loss, so you’d have to write that off script. But a lot of the manufacturers are already working and getting very close to bringing oral GLP-1s to the marketplace for weight loss.
And when that happens, our current trajectory of 8 to 12%, that’s going to increase a lot, and that’s where we say that it could be as much as a 20% increase. And if RX is, let’s say, 30 to 40% of your total healthcare spend by 2028, then that means this will increase the total healthcare spend for an employer by almost 10%. It’s significant.
You mentioned before that weight loss is a separate coverage. Is weight loss not a standard benefit, and if so, why? How is that determined?
Really, weight loss is determined by the individual payer, meaning insurance carrier or TPA, but it’s also, if you’re self-funded, it’s determined by you, the plan sponsor. So the plan sponsor has the ability to determine whether they want to cover weight loss and how they want to cover it. Some plan sponsors will not cover weight loss drugs, but they will cover nutritionists, dieticians, health coaches, they’ll cover maybe the bariatric surgery, the gastric bypass, et cetera.
Now, the neat thing, not neat thing, but the one thing that a lot of people need to keep in mind with the bariatric surgery, when done right, you only have to do it once. And while it might cost 15, $20,000, you’re done that expense, and now the member’s reaping the rewards and hopefully you’re gaining the benefits of reduced comorbidities. When you’re talking these GLP-1 drugs, you’re on them for the rest of your life.
But a lot of plan sponsors are deciding, yep, we’re going to cover the GLP-1 drugs and other weight loss drugs, but we’re going to make sure that we put guide rails on to be certain that the member is getting the appropriate drug under the appropriate circumstances in the right dose at the right cost.
What we are seeing in the data is a little bit troubling. What we’re seeing is a lot of people, a lot of … And again, I’m not beating up the physicians here, but what we’re seeing is when we look at Q1 2022 versus Q1 2023, almost a 40% uptick in the number of members reported as using diabetic 2 type drugs. Now we know you didn’t have a 40% increase in type 2 diabetes. What that is, is that’s doctors writing the script off label.
A lot of the plan sponsors are moving towards covering the weight loss drugs. I just had another 20,000 employee company send me an email yesterday afternoon, said, “We’re changing directions. We want to cover the weight loss drugs. What do we need to do?”
I said, “The first thing you need to do is put the prior authorization on the diabetic drugs, then put in your weight loss. We need to put a prior auth on the weight loss drugs, but I would also suggest that we input other criteria. The member must first have tried behavioral and lifestyle changes for a period of three to six months under professional guidance, and that professional guidance must attest to the fact that, yep, it wasn’t successful. Then you want to start the drugs.”
Yeah, no, I definitely want to touch on the prior auth stuff, but just stepping back real quickly, it’s interesting. You’re seeing a large employer contacting you and said, “Hey, we want to cover weight loss.” It’s interesting that with all the scrutiny around it and particularly the cost of it, you have employers coming to you to say, “We do want to cover weight loss.” What’s the thinking and the rationale, because that’s a real expense potentially for employers?
Yeah, the rationale behind it … And by the way, there’s not a lot of data out there, but there is some data out there. We’re going to, I think over the next year or two, as the pharma companies really start jumping deeper into this, we’re going to start seeing more data. But it appears that, and it’s logical that if you cover the weight loss drugs and the member actually loses 10 to 20% of their body weight, a lot of the comorbidities and the expenses related to those comorbidities will decrease.
So when you think about the comorbidities, think about a person who’s carrying an extra 30 or 40% on their body frame. Well, one of the biggest expenses for most employers or plan sponsors is the musculoskeletal medical expenses not related to the drug, but related to back problems, knee problems, hip problems. And if somebody is carrying around a lot less weight, guess what? They don’t need the knee replacement. They don’t need the hip replacement as early. They might not have a problem with their back.
But it also folds into the other comorbidities such as hypertension, diabetes, heart disease, stroke, sleep apnea. If you can lose 20 to 40% of your body weight, you may no longer have the sleep apnea. You might not need that CPAP machine that your wife hates and that your plan paid for. So there’s a lot of expenses related to the comorbidities that plan sponsors are thinking, rightfully so in my opinion, are going to offset the expense of the GLP-1s and the weight loss drugs.
There was that recent study, I think it was from Novo on the select trial showing a significant decrease in major adverse cardiovascular events. Are employers paying attention to those studies and is that a driver or is it really just more about just thinking about it as a benefit, something they want to do for their members? It sounds like you’re saying that they are thinking more about the downstream costs as well.
And does that mean that it’s really only certain types of employers, ones that have long retention time for their employees versus maybe retailers that maybe have a high turnover of employees? Is there a difference in which employers are choosing to cover versus not perhaps?
You popped two good questions in there at once, Charles. The first is are they looking at data? They’re not really looking at data because as you just mentioned, the first data is really just starting to come out right now on these, but it is logical, and the plan sponsors, if nothing else, they’re pretty logical about the decisions that they’re making. So they’re saying, “Hey, logically, if we can get these folks into a better state of health, then we’re going to be paying less claims elsewhere.”
The other part of it though, and this is not to be underestimated, is the goodwill that’s generated in their populations. A lot of folks out there are putting it in without regard to whether it’s going to reduce medical claims, but more is it going to provide better morale? Is it going to help my employees be happier and think that they’re with an excellent company that’s providing excellent benefits?
Now, what we are seeing, to your second part of the question, we are seeing different industries adopt it at different rates, and we’re seeing different companies adopt it at different rates. So the profile of a company that’s got a high diabetic population, and if we’re looking at their population health management shows that they have a lot of folks that are obese, particularly if they’re doing care screenings at the employer, they’re going to adopt, right? They’re at the early end of adoption.
If we’re looking at retailers that have high turnover, like you mentioned, they’re at the late side of the adoption because the employee’s not there long enough for the benefits to be returned back to the employer, because it is a significant upfront expense for the employer banking on the fact that a year or two down the road, they’re going to reap the rewards of having employees with less comorbidities associated to obesity.
You touched on it a little bit earlier, and I want to dive into it now, is the guardrails then, because you mentioned that maybe 50% of payers and employers covered weight loss before Wegovy’s approval, but that’s increased to 60, 75%. But the only way you can do that and still manage the cost, is to put in guardrails. So you talked about prior authorizations. Maybe explain what a prior authorization is first.
Yeah, to a lot of plan sponsors and a lot of your listeners, prior authorization usually has a negative connotation to it. What I would tell you is that prior authorization is really ideally intended to protect the member. It’s to make sure that the member’s getting the right drug for the right diagnosis, in the right dosage, in the right setting at the right time, and it really can be very effective.
Now, I’m not going to pick on any of the PBMs, I’m not going to single anybody out, but a lot of your PBMs will simply rubber stamp the prior authorizations. If you’re seeing an 85% approval of the prior authorizations requested, that’s a rubber stamp. The number that we look for is down around 65%. So of all the prior auths out there, about 65% should be approved.
Now, what the prior auth, as I mentioned, is intended to do is to make sure that the member is getting the right drug at the right time in the right dose. So with the GLP-1s, what we’re looking to see is, okay, is the member truly obese, particularly if you’re using it for weight loss drugs? And let’s start with diabetics. If it’s for diabetic drugs, then you want to have the prior auth on there so doctors can’t write the GLP-1 for weight loss, even though it’s a diabetic drug.
On the weight loss side, what you want to be sure is that the person’s obese. I think I shared with you this story, and this is true, that we had a client that shifted from one PBM to another, and when they shifted it, the GLP-1 that the CEO’s wife was on was not covered under the new formulary, and the CEO’s wife was pretty angry about it. But when we did a little digging, we found that the CEO’s wife had a BMI of under 24. She didn’t need weight loss drugs. She probably needed a psychologist. Some people get addicted to these things.
But it was pretty significant. The idea of the PA is to make sure that the employee has the right drug in the right dose. So let’s say I am obese and I’ve not yet tried dieting, I’ve not tried exercising, I’m just going right to the GLP-1. Probably not the right thing. You really want to see where the member can get at through lifestyle changes, then start looking at the drugs and the GLP-1s.
Same thing you would do with the surgery. You would never recommend surgery right away. You would say, “Hey, let’s go see if diet and exercise works first.” The challenge that we’re having with the prior authorizations is that everybody’s using the FDA guidelines, and as I mentioned earlier in the call, they are very easy to meet.
If you just have a BMI of 30, according to the CDC and the FDA, you’re obese. If you have a BMI of 27 and one comorbidity, you’re obese. You can’t see me, but I’m pretty much a gym rat. I’m in the gym three to five times a week. I work out five times a week, and I’m not obese. I’m a big guy. I look like a linebacker coming at you. But under these definitions, I could qualify for prior auth.
And is BMI the only indicator in a prior auth. What else goes into a prior authority? Or maybe perhaps first, what can go into a prior auth? And then secondly, what are the more common ones?
Great. So what we’re doing right now is USI is working with a lot of the PBMs, as are a lot of the other consultants across the country, convincing them to put in additional steps into their prior auth criteria. So I mentioned things like behavioral modifications and lifestyle modifications, working with a gym trainer, working with a dietician or a nutritionist.
But the other thing that you want to look at is age and weight loss targets. These can all be put into your prior auths. Other things that you can also put into your prior auth is a reauthorization period. Okay, we approve this. We’re looking at it for six months. After six months, did you maintain your weight loss? Have you maintained working with the nutritionist and with your health coach or trainer? And then you can reassess where it’s at.
The big thing that we’re seeing right now, it appears, and this is anecdotal, but it looks like it’s popping across a lot of our groups. We’re seeing members who started the injections last February, March, and then when they got to this July, stopped taking the injections.
And what we’re guessing at is that they lost the weight they wanted to lose for the summer. They looked good in their bikini for the three months, or their bathing suit for the three months, and now they’re going to stop doing the injections, because they are injections. And they’re going to put weight back on and start the whole process again next January, February, March. That’s not the intended use for these drugs because what happens is once you stop taking these drugs, you gain all the weight back. There is no residual effect.
And that’s because it’s really just physically impairing your desire for food or feeling hungry, right? It’s not changing any of the underlying behaviors of why someone might crave food. To that effect, how effective are some of these prior auth criteria such as undergoing behavior modification, nutritionists, those kind of tools? How effective do you find any of these?
Well, we’re finding that a lot of the folks who are seeking the use of these drugs, once they go through the behavioral modifications, they still need the drug. So it’s not that you didn’t need the drug to begin with, but they’re able maybe to obtain a 5% reduction in body weight when they really needed 15 to 20%. Now they’ve worked with a professional, they’ve got 5%, they still need to get that other 15%, that’s where they’ll start turning to the GLP-1. And the GLP-1s are remarkably effective.
The problem, there’s a couple issues. With any drug, with any treatment, there’s always negative impacts. What we’re seeing with the GLP-1s is two or three phenomenon. One they call corpsing. The members look drawn, their face. They lose so much weight so quickly that their faces look really drawn, their eye sockets look tucked in. It’s not a particularly appealing look.
In addition to that there’s, a lack of a technical term, what they call Ozempic butt. Because the people might not be exercising, they’re losing weight so quickly, their body is eating the muscle material, and you can really see it in their behinds, in their rear ends that they start to sag. So they call it Ozempic butt.
But there are other issues, and when you look at the boxes that these drugs come in, the warning labels, you’ll see everything from thyroid C cell tumors to pancreatic cancer to acute pancreatitis. The more common items are loss of appetite, which is what the drug’s supposed to do, vomiting, headache, stomach upset. So you have a lot of gastrointestinal symptoms like abdominal pain, constipation, diarrhea.
And what we just started seeing was class action lawsuits. And kind of the ironic part about the class action lawsuits is they’re citing some of the very things you want the drug to do, “Hey, I don’t want to eat anymore. I feel full.” Well, that’s exactly what the drug was intended to do, but people aren’t happy with that for some reason.
But with that said, I’m not making light of it because there are … I don’t think the physicians, yet, are educating the folks that are pursuing these drugs on all the potential negative consequences that can come from taking a GLP-1. Because remember, your body’s being told you’re not hungry, you don’t want to eat.
So unless you’re replacing all those other calories that you used to eat with very high quality calories, a lot of fruits, a lot of vegetables, a lot of protein, then you’re going to be malnourished, and that’s what gives you that corpsing look, and that’s what gives you the Ozempic butt, and it can create a lot of these other symptoms.
One of the other things we’re seeing right now, it was a new term to me, was gastro paralysis, where these people, they’re not digesting their food and they’re not sure that it goes away when you stop taking the drug.
Yeah, I saw that recently as well. Hey, want to get back to the guardrails, and one of the things that you mentioned is that in filling out a prior authorization by your physician, the physician has to attest that the patient went through nutritional counseling and or did X, Y, and Z and failed, and therefore it requires this. Not to say that physicians do this routinely, but couldn’t a physician just simply say, “Oh yes, my patient,” who they might’ve seen for the first time that day, “has been here and I’m going to attest they did all this,” and get that through?
Charles, they can. I mean, they’re essentially doing that with diabetics or they’re prescribing somebody a drug that they know is for type 2 diabetes to somebody who’s not diabetic. And I don’t want to paint physicians with a bad stroke because a lot of physicians take it very seriously. But what we are seeing is these pop-up companies that are saying, “Hey, we will get you approved for the drug.”
Now, these are companies that go to the member and say, “Hey, you call us, our doctor,” who maybe the doctor, I don’t know, they’re in another country, is attesting that the member has gone through the appropriate nutritional counseling or behavioral modifications. That’s a big concern to us.
Yeah, what do you think about that? I mean, I’ve seen it a lot now, or I’m hearing about it online, sort of a telehealth model to do a telehealth visit and get prescribed one of these drugs. Obviously you see it in things like for hair loss and other kind of conditions, and no one bats an eye. And most of those are cash pay, right? Those are out of the person’s pocket. But this is obviously, that’s not feasible for the majority of people. But how do you control for that, and do you think that kind of model can even really work?
I don’t think the model works. I think the model’s really set up to dupe the plan sponsor and the healthcare administrator, the PBM. Again, we are seeing some PBMs put in some pretty good guide rails. One of the things that the PBMs could do is require that the script for the drug comes from an appropriate physician or medical practitioner. In other words, there were times when general practitioners were prescribing drugs for hepatitis C. That’s not the right person to be prescribing a hep C drug.
But in this case, with these tele-doc situations, what we’re encouraging plan members to do is to talk to their primary care physician and to make sure that they research the side effects of the drug and that they understand that they’re going to be on the drug for the rest of their lives.
And have the conversation with your PCP. If your PCP isn’t going to prescribe the drug for you, I’d be hard-pressed as a patient to then go to one of these tele-doc companies to go get that drug, but we’re seeing it. There’s a profitable market out there for these companies, and it’s a little alarming.
How does a plan sponsor combat that sort of inappropriate utilization or that end run around the guardrails? And I’m not saying that an online option isn’t appropriate for some people. You can certainly set up a model where they’re doing everything by the book, it just allows better access for folks. But you can see the potential for abuse of that too.
Yeah, you absolutely can. And a lot of this is so new that we’re doing this on the fly. Same with the actual criteria you use for the prior auths. That’s being designed on the fly. We’ve been successful with some of the PBMs getting the criteria lifted to a 32 BMI or a 30 BMI with a comorbidity and then a 33 or 35 without a comorbidity, and they’re playing ball. They’re willing to move.
But to the exact question or scenario that you provided, one, in theory, way that the plan sponsor could protect themselves against it is to require that the script comes from a participating network provider because almost everybody now is using a network provider. There’s very few programs out there that are using out of network providers.
They are, God bless, but the large majority of members are using network providers. And as long as that network provider is writing that script, it does help provide another level of protection for the plan sponsor. But we’re not there yet. I haven’t seen anybody input that type of protection mechanism yet.
You mentioned before that obviously all the big PBMs have their own prior auth systems, and you said a lot of times it seems like they get rubber-stamped. Certainly, there’s an incentive to dispense. How do you drive a 65% utilization? What type of prior auth platform do you need for that?
So when we’re looking at that 65%, that’s where we see PBM or the third party administrator or the medical TPA that’s doing the prior auth is not using what we call skip logic auto-adjudication. And I don’t want to bore your listeners with this, but I’ll give you a real brief explanation.
When you go and get a specialty drug, and many of you have heard this conversation from your doctor, your doctor says, “Hey, we’re going to try this drug. It needs to be pre-approved by your insurance carrier. Jim in my office over here is going to help out.” So Jim gets that, goes in the other room, he sits in front of the computer and he starts filling out a skip logic questionnaire. Hey, if he answered the first four questions, yes, skip the question eight.
Part of the problem with that is that we are so all genetically close that just one little difference can be a big difference for us. So the skip logic questionnaires oversimplify things a little bit, but what happens on the other side, that skip logic questionnaire is received by a pharmacy tech. And a pharmacy tech could have as little as three months of experience in pharmacy training.
Now, what the pharmacy tech then goes back and does, they ask the same person who input the information to attest that the information that was input is correct and accurate. Now, that person may have three things going on. They might’ve just made a mistake. They might’ve accidentally put in a person weighs 170 pounds when the person really weighs 120 pounds. Now the person’s almost getting a dose that’s 50% too much for them.
And that means a lot with these drugs. If the drug on average costs $15,000, all of a sudden you just increase that by almost 50%. Vice versa, if the person really is 170 pounds and they made a mistake and it was 120 pounds, now the drug’s not going to work for the person. But other things can go on, the person can input and try to answer those questions with what we call input bias. So they’re trying to answer the questions in a manner that will get the drug approved. Why? Because they assume the doctor is the be all and end all, which is okay.
But the idea is when you look at these other vendors, what they’re doing to get down to the 65%, they don’t use skip logic questionnaires, they actually have somebody pull the medical file. That’s important. So instead of somebody just going through a skip logic questionnaire, what the PBM or the medical TPA is doing is they’re having a nurse or a PharmD, a doctor of pharmacology, reach out to the member’s doctor’s office and get the actual medical file.
That way they could see how much the member weighs, they can see what other comorbidities are going on, they can see what other drugs the member’s on. The next step in this will be, and I’m thinking we’re about five years away, where pretty much everybody on any specialty drug has some sort of genetic testing that’s required because a lot of these drugs you’re not going to metabolize anyway. Now I know I kind of just skipped questions, but the idea behind the PA, the way you get down to a 65%, pull the medical file. That’s the simple answer.
I mean, it’s crazy when we think about where all this is potentially going here. Maybe to wrap up here, we covered a lot. Your best guess over the next couple of years, where do you think we go with this coverage? Because on the one hand you’re talking about these drugs are very effective.
It sounds like employers to a certain extent are embracing coverage, but on the other hand, we’re trying to manage and make that utilization more appropriate to manage down the cost. Best guess, next couple of years, how big is the usage do you think for GLP-1s from today’s levels, let’s say, from what you’re seeing today, I guess?
Yeah, I mean, if you believe some of the folks out there, it’s looking at a 7% growth rate compounded year over year. So that means that 7%, I think the number is within five years, that means it doubles. That’s a big concern. However, the employers are putting in some of the guide rails. I think you’ll also see many employers change their plan designs.
And a lot of employers already have. A lot of employers have said, “Hey, formulary copay is one thing. A brand is another.” I’m sorry, a generic is another copay, a brand is a higher copay. But then they’re adding a fourth tier, and the fourth tier is a specialty tier.
Well, my belief is that they’re going to put the weight loss drugs up in that fourth tier, so it’s going to be specialty drugs plus weight loss drugs are going to be in the fourth tier, and they’re going to have a member bear a larger cost share of that. Because with the potential volume out there, I don’t see any other way for the employer to do it other than to cost shift some of the cost back to the employees who want to take these drugs.
Hopefully what happens over time, and we are optimistic on this, is that the savings on the medical side will offset some of the cost on the RX side. So the cost shift back to the members and back to the employees doesn’t need to be as significant. But right now we are all kind of in a guessing game.
Yeah, I mean, you look at some of the data, it would suggest that there are some real potential downstream benefits, but it’s too early, right? Well, hey, this was a lot, but really informative and really interesting here. And I know it’s a big challenge for employers as they set up their benefit designs, particularly on the pharmacy side, but we’ll close it out here.
And Vaughan, really appreciate all your thoughts and insight here, and thanks for joining us on this podcast. And thanks everyone for listening, and look forward to having you on a future TD Cowen FutureHealth Podcast. Thanks everyone.
Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.
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