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Driving Down Pharmacy Spending w/ David Henka

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Driving Down Pharmacy Spending w/ David Henka

August 29, 2019

Driving Down Pharmacy Spending w/ David Henka

Pharmacy Benefits Managers, better known as PBMs, are your classic middle-men. First, they buy medications from pharma manufacturers. Then they bundle those medications into formularies and sell that service to employers, plan sponsors and health plans. The problem is, there’s no transparency into how much PBMs pay for the drugs, and there’s a complex rebate system layered on top of that. With dug costs on the rise, it’s no wonder that many characterize PBMs as the bad guy, nor that the feds are taking aim at their business model.

Today’s guest tells us not to count on regulation to fix this. First of all, the pharmaceutical industry has strong ties to Washington and a very powerful lobby. That’s going to hold up any proposed regulation. Secondly, the regulations fail to address the underlying issues driving pharma costs today. But there is something we can do right now. David Henka, President and CEO at ActiveRADAR, tells us how they’re using reference pricing and therapeutic equivalents to enable a new interaction with the PBMs formulary. And he claims it can drive immediate and ongoing savings of more than 20 percent for employers, health plans and other plan sponsors.

David gives us a foundational overview of the issues at hand and offers up several suggestions for how we might move forward. Topics include:

  1. What is a PBM?
  2. Why were PBMs created in the first place?
  3. Are PBMs the bad guy or a necessary component in the system?
  4. What are PBM rebates and why do we keep hearing about them from the feds?
  5. What is the fundamental issue with U.S. pharmaceutical pricing?
  6. Is the U.S. really funding pharma R&D for the entire world?
  7. What is reference pricing and how can it drive down pharma spending?
  8. What are therapeutic equivalents? How do they differ from generics?
  9. How has the market received the idea of reference pricing and therapeutic equivalents?

I’ve been meaning to cover pharma on the show for some time. This was a much needed first dive in, and Davide Henka delivered the goods to get us started.

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