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Each week, Health Affairs' Rob Lott brings you in-depth conversations with leading researchers and influencers shaping the big ideas in health policy and the health care industry.
A Health Podyssey goes beyond the pages of the health policy journal Health Affairs to tell stories behind the research and share policy implications. Learn how academics and economists frame their research questions and journey to the intersection of health, health care, and policy. Health policy nerds rejoice! This podcast is for you.
Doctor. Hello, and welcome to a sponsored health affairs podcast episode brought to you today by CVS Health. I'm your host and a deputy editor and correspondent at Health Affairs Publishing, Jessica Bylander. Today on the program to discuss pharmacy benefit managers or PBMs, we have CVS Caremark Chief Growth Officer James Marjota. Throughout his career at CVS Health, James has led and scaled businesses across CVS Accountable Care, MinuteClinic, CVS Caremark, Aetna, and CVS Pharmacy.
Speaker 1:Today, he and I will discuss what value PBMs are bringing to the healthcare system. James, welcome to the program.
Speaker 2:Jessica, it's fantastic to be here and look forward to our time together today.
Speaker 1:So to start us off, there is a lot of debate about the role of PBMs and whether they can actually drive down prescription drug costs. So how do you describe the value PBMs bring to the healthcare system and what makes CVS Caremark unique?
Speaker 2:Jessica, when we think about the value that PBMs bring to the healthcare system, we first need to think about who our customers are. And as we think about that, it's always centered around our customer and their priority first and foremost is how do they manage cost? Secondly, how do they ensure that there is a experience that their members have in accessing the system? How do they provide an affordable benefit? And how does that all come together in a way that helps them execute their strategy?
Speaker 2:And each customer is unique in terms of their approach, what they need to do. And so when you think about the role that the PBMs play, it's really orienting our infrastructure capabilities, expertise to help deliver on their commitments and execute their strategy better than anyone else. And so there's a number of approaches that we deploy in partnership with our customers to help manage the overall cost of pharmacy benefits for their particular members. When I think about CVS Caremark and why are we unique? I would highlight several key aspects of that.
Speaker 2:First and foremost, we are very customer centric and customer oriented. We listen to our customers. We understand what's important to them, their priorities, and we align our organization, our capabilities in a way that helps deliver on their commitments and their objectives better than anyone else. Secondly, when you think about those we serve and the infrastructure that's needed in order to engage with manufacturers, in order to create competition, in order to deliver the greatest value from a price perspective, the size and scale of CVS Caremark is unmatched and in a way allows us to work together with the supply chain to optimize in a way that delivers value to our customers. Secondly, as we think about the role that we play, it is how are we engaging with the members that we serve on behalf of our customers to help advance their strategies in the least abrasive way possible.
Speaker 2:When you think about managing the overall cost of prescription medications and the desire of our customers to have an affordable benefit, it's important that they take very active approaches to managing overuse, abuse and misuse of medications. The third area, and it's one that is a clear differentiator and franchise for CVS Caremark is our expertise in specialty pharmacy. Specialty pharmacy represents close to 50% of the cost of providing prescription benefits, but it usually only represents about two to 3% of the members. So there's a very small subset of members that are accessing the benefit and in doing so represent a significant amount of the cost. So our ability to actually engage those members in a way that supports them with their complex condition to help manage their care is unique and differentiated.
Speaker 2:Then finally, how are we engaging the member? As we think about the trust, the engagement and the work that we're doing, engaging with that member each and every time they access the prescription benefit. And the prescription benefit is in many times the most utilized benefit within any given plan. And so our ability to actually engage that member to produce a different outcome, to manage the overall strategy and to help them manage their care effectively is really a final area of differentiation for us.
Speaker 1:So when you say customers, you're thinking employers, the health plans and the members of those plans, is that right?
Speaker 2:That's correct. It's traditional employers, members of health plans, but also state and local government and union and labor customers as well.
Speaker 1:So obviously high drug costs continue to be top of mind for employers, health plans and those other entities you mentioned. How is CVS Caremark helping manage those costs and improving affordability? You touched on this a little, but could you kind of drill down on that?
Speaker 2:As you think about managing costs, you really need to understand what are the underlying components that ultimately produce the cost paid for the pharmacy benefit. And so we like to think about it in terms of cost equals price times product times utilization. And so the sum of that equation is what ultimately will produce the cost associated with providing the benefit. And so if you look at each one of those three pillars, if you think about the pricing construct, it's how are we creating competition within the supply chain? How are we optimizing in a way that delivers the greatest value to our customers and our purchasing scale throughout the entirety of the supply chain to deliver value to our customers.
Speaker 2:Secondly, as we think about the product, and so this really gets into mix and when you start to evaluate and understand how plan designs are built, how we work with our customers to take a very data driven approach in terms of what's driving their costs, what are the conditions that they have within their population? Where do they want to invest the dollars that they've allocated for the benefit? You start to think about that in a way that maximizes generic medications, which are the lowest cost prescriptions available, traditional branded products, specialty medications, which are used to treat high cost complex conditions. And then really the new emerging opportunity, which is biosimilar medications. And so these are really generic products for the high cost specialty medications.
Speaker 2:And there's a tremendous opportunity that's being presented over the past several years and there's a pipeline that is growing. So part of it is we have to make sure we've got the right unit cost and price. How do we work to establish and achieve the best mix given the population that is being served? And then finally, how are we managing the utilization? And so when we think about utilization, it's really understanding the quality, the care management, evaluating the drugs that are being prescribed, working closely with the physician and the member in order to advance the approval of certain medications.
Speaker 2:But you're really trying to ensure that you're managing the overuse, misuse, and abuse of medications and ensuring that the medications that are dispensed are appropriate for the given diagnosis that a member might have. And so we really think about those kind of three key areas that make up the cost equation. And then how are we executing strategies, leveraging our infrastructure, our ability to engage with the member, our digital assets, the front engagement that we have is we're connecting with those members in a way to help support them on their care journey. And so when you bring all of those together, it really creates the outcome that helps our customers manage their overall cost, which is the role that we play.
Speaker 1:Great. Yeah, I know that utilization adherence, those are all really key issues and also the availability of generics and increasingly biosimilars is something we follow a lot. So really interesting points. So what challenges are customers facing as they decide on their pharmacy benefit coverage? Like, they even aware they're using a PBM and so on?
Speaker 2:Oh, they're absolutely aware of the relationship that they have and what's really happened over the past several years. And I think back to when I first started, I've been in the PBM business for over thirty years. And at that time it was really a mail service as a voluntary benefit. And so as it's evolved over the past period of time, it's very much a foundational aspect of the benefits package that a plan sponsor offers to their members. And so it's continued to grow in its cost and ultimately its focus when you think about truly at the C suite level and understanding the cost and the acceleration within the pharmacy benefit.
Speaker 2:It's one of the least expensive ways to treat conditions when you think about alternatives of being inpatient or other particular therapies, but it's continued to accelerate in a way that it represents more than 50% of the costs that typical plan sponsors are spending. And it's continuing to grow and trend based on disease progression and continued increases. So it's at the C suite level, clients are very much aware of the growing cost and really the focus of the need here because it touches so many members and it's accelerating in a way that they truly need the help of PBMs and experts like CVS Caremark to support their strategies.
Speaker 1:Right, so strategies and sort of controlling those costs as they continue to increase.
Speaker 2:When you start to think about how they have the ability and what's top of mind in terms of their offering a benefit, affordability and cost is the number one criteria and area of focus for our customers. But fast following that, it really gets into the experience and think in terms of the member experience. So as you're managing and trying to provide an affordable benefit that all of the members can use, you have to also manage the experience that the member goes through as they're accessing the benefit. And so those are two of the primary areas of focus for our customers. And then what's continuing to emerge is ensuring it's compliant, it's responsible.
Speaker 2:And when you think about the overall legislative and regulatory environment, that it's also very responsive to the ongoing changes in evolution and really an area that CVS Caremark has taken a leadership position in terms of our overall approach relative to what's important to our customers.
Speaker 1:Right, there's a lot of developments on the policy side, a lot to follow. And so we know plan sponsors are looking for more transparency in drug pricing. What is CVS Caremark doing to respond to this and how do transparency models work?
Speaker 2:This has been a movement that's been underway for several years in terms of a desire to understand and to be more transparent and really connect how you think about the overall supply chain within the pharmacy benefit management arena. And so we very much support our customers in terms of their desire to understand the underlying economics and have really taken a leadership position over the past couple of years in terms of introducing new models from a pricing perspective, how those models manifest themselves in terms of benefit design, all the way from how we're purchasing from the manufacturer down to how the member actually pays for the medication. And so really looking at how do you align the purchasing with what's ultimately paid, not just by the plan sponsor, but ultimately by the member. And so we very much support the transparency requirements and understand the regulatory environment, taking a leadership position and really think about this as an opportunity where our clients are looking to us for guidance in a very dynamic market in terms of how do we manage through this in a way that allows us to maintain the affordability of the benefit. How does the economics change when you start to think about underlying drug pricing, still leveraging strength of CVS Caremark to deliver the best value across the cost equation that we talked about earlier, but ultimately in a way that allows them to understand the cost of the medications and true net cost of the medications.
Speaker 2:And this is one of the areas that becomes challenging, which is there's the discounted cost of a medication and then there's the rebate that you receive from manufacturers at a future point in time. And so really when we think about supporting our plan sponsors and making the very best decisions, they need to understand the true net cost of the medication. And that's really an area that we're supporting our customers in because it also helps them to make the best decisions in terms of coverage and also the affordability of the benefit down to their members and constituents.
Speaker 1:So I'm wondering now how CVS Caremark is using technology innovation, including artificial intelligence or AI to transform pharmacy benefits and the member experience.
Speaker 2:Jessica, that is a paramount area of focus for our organization. We announced over the next ten years, we'll spend $20,000,000,000 as a company to deepen and advance our focus on using advanced technologies to enhance the delivery of our services across the CVS Health ecosystem and CVS Caremark is benefiting meaningfully in that regard. There are several key areas that I would highlight that have been paramount from our perspective. And so you really have to think about this in a way and it really builds upon one of your earlier questions in terms of how CVS Caremark is differentiated when we think about the cost, the member experience, but really advancing in a way and thinking about us as a really technology services company and evolving in a manner that allows us to not only support the plan sponsor from a strategic planning perspective using data and insights, how are we engaging the member in a way that identifies opportunities and helps prompt them to take the next best action. As we think about the models that we're deploying and identifying those opportunities and leveraging data, but also how are we engaging with the provider?
Speaker 2:And that's one thing that we haven't talked about throughout the entirety of all of this, Jessica, a prescription doesn't get dispensed unless a provider prescribes it. And so this is an area that we've invested very heavily in from a technology perspective and it's leveraging our connection deep within the electronic medical records across the industry in order to work within the healthcare ecosystem to understand information relative to our patients and our members' conditions, how they're accessing medications and leveraging that from a prescribing perspective. Let me give you an example. We, Myra went a biosimilar within the past year and a half or so. And it was one of the most successful conversions that ever occurred within the biosimilar industry and the adoption of the product.
Speaker 2:What we were able to do by leveraging our advanced technology, our connection into the healthcare ecosystem through the electronic medical records is we were able to engage directly with the physicians, identify the members that were on the branded medication. And then we were able to work within the system, within the provider flow to communicate with the physician, to convert them to the biosimilar medication. And so we've achieved over 90% adoption and conversion to the biosimilar saving our customers $1,800,000,000 plus and in doing so reducing the cost for members, many of which moved to a $0 copay. That's just one example of how we're leveraging technology, but also how it's connected and wired deeply into the healthcare ecosystem to produce a better outcome, to reduce member abrasion and to manage and drive down the cost of care. We're also using it for traditional prior authorizations where we're able to identify areas of opportunity.
Speaker 2:A great example is a plan sponsor has determined that they wanted to more effectively or closely manage a therapy and require a prior authorization. And this is an area that's received quite a bit of press in terms of the abrasion and the impact that has on physicians and ultimately members. And so we've used artificial intelligence to help us extract the data, understand the clinical criteria, apply the critical criteria and determine what additional information we might need, how we might connect back into the provider to receive that information. How do we keep the member informed as it progresses through the prior authorization approval process, and ultimately move through the disposition of that request. And so we've accelerated into minutes the time that if all the information is there, that the prior authorization is approved.
Speaker 2:And so that minimizes abrasion to the member. It gets them on therapy faster. In the event we need more information that's handled in a very electronically oriented way. And ultimately, there's a decision that the prescription should not be approved, there's a human in the loop to make that decision. We do not use AI or advanced technologies to make decisions against prior authorizations.
Speaker 2:We would always have somebody evaluate that. We're using it in our call centers to enable in the event we get an outbound call from a member asking about their benefit, we're using it inside our call centers to anticipate, to listen to the members as we're engaging in the conversation, to present the representative with the information that they need in an anticipatory manner to allow them to best serve that member because our customers contract with us not only to help manage the cost, support the care that they're investing in for their members, but their employees and their members are there to serve their mission, not to navigate the healthcare system and the benefit that we've provided. So we think about this in a way that how do we make this most efficient while managing and balancing the totality of what's needed. And then the final area is how are we using technology to predict, anticipate, consult and bring forward advanced strategies to support our customers really in a prospective way, given the continued trends and dynamics within the pharmacy benefit landscape.
Speaker 1:So, yeah, this just sounds like a really interesting new frontier, you know, EHR prompts to kind of change provider prescribing and also just using AI to speed up some of these processes that can can feel a little slower. This sounds like a really interesting new frontier kinda using technology and AI to to kind of attack some of those pain points, like substituting generics or biosimilars for for the brand name and and also kind of speeding up some of these these processes. So interesting and definitely something to follow.
Speaker 2:Jessica, I'd like to add what really, and you kind of think about the next frontier, right? So we think about the foundational elements of what you historically think about in terms of what we've done and how we're helping our customers manage the cost of pharmacy benefits. But you also have to think about it in a way that the trusted relationship that we have with those members creates an opportunity for us to engage them and work with them in a different way to help support their care and support them on their journey. We recently launched Health one hundred, which is we believe a meaningfully differentiated consumer health engagement platform that will really create an open access environment for our customers and their members to have a single point because this is one of the things that is most challenging for our customers and their members is just how fragmented the healthcare system is. And so the core system is fragmented.
Speaker 2:And then if we think about how various point solutions that might be enabled to support a given therapy are enabled, It's very challenging for a given member to determine where to go for what, when and how do you best support in an environment where most people don't have a primary care physician. If they do, they're not consistently seeing the primary care physician and as time progresses, disease progresses and that becomes very, very problematic. And so what we've launched is really a first and meaningfully differentiated given the number of members we serve every day and the trust we have is Health one hundred. And think about that in a way that's really meant to be the one stop shop for not only CVS Caremark members, but broader members that we serve to access a trusted source that is deeply integrated into the broader healthcare system with other partners outside of the CVS Health family to help our members support and navigate care. Think in terms of providers participating, other health plans participating, our customers participating, it's really an exciting time and one that is very much relevant given the challenges that our customers are facing in particular their members.
Speaker 2:We'll also be deploying an AI coach and support the members that engage in the platform. So there's some really exciting times and things that are coming from CVS Health and CVS Caremark generally, as we think about controlling costs and thinking about costs, not only around pharmacy, but how do we think about the total healthcare costs of those we serve?
Speaker 1:That's really interesting. James, thanks again for joining us on this sponsored Health Affairs podcast episode. This episode has been brought to you, the listener by CVS Health. Thanks for listening and be sure to subscribe to all of Health Affairs Publishing podcasts, A Health Podyssey and Health Affairs This Week, wherever you listen to podcasts. Thanks.