Making Sense of the PBM World with Brian Shonat of Goodroot

This video provides an in-depth exploration of the complex Pharmacy Benefit Manager (PBM) landscape, focusing on strategies for self-funded employers to manage escalating pharmacy costs, particularly for high-cost specialty medications. The conversation features Brian Shonat of Goodroot, who details the firm’s two main solutions: AlignRx, the agnostic pharmacy consulting arm for deep, individualized expertise, and CoeoRx, a fluid coalition offering pre-negotiated PBM contracts to provide small and mid-market employers with choice, leverage, and savings. Shonat’s perspective is uniquely informed by his personal experience living with hemophilia, a condition requiring expensive specialty medication, which underscores the dichotomy between the human need for effective treatment and the financial pressures placed on health plans.

The discussion highlights the inherent confusion and lack of true transparency in the PBM world. Shonat argues that "transparency" is often an overused buzzword, as PBMs may only pass on 100% of agreed-upon rebates, while contract terms and conditions are far more critical than headline discounts (like AWP percentages or rebate guarantees). Key areas of hidden profit for PBMs include spread pricing, the exclusion of multi-source or single-source generic drugs from generic pools to maintain higher margins, and the imposition of penalties or reduced rebate guarantees when employers attempt to carve out specialty pharmacy services. The video stresses that pharmacy spend, once 5-10% of total plan costs, now often approaches 50%, making PBM contract optimization a necessity rather than an option.

Goodroot’s approach, facilitated by the AlignRx team, emphasizes agnostic consulting to navigate these complexities. They utilize a proprietary repricing tool called "Neuro" to take a client’s actual utilization data and reprice it across various PBM contracts, providing an accurate, apples-to-apples comparison of true financial impact. The CoeoRx coalition, which includes nine different PBM partners, is designed to offer a full spectrum of solutions, recognizing that a one-size-fits-all approach fails to address diverse population needs (e.g., a young population versus one requiring robust specialty care). The ultimate goal is to move beyond the status quo of accepting single-digit renewals and achieve substantial cost reductions, often in the range of 20% to 30% decreases, by identifying and mitigating hidden fees and optimizing contract language.

A significant portion of the conversation is dedicated to specialty medications, which are the primary driver of cost trend. Strategies discussed include optimizing the site of care for medical injectables (J-codes) by moving infusions from high-cost hospital settings to lower-cost clinics or home delivery. Furthermore, they emphasize leveraging Patient Assistance Programs (PAPs) or Manufacturer Assistance Programs (MAPs), which can cover 100% of the drug cost for qualifying members, potentially saving hundreds of thousands of dollars per patient annually. The conversation also touches on alternative sourcing (International Filling) and the emerging field of pharmacogenomics—genetic testing to predict a drug’s efficacy and a patient's reaction, allowing for more informed and personalized prescribing decisions, thereby reducing costly trial-and-error treatment paths.

Detailed Key Takeaways

• Pharmacy Spend is a Critical Focus Area: Pharmacy costs have dramatically increased, often accounting for nearly 50% of an employer's total health plan spend, making PBM contract evaluation a non-negotiable component of self-funded plan management.
• Contract Terms Outweigh Discount Percentages: Brokers and employers should prioritize detailed contract language over headline figures like AWP discounts or rebate guarantees. Key areas to scrutinize include termination clauses (e.g., 180-day notice requirements, evergreen clauses), definitions of rebatable drugs, and how multi-source and single-source generics are categorized.
• Beware of "Transparency" Buzzwords: True transparency requires understanding what the PBM is transparent about. Many PBMs claim to pass on 100% of rebates but may limit the definition of a rebatable drug or generate profit through undisclosed administrative fees and spread pricing.
• The Coalition Model Provides Leverage: Solutions like CoeoRx aggregate lives across multiple employers, granting small and mid-market groups access to PBM pricing and contract terms typically reserved for massive organizations. This is a highly efficient way to achieve scaled savings.
• Agnostic Consulting is Essential for Complex Cases: Consulting arms like AlignRx offer the ability to negotiate with any PBM, including those bundled with major carriers (Bucas). This allows groups to improve their existing PBM contract without incurring penalties for carving out or leaving the carrier's bundled solution.
• Data-Driven Repricing is the Gold Standard: Utilizing tools like Neuro to reprice a client’s actual historical utilization data against potential PBM contracts provides an accurate, apples-to-apples projection of future savings, moving beyond broad demographic assumptions.
• Specialty Drug Management Requires Multi-Pronged Strategy: High-cost specialty drugs must be managed through several tactics: optimizing the site of care (J-codes) to move infusions out of high-cost hospital settings, and rigorously pursuing Manufacturer Assistance Programs (MAPs) for eligible members.
• PBMs May Penalize Specialty Carve-Outs: Many PBMs discourage specialty carve-outs by imposing fees or drastically reducing specialty rebate guarantees (e.g., from 100% down to 60%), making it crucial to evaluate the net financial impact of carving out.
• Single-Source Generics are a Hidden Profit Center: PBMs often exclude single-source generics (the first generic alternative after a patent expires) from their standard generic pool because these drugs initially have significantly lower AWP discounts. This practice allows PBMs to maintain higher generic spread margins.
• Pharmacogenomics is the Future of Drug Efficacy: Genetic testing (pharmacogenomics) can predict how a patient’s biology will react to a specific drug, potentially eliminating costly trial-and-error prescribing and ensuring patients receive the most effective medication upfront.

Key Concepts

• Spread Pricing: The difference between what a PBM charges the health plan for a drug and what the PBM reimburses the pharmacy for that drug. This is a major source of hidden PBM profit in traditional contracts.
• J-Codes (Medical Injectables): Billing codes used for drugs administered by a medical professional (e.g., infusions). Optimizing the site of care for J-code drugs (moving from hospital to home or clinic) is a critical cost-containment strategy.
• Manufacturer Assistance Programs (MAPs) / Patient Assistance Programs (PAPs): Programs offered by drug manufacturers to provide high-cost specialty medications at little or no cost to qualifying patients, typically based on household income thresholds.
• Single-Source Generic: The first generic version of a drug to enter the market after the brand patent expires. PBMs often treat these differently than multi-source generics due to initial pricing structures.
• Pharmacogenomics: The study of how an individual's genetic makeup affects their response to drugs. This testing aims to personalize medicine by predicting drug efficacy and adverse reactions.

Tools/Resources Mentioned

• Neuro: A proprietary repricing tool developed by Goodroot/AlignRx used to analyze a client’s utilization data and compare the financial outcomes across various PBM contracts on an apples-to-apples basis.
• CoeoRx: Goodroot’s fluid coalition model that provides pre-negotiated PBM contracts to small and mid-market employers, offering choice, leverage, and savings.
• AlignRx: Goodroot’s agnostic consulting arm specializing in deep-dive PBM contract analysis, RFP management, and negotiation with bundled PBM solutions.