PBM Consulting - Bringing Transparency to Pharmacy with Trevor Daer of Granite Peak Analytics

This video provides an in-depth exploration of the Pharmacy Benefit Manager (PBM) consulting space, focusing on the critical need for data transparency and objective analysis to combat prescription overspend. Trevor Daer, founder of Granite Peak Analytics, discusses his journey from working within a Third Party Administrator (TPA) to establishing a firm dedicated solely to optimizing pharmacy benefits for self-funded employers and their consulting partners. The central theme revolves around shifting the focus from "savings" (often based on inflated metrics like Average Wholesale Price, or AWP) to actual "spend," thereby eliminating hidden costs and misaligned incentives inherent in traditional PBM models.

Daer recounts a pivotal moment early in his career where he discovered a PBM preferring a more expensive inhaler for the client's formulary, not due to clinical superiority or lower net cost, but because the PBM received a higher rebate—a rebate that did not fully flow back to the client. This revelation highlighted the systemic issue of PBMs prioritizing their own profitability over the financial well-being of the plan and its members, motivating Daer to seek out transparent, pass-through PBM solutions. Granite Peak Analytics was founded to address this gap, providing objective, data-driven consulting to large payers and their advisors. The firm acts as a specialized pharmacy partner, offering expertise that general benefits consultants often lack due to the rapid complexity and deliberate obfuscation within the PBM sector.

The core service offered by Granite Peak is the negotiation and management of unified PBM contracts for an advisor's entire book of business, leveraging collective size to secure Best-in-Class terms and simplify the transition process for employers moving to self-funding. This approach ensures better contract terms and eliminates the need for consultants to vet dozens of new, often confusing, PBM solutions. Looking forward, Daer identifies Specialty Pharmacy as the single greatest risk to the self-funded industry, noting that specialty spend now accounts for 50% to 60% of total pharmacy costs, threatening plan solvency and stop-loss renewal rates. The future focus of Granite Peak is streamlining the operational complexities of specialty drug management, including integrating solutions like importation and carve-outs, and ensuring clear accountability among the various vendors in the ecosystem.

Key Takeaways: • Focus on Spend, Not Savings: Consultants and employers must shift their analysis from focusing on "savings" (e.g., discounts off AWP) to analyzing actual prescription drug "overspend." The true measure of success is the total cost paid, not the percentage discounted from a manipulated benchmark. • Rebate-Driven Formularies Create Conflict: PBM formulary decisions are often driven by maximizing the PBM's rebate capture, even if it results in higher net costs for the patient and the plan. Clients must scrutinize formulary changes to ensure they are based on clinical appropriateness and cost-effectiveness for the payer, not just PBM profit. • Specialty Pharmacy is the Primary Financial Risk: Specialty drug costs are the most significant threat to the self-funded market, now consuming 50-60% of total pharmacy spend. Failure to proactively manage specialty risk guarantees higher stop-loss premiums and potential plan volatility. • PBM Consulting Requires Objective Data: Effective PBM consulting requires a dedicated data platform capable of consuming large datasets and translating them into meaningful, actionable insights, a capability that standard spreadsheets or general analytics platforms often lack. • Consultants Need Specialized Pharmacy Partners: Given the rapid changes and complexity of the PBM landscape, general benefits advisors cannot be experts in everything. Partnering with objective, niche pharmacy consultants allows advisors to deliver specialized value and win/retain business without the burden of constant vendor vetting. • Leverage Collective Buying Power: Brokers should group their entire book of business under a single, negotiated PBM contract. This leverages the collective size of the book to secure superior contract terms and simplifies the implementation process for new self-funded clients. • Accountability and Aligned Incentives are Key: The broader healthcare system, including the PBM space, suffers from misaligned incentives. Progress requires every component of the system to hone in on its area, increase accountability, and align financial incentives to prioritize patient and payer outcomes over individual entity profit maximization. • Operational Streamlining for Specialty Solutions: The increasing use of specialty pharmacy overlays, importation programs, and carve-outs creates communication and integration challenges. Future solutions must focus on streamlining the operational execution of these complex vendor ecosystems to ensure seamless service and maximum cost reduction.

Key Concepts:

• PBM Consulting: Providing objective analysis and guidance to large payers (employers, TPAs, brokers) to help them optimize their Pharmacy Benefit Manager contracts, reduce prescription overspend, and manage specialty drug risk.
• Pass-Through/Transparent PBM: A model where the PBM passes the actual cost of the drug and all rebates directly to the client, charging a flat administrative fee, thereby aligning incentives.
• Specialty Pharmacy Risk: The financial exposure associated with high-cost, often injectable or complex, specialty medications, which can quickly exhaust specific and aggregate stop-loss limits.
• Formulary Management: The process by which a PBM determines which drugs are covered. In traditional models, this is often influenced by manufacturer rebates rather than clinical or net cost benefit to the plan.

Examples/Case Studies:

• The Inhaler Example: A PBM preferred a new inhaler that was both more expensive for the patient and the plan because the PBM received a higher rebate on that drug. The client's flat rebate amount did not offset the increased cost, proving that the formulary decision was purely profit-driven for the PBM, despite claims of clinical and cost-effectiveness.
• Cost Plus Pharmacy: The speaker's former TPA had created a Cost Plus Pharmacy 15 years ago, predating modern initiatives like Mark Cuban’s Cost Plus Drugs, highlighting that innovative, transparent models have existed but were often suppressed or misunderstood within the industry.