Dr. Leo Damasco and Phoebe Gutierrez dive into the latest federal push on pharmacy benefit manager (PBM) reforms and drug pricing, exploring how these changes could impact telemedicine. Learn how transparency measures and cost reductions might enhance patient access and affordability in virtual care.
Dr. Leo Damasco and Phoebe Gutierrez analyze the latest executive orders addressing pharmacy benefit managers (PBMs) and drug pricing reforms. They unpack the role of PBMs in controlling prescription drug costs, the hidden rebate system, and how these reforms aim to increase transparency and lower costs for patients. With a focus on telemedicine, they discuss how these changes could improve medication affordability, enhance prescribing flexibility, and impact the operations of telemedicine startups and providers. From ending rebate games to tying U.S. drug prices to international benchmarks, this episode offers critical insights for physicians navigating the evolving healthcare landscape.
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About the Show
Telemedicine Talks explores the dynamic world of digital health, offering physicians insights into regulatory changes, compliance, and opportunities in telemedicine to enhance their practice and career.
About the Hosts
Dr. Leo Damasco – Pediatrician and emergency medicine physician turned telemedicine advocate, guiding doctors through the transition to virtual care.
Phoebe Gutierrez – Former state regulator and telehealth executive, specializing in compliance and sustainable virtual care models.
Connect with Phoebe Gutierrez
LinkedIn: https://www.linkedin.com/in/pkgutierrez/
Email: phoebe@telemedicinetalks.com (mailto:phoebe@telemedicinetalks.com)
[00:00:00] Hey everybody. Welcome back to telemedicine talk. So this is part two of the Phoebe policy updates that everybody loves. We are gonna be talking a little bit about some of the federal government's, push on drug pricing and some PBM or pharmacy benefits managers. Reforms based on some recent executive orders.
No, this is good. This is good. 'cause this is a hot topic in today's news right now, right? Drug prices going down, care being more affordable and relating to telemedicine. Will this increase telemedicine use? And a lot of telemedicine relies on prescribing, quick turnaround, quick management, and.
I see, just on the platforms, a lot of the roadblocks is, Hey, can I afford this? If this actually goes through, are we gonna see more people using telemedicine platforms? Are we gonna see better costs in [00:01:00] telemedicine it's relatively cheap already, but now, is it gonna be more accessible to more people?
Super interesting. Yeah, Phoebe let's start at the beginning. What is PBM? What is that and what are the changes that's happening right now? I wanna start and just like preface this, that I am not a pharmacy expert . And again, this is also what just makes healthcare so fricking complicated is that you have folks that really understand like the policy as it relates to health. And then pharmacy is actually carved out and viewed completely separately and managed by separate entities. So ultimately, like a pharmacy benefits manager or PBM is a company that really just manages your prescription drug benefits on behalf of the health plan.
So they're not necessarily the company that like manufactures the drugs, like the pharmaceutical companies. And they're not actually the ones who give you the drugs, so they're not a [00:02:00] pharmacy. But they're in charge of making like really crucial decisions about like setting the formulary, what drugs are covered, how much the drug is gonna cost, and like actually who gets paid what for the drugs.
Then this is huge, right? Because I know prescribing a lot of patients are like, Hey, is it included in my formulary? Am I gonna get the better price for it? Because everybody knows you prescribe outside of your formulary, and it could be orders in cost increase. So yeah, this is, this basically sets your market for what drugs are prescribed, right?
am I understanding that correctly? No. Exactly. So they're almost like a broker. They're a broker between health plans and pharmacies and drug companies and you, and they really get to set the stage on what drugs you can get and what drugs you can't. And then of course, like how much it's gonna cost you out of pocket
if you have to pay. okay.
. So to dive into a little bit about what PBMs actually do, they [00:03:00] are going to actually pick the drugs that are covered. So if a drug's not on their list, most likely your insurance isn't gonna cover it because. Drug companies often have to pay PBMs to get on the formulary list.
That's interesting. It's very, that's not biased at all. No. It doesn't have, kickback written all over it. The next thing is they negotiate discounts, and I'm sure so many people have heard it's a pharmacy rebate, right? Yeah. Yeah. So they negotiate these discounts or rebates from drug companies.
So in exchange for being on that list, drug companies will, give the rebate or like I said, like the discount. The problem though is PBMs don't always pass that discount that they negotiated onto the patients. So the drug could, in theory be $150, they could get a rebate for $50 and the PBM could actually go, we're still gonna charge you $150 'cause that's our fee.
PBMs also get to tell [00:04:00] pharmacies how much they're going to pay for a drug, and it's often less than what the pharmacy pays to stock it. So that's why so many small and independent pharmacies go out of business 'cause they can't really compete by continuously losing money.
Another key thing is they can also change fees after the fact. So PBMs can go back to the pharmacy months later and actually take money back from them. They're called DIR fees, and these fees are really hard to predict and really make it difficult for a pharmacy to stay open. And then the last thing that is again, problematic with PBMs is, many PBMs now are owned by insurance companies.
So this means that they steer patients towards their own mail order pharmacies or retail pharmacies, even if it's not the best option, because ultimately it's [00:05:00] advantageous to them and it's going to benefit them.
So when you think about a PBM two, like I always like to say what markets are these in? 'cause I always primarily talk about, medicaid and Medicare, but PBMs actually affect everybody who gets prescriptions from Medicare to Medicaid to commercial insurance and employer sponsored, coverage.
Tricare, the va, Leo, you and then, ultimately even cash pay. So even cash pay patients are feeling the impacts of PBM negotiated prices. You think about like good RX and some of those like larger pharmacy changes as well. Yeah. Yeah. And so it sounds like these entities are super powerful, right?
Basically they get to make their market. Create their own market, set the prices of their market, and oh, by the way, if they don't like it in the backend, take some money back. It's like me gonna the grocery store [00:06:00] and paying for my groceries and be like, oh, I don't like this price. I'm gonna, take back another 50 bucks from what I spent.
That's just wild, just to think about the thought process behind that. There's legislature targeting the PBMs, and why is that? Why are they doing that now? I think the short answer is that. One is we all know that the cost of health and the cost of prescription drugs, it just continuously gets higher and higher.
And from somebody who is why does insulin cost this much in the United States but is so much cheaper in Canada or Mexico? I think it's those questions that people are just getting a little fed up with this like arbitrary of who the hell set these prices and what makes it like gold?
And the short answer is that because PBMs are making money on the backend the savings aren't really ever passed down to the patients. Yeah. And now that, again, it's to, not [00:07:00] to politicize things, but that's a big thing where it's as we're talking about people needing to save money in healthcare, people needing to be, healthier.
The Trump administration and Congress are really just focused on changing how PBMs make their money and really trying to focus on forcing them to be more transparent so that we can, at least as consumers understand what is actually driving these costs. Yeah, no I think that's super, super useful, right?
I think transparency is key, right? A lot of the consumers, a lot of the patients don't know, right? They don't know who to blame, who to go after and really just assign the high cost of care to maybe not the correct source, right? And we're not gonna be able to fix high cost of of healthcare without knowing exactly what to fix.
But it's this car game, right?you can't really pinpoint what it is. And I think this is clarifying that a bit. Sounds like No, absolutely. So [00:08:00] there's three major reforms that are, like being pushed through the executive order.
And so one is to like end this whole like, hidden rebate game. So like right now, again, PBMs get to negotiate these big discounts from, the drug companies in exchange for getting added to these formulary lists. And instead of lowering the cost at the pharmacies, PBMs keep part of that rebate and you pay full price.
And they make money on the backend. So the proposal is saying you can't keep those rebates. You actually have to give them to the patient at the pharmacy counter, which means an immediate discount. If you have negotiated the price at, again, I'll use my $150 example, if you've negotiated that drug is supposed to be a hundred dollars on your formulary, then at the counter, that person is paying a hundred dollars, you're not gonna, there is no rebate.
You've negotiated the discount. This is the discount. This is what the person [00:09:00] pays. So Why would they negotiate a discount anyways then? That's the whole purpose of these PBMs, right? Yeah. The whole purpose is look we're doing the thing for consumers.
We're here to, really help the consumers, get you some cost savings. And I think it's very apparent that it's turned into this almost like self-serving. Yeah. Nature. And so that's one of the things that they're really trying to put a kibosh to. So whatever they wanna say the discount is really has to be, passed down to the patient.
The second piece is they are really forcing PBMs to show their math. So right now, there's truly no requirement for a PBM to tell you how much they got from a drug company, how much they passed onto a health plan or a patient. Then how much they paid your local pharmacy. So the proposed rule would just require PBMs to disclose every dollar they make and how they make it so that again, employers and insurers and [00:10:00] government programs can actually see if and when they're being ripped off by these PBMs.
To be fully honest, most employer sponsored insurance plans have zero idea if the PBM is a benefit or a detriment to their people. But because it's so instilled in this culture that you have, again, like you, you just have to go through a PBM to do this. It again, it just, it just creates this like spiral where you just have PBMs that are just.
Almost untouchable. Yeah. It's so funny, interesting how this synergy created it, right? And it's now just accepted. And it's interesting that it was created as a way to protect the consumer, butNow we just don't know. yeah. So the last kind of like key piece is that.
It's proposing to tie us drug prices to what other countries pay. And again, this one is very [00:11:00] specific to just Medicare, only for right now. But for, drugs given in clinics or hospitals like, chemotherapy, for example, Medicare often pays way more than other countries, sometimes two times, three times, four times more.
we need to stop that. And again, like I'm all for that because again, one of the reasons why, like what drives the cost of healthcare in the United States is these kind of like arbitrary, they know that they could bill Medicare, they know they're gonna get reimbursed.
So like why not get reimbursed for the most amount of money possible? And so in the proposals, like Medicare should actually be paying like the cheapest. So this, again, would drastically lower costs on some of the most expensive treatments in the country and cut out PBMs who profit from brokering those really high prices.
So the next kind of big thing is just really what this means for people in real life. And so for patients, it ultimately just means you're gonna pay [00:12:00] less at the pharmacy. So you won't be stuck. Now again, the question here is is this actually gonna lower pricing? Is this actually gonna do anything?
If in a perfect world it would. Where it's at today, again, PBMs are huge. So you're gonna see some like really upset organizations come out and like really be opposed to some of these changes. For independent pharmacies. I think independent pharmacies are really, hoping to take a little bit more control and remove some of the additional, like layers that the PBMs are, adding to their, business basically. And for, some employers and health plans, I think it's gonna be able to get them to go back to the table with some of these PBMs and really start to negotiate some better contracts.
Really, again, if they're promising savings, but they're not actually showing, there could be a push to be a little bit more transparent, add in some additional reporting. But really again, just trying to emphasize some [00:13:00] of that. Really to close this out, these reforms do directly threaten PBMs.
And their profit models. Especially like the rebate, arbitrage, playbook that's been used for the last 15 years. So I'm expecting, of course, like PBMs are gonna be pushing back really hard either through litigation or most likely just delaying implementation or trying to just go around it and coming up with some additional fee structures.
And then I think ultimately like insurers are gonna be really conflicted. You have operated in this space for many years. You don't know a different way. And so it's really going to turn into, sometimes like how the health insurance plan needs to just make some key decisions internally for their patients and their members going forward.
And you mentioned too, the insurance companies own some of these PBMs, right? So it's [00:14:00] self-serving, right? Like they basically pay themselves, right? Yeah. They get their own rebates. So I could see the insurance companies as well pushing back 'cause just ruining this racket. Yeah, I think a really perfect example is so like United, United owns OptumRx.
OptumRx is. Huge. Like in California, there's a very specific formulary that people on Medicare and Medicaid have to use and they have to go to a preferred pharmacy and they have to use again. And I think it, it all ties back to these like very specific PBMs that control almost wholeheartedly the full market share.
Again you're cutting out other people and other pharmacies mainly, to funnel people into that process. Now, again, from an insurer standpoint, it does, it makes it easy because they do manage it, right? They're managing that benefit. They're managing, they're making sure everything is running smoothly and so on and so [00:15:00] forth.
But at the end of the day, like it might not be what's best for patients. Sometimes it isn't. I could tell you firsthand that, I've definitely made kind of prescription choices based on what's available and it may not be the best prescription. A good example was recent changes in the asthma protocols.
The new asthma guidelines call for a specific kind of combined inhaler. And some of these insurance companies Don't carry that in their formulary. implementation of the new guidelines was challenging that way. Yeah we see these real life examples often and it's gonna be interesting to see, how that changes and on the doctor's end, is that gonna help us, free up our care, get better choices and actually deliver the medications that's needed to the patients versus making kind of concessions.
We'll see. One can hope, right? One can hope. The idea behind it is, yeah, giving, giving clinicians, physicians [00:16:00] a little bit more autonomy to prescribe what you feel is the right thing to be prescribed, but also ensuring that those things are gonna be covered and that they are affordable.
And I think, again, as somebody who's a consumer in this space, It is interesting, right? I have health insurance. If I wanna get anything on the formulary, it's five bucks. If I wanna get anything off the formulary, it's like 400. So to me it's that whole, oh, it's not subtle.
It's orders and sometimes the medication's the same, yeah. I'll give a really good example I got on a new birth control mainly for hormonal reasons. And the one that I wanted to go on was not covered by my insurance. It's not on the formulary list.
It's also like the least amount of birth control possible. YeahI'm gonna have to sell, probably one of my kidneys to continue staying on it. Like it's not, so if you're selling an ovary, then you need half the medication. So done two problems, one solution game over.
But no, but, you get what I'm saying. It takes away the personal autonomy. It also takes away [00:17:00] even the physician who prescribed to me, she was like, your insurance isn't gonna cover it and I'm so sorry, but this is really what you need.
Actually, that same example too, I know somebody close to me that, has anemia and was placed on birth control to control that. And she had to stop her birth control. 'cause the one that she was on that, the one that really, she liked when she switched insurances, went from 20 bucks to 200 bucks and she's no thank you.
It's just not gonna happen. The alternatives just, weren't appeasing to her and it was just like done. So definitely affecting care and affecting patient outcomes. Yeah. Absolutely. Absolutely. Yeah. Finger, hopefully some of the policy, changes really do, be able to drive some of those better negotiations.
I think we all want a little bit more transparency in our healthcare especially cost of care. And, ultimately yeah, these are some of the policy decisions that I do agree with and that I do think would be like really beneficial to patients, [00:18:00] physicians and really like anybody working in the healthcare industry.
Yeah. it's super useful. Keeping an eye on this, right? And a lot of us docs, we practice and we just go along and, a lot of times, for the most part, this doesn't affect us, right?we just do what we do and we do what we know we are doing.
But there's a lot of these things going on in the background. Not just telemedicine, but brick and mortar as well, but I think in telemedicine, keeping a closer eye on this, because, you're working for startups, you're working for smaller companies. How is this gonna affect their bottom line?
How is this gonna affect your workflow if you're starting a telemedicine company? How is this gonna change how you approach medications? So definitely something to look out for. So cool. No, this is awesome. I love this update and looking forward to more as they come along.
Thank you, Phoebe. Yeah, thanks everyone for letting me bore you with all my policy and regulation and fun government talk. Now I can get back and try really understand what we're talking about now. [00:19:00] Lot of big words. But hey, if you guys have questions, definitely contact Phoebe, phoebe@telemedicinetalks.com.
You get to contact me@leotelemedicine.com. I don't talk policy, but if you just wanna just say what's up also yeah, please suggest any topics you want to hear. If you want to get on the show just to talk telemedicine, please drop us a line info@telemedicinetalks.com and we'd love to hear from you and see you soon.