Speaker 1: 0:00

Most everyone agrees that the traditional PBM arrangements are bloated, unsustainable and, frankly, don't always work in the best interest of plans and their members. But one PBM is trying to fix that. What are they doing? We'll find out on this episode of Shift Shapers.

Speaker 2: 0:18

Change either energizes or paralyzes. The choice is yours. This is the Shift Shapers podcast, bringing the employee benefits industry interviews with individuals and companies who are shaping the industry shifts. And now here's your host, david Saltzman.

Speaker 1: 0:39

And to help us answer that question, we have invited Susan Thomas, Chief Commercial Officer at LucyRx. Welcome, Susan.

Speaker 3: 0:47

Well, thank you. Thank you for having me. It's our pleasure.

Speaker 1: 0:50

So we always like to ask people how you got to be doing what you're doing, because there aren't a lot of straight lines in our industry. How did you end up doing what you're doing?

Speaker 3: 0:59

Well, not through a straight line, that's for sure. I'm actually a registered nurse by background and got into health care really because I wanted to help people get better. Early in my career I worked in oncology and specialty pharmacy and then just kind of gradually morphed into the PBM industry about two decades ago. I realized health care is more than just the care of people. It's a business, and so I really wanted to understand how the business works, and I've spent my last two decades trying to understand that and make it better.

Speaker 1: 1:33

I have a bunch of nurses in the family. How did your nursing experience inform what you do today, or did it?

Speaker 3: 1:39

It did and it still does. You know, I consider myself a clinician. I'm still a licensed registered nurse. It certainly helps me from the perspective of who we're caring for, and that's the patients that need prescriptions at the end of the day. Certainly, we serve payers as well, but my knowledge of disease states and conditions and medications certainly serves me well in PBM space.

Speaker 1: 2:07

Well, you know, unfortunately, once again the PBMs. Like every time we talk to somebody from PBM, there seems there's something in the news. This week it was congressional hearings. The FTC found that back on January 14th that PBMs had collected five almost $6 billion in specialty drug markups. What's that all about?

Speaker 3: 2:30

You know, it's really why Lucy was formed is that misaligned incentives In the traditional PBM space we've seen over the last several decades this vertical integration where PBMs have aligned themselves with large insurance companies. They own their own mail and specialty, they manage and control the formularies, they have rebate GPOs that are largely offshore, making it difficult for plan sponsors to understand kind of what's going on under the hood. And when PBMs revenues come from those owned assets, the incentives are going to be to drive up volume, drive up cost to plan sponsors. That's how they make their money.

Speaker 1: 3:14

But it's interesting that there's so much money floating around in this industry. I mean, the FTC hearings talked a little bit about this $5.9 billion, but they were almost talking about it like it was a day-to-day expense. I mean, I don't know, for you or for me, I guess $5.9 billion is serious money, but are the problems in the industry a function of how much money there is floating around, or is that vice versa?

Speaker 3: 3:42

I think it is a measure of how much money is in the space. I mean, we're expected to spend $500 billion in pharmacy this year. It'll be a trillion dollars by 2030.

Speaker 1: 3:55

So there is a significant amount of money in the pharmacy benefit space For sure Loaded question, but and we probably talked about this for an hour how the hell did we get here?

Speaker 3: 4:08

We probably could talk about it for an hour or a day. You know, I I wonder about that myself because back in the 90s the government created laws that prevented physicians from self-dealing, from referring clients or patients to owned entities physical therapy entities that physicians owned, or pharmacies, et cetera. So there's a law preventing that self-dealing. How did we not create similar laws for insurance companies or PBMs that now sell drugs to members, not just manage benefits? I think that's part of it. The lack of regulation in the industry has allowed the traditional PBMs to just control the whole ecosystem.

Speaker 1: 4:57

Well, I mean, but I think you're right. I've been at this since 81, back when dinosaurs roamed the earth and pharmacy was a problem back then. So we all kind of know some of the problems and we know that the money is driving some of the problems To your point. There haven't been a lot of regulations. Do you attribute that just to big pharma having a big checkbook? Because I think in other industries there would have been a human cry already and something would have been done.

Speaker 3: 5:25

Yeah, I think it's big pharma. I think in other industries there would have been a hue and cry already and something would have been done. Yeah, I think it's big pharma. I think it's lobbyists for the PBM industry, retail drugstores.

Speaker 1: 5:37

I think there's a lot of muscle in this industry that has prevented change. Frankly, if you had to put your finger on one or two huge problems that you're working on at LucyRx, that you folks are working on solving, what would they be?

Speaker 3: 5:49

Really it's conflict of interest. So when we formed Lucy we asked ourselves what if there were no conflicts, what if our incentives were aligned around the plan sponsors and the patients and members that they serve? And if we eliminated conflicts, where would those be? Where are the most prevalent conflicts that exist in the space today that are causing rising drug costs, preventing plan sponsors from really managing their own benefits? So it's really eliminating conflicts and we've selected two key areas where we believe the conflicts are so rampant, and that's formulary management, and then retail or sorry, mail and specialty ownership, really the network formulary management.

Speaker 3: 6:41

We believe that because the traditional PBMs have their own GPOs, group purchasing organizations that are offshore, hard to audit, hard to get access to. We think that the way they create their formularies incentivizes higher cost brand drugs so that they can retain a piece of the rebate. We've eliminated an exclusive arrangement with any one GPO and when you think about this industry you either are the big three or you use the big three for their scale and their supply chain economics. We've decided we're not going to have an exclusive arrangement with a GPO. We've created a marketplace, a formulary marketplace, that gives us much broader access to what's going on in the whole ecosystem and now we're not handcuffed to one GPO's decision-making around formulary drugs and preferred brand drugs.

Speaker 3: 7:44

It also gives us flexibility to create utilization management criteria. That really makes more sense for plan sponsors and their members. I've heard so many times in the last 12 months you can't put that in place for GLP-1s, you'll lose all the rebates. But we know that's a category that requires really close monitoring and intense utilization management criteria. And if a PBM is going to handcuff or tie a plan sponsor who's paying for these drugs to, you know, basically open up the floodgates to paying for drugs. It just doesn't make any sense. So our formulary marketplace gives us much broader decision making and eliminates the conflict that exists.

Speaker 1: 8:29

Before we get on to network, a little bit about on a practical sense. If I'm an advisor and I'm building a plan for employer, how does being able to play around with the formulary help both the employer and deliver better outcomes for the members?

Speaker 3: 8:43

We've obviously connected the dots there. What it allows us to do is align the specific plan sponsor's utilization to the right value stream, so where they can achieve the greatest rebate value across the ecosystem. In other words, they're not locked into one GPO for their rebates and one set of decisions. So if a plan sponsor says you know, we really think that Humira is costing our plan millions of dollars and would like to consider a biosimilar approach where it's a less expensive net cost to our members and to our plan, one PBM GPO might say you can't do that. Or well, here's your option and it's only, there's only one. With our marketplace approach we have multiple options and we can shot those across the different GPOs to give plans more options. And then we also can provide them with drug level rebate value so they can make really real time decisions on. Is that a better net cost position for me as a plan sponsor?

Speaker 1: 9:55

There's a lot of talk, especially since the J&J lawsuit last year, about fiduciary responsibility and especially around pharma, because that kind of an approach, the approach that you're taking, help advisors and plans meet those requirements of saying, look, we did our due diligence, we really looked through a bunch of different options instead of just saying we swallowed whatever we were taken and we moved on.

Speaker 3: 10:22

Yeah, I think that's really why we're seeing those lawsuits. I think many employers have just resigned to the fact that they're stuck and they don't have control, and that's unfortunate. But the large PBMs have taken that control away in many cases and not allowed. When a PBM says you can't do that, but you're the payer, it really does tie their hands right. So I think that's part of the challenge. Our approach is to enable better decision-making and actually provide net cost information. Traditional PBMs are inclined to say that data is proprietary or we can't share that value, or they give averages, and that doesn't really allow plans to make decisions in their best interest.

Speaker 1: 11:18

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Speaker 3: 12:20

You should ask for clarity around the true net cost. The true net cost. So the way pricing is structured in this industry today is we guarantee minimums, we guarantee minimum rebates by channel and we guarantee network discounts. If a PBM uses that guarantee as a measure of a net cost equation, that doesn't work because all drugs have different rebate values. So if you're looking at a class of drugs and it's off the charts on your budget, your PBM should be able to provide you true rebate value. No-transcript no-transcript.

Speaker 1: 13:48

Will you talk a little bit about network and why that's important and what to look for there?

Speaker 3: 13:52

Absolutely. I mentioned at the beginning the traditional PBMs have entered into or acquired their own mail and specialty pharmacies and those are revenue streams for the entities specialty pharmacies and those are revenue streams for the entities. You can see that in many of the earnings calls for the largest PBMs. Well, I mean, imagine you're a cancer patient and you leave your oncologist and he says you know you need to start taking this oral chemo agent, but my PBM is forcing me to use their owned specialty pharmacy. Now I have to wait five days to get the medication. I'm a little bit anxious if that's the scenario.

Speaker 3: 14:35

In our model we have eliminated the ownership of specialty in that case and we have contracted with large national integrated health systems. So our model is allow the member to pick up their oral chemo agent at the pharmacy in their cancer center. It's so much more effective. The speed that therapy is same day. It also eliminates the waste, because in a traditional specialty pharmacy they're shipping a 30-day supply whether your dose was changed or not, and there's $5,000 to $7,000 of waste for an average cancer patient in the pharmacy space. So just changing that model gives members a better experience, eliminates waste for plan sponsors and isn't a hidden fee that plans don't understand.

Speaker 3: 15:30

And on the mail side. So we've seen the big three push, push, push prescriptions to either their mail facility or the retail chain that they own. Again, why should we lock a member into a channel that they're not customizable with? We are contracting with best-in-class mail facilities like Amazon. Who doesn't have Amazon on their phone as an app? Amazon offers a modern, truly efficient member experience at a lower cost. Imagine MedShip next day delivery at no additional cost. That doesn't happen in a traditional PBM space.

Speaker 1: 16:12

Other than being kind enough to do interviews like this, what's LucyArts doing to help educated advisors and the plans they serve?

Speaker 3: 16:21

Well, our roadshow has been pretty intense this year. We imagined this new way of doing pharmacy care about three years ago and have made the investments in a couple of PBMs that give us the platform to run a new business. That was in 2024. New business that was in 2024. Since then, we have been really spreading this message and sharing with consultants and brokers how formulary autonomy, or a marketplace of formulary that requires the GPOs to compete against one another, and an independent pharmacy network change the game, and we've been putting together our case studies to share examples of how that works. So we've been out in front of all the large national practices, as well as local health and benefits brokers, to help them understand that things really can be different and just you know, let us share how that could work.

Speaker 1: 17:23

Well and for their own protection, as we discussed, and for the betterment of their members. Things have to change, it's? I guess it's going to be a bottom up, grassroots approach, which is what we're seeing. I still don't see anything for all of the, as we started the conversation today, wailing and moaning and gnashing of teeth in Washington, not seeing anything happen up there. It's a whole bunch of conversation. Teeth in Washington not seen anything happen up there, except a whole bunch of conversation. Are you aware of anything that stands a snowball's chance in hell of passing that's floating around Congress right now?

Speaker 3: 17:52

There's certainly conversations going on. You know we saw some introductory bipartisan bill before the inauguration and that all the pharmacy components largely were removed from that. We think that something will pass this year, probably not all components that were in that bipartisan bill, but it's too soon probably to know how Congress is going to look at what's been submitted. We're just what we know at Lucy is. We're already aligned to that, to the vision of eliminating conflicts. We don't own mail or specialty. We're not affiliated with a giant insurance company. We don't own our own retail pharmacy and sell drugs to members.

Speaker 3: 18:40

So whatever comes to light, we're already aligned and won't have to pivot or, you know, divest of assets like we think will happen in this space, and you know you already see companies like CVS starting to consider losing or divesting some of the assets in their organization. Don't know if it's related to some of the scrutiny in the space. Don't know if it's related to some of the scrutiny in the space. You've seen in a recent earnings call the CEO of UnitedHealthcare state that they already passed 98 percent of rebates to to their plan sponsors and expect to pass the other two percent within the next three years. Now, is that because of the scrutiny from Washington. Maybe my question there that 2% must be a pretty big number to take three more years to get it into the right hands.

Speaker 1: 19:35

Well, somebody once told me that human beings never act with the light. They act with the heat that comes from it. So maybe there are some changes, you know, finally coming. But I think he said it best. The entire health insurance industry writ large has been the poster child for misaligned incentives, and for a long time it's been the entirety of the industry there. I don't think there was one component that I could point to with all my years of practicing that was exempt from that. So it's nice to see them. And if the pharmacy piece is going to be the piece that pulls away, it's certainly a big percentage of spend, so it's nice to see that there are some changes happening there. What do you see in the next couple of years? We heard a press conference from I guess it was from the White House day one where folks are talking about AI and the impact that AI may have on designing genetically perfect drugs for individuals. We've had conversations on this podcast before about pharmacogenetic testing and what that might bring. What do you folks see coming?

Speaker 3: 20:36

Certainly that kind of technology advancement for sure, you know GLP-1s is a really good example of a lot of people have conditions that are indicated for GLP-1s Now plan sponsors largely can't afford them. But with precision and AI and machine learning and genomic advances we'll know exactly who's going to benefit from those types of drugs. And I think that'll make a huge difference if those kinds of things actually advance. Because you know, as the skeptic in me says, if those things advance then you have a smaller target for a population of drugs. And does pharma really want that? Do the large pdms and pay or payers really want a smaller population? Um, when you can fine-tune who's going to respond and who's not going to respond. So I'm a little skeptic, but I think technology is definitely going to play a role. I mean, we use ai in our reporting and specialty navigator tool today to determine what the best solution for a given patient is in their journey for specialty drugs, for example.

Speaker 1: 21:54

I think there's a lot of really interesting stuff coming down the pike, but we saved the most interesting question for last Lucy Rx. Where did Lucy come from, or is there a Lucy? Lucy Rx.

Speaker 3: 22:06

Where did Lucy come from? Or is there a Lucy? I like how you phrased the question, because we've thought a lot about the name. It actually derives from the Latin word for light and our vision is Lucy Rx will shed a light on the opaque practices in this space and be much more transparent and provide clarity around options. See, transparency in this space has become kind of an everyday word and basically meaningless. If you're passing through the value of drugs or rebates, okay, but are you making decisions in my best interest? That's true transparency, and that's our. Our purpose really is to shed a light on how decisions are made in the space and how to make make them more beneficial for employers and brokers to understand and for members to actually access medications. It's a woman's name, it's a name and we think that brings the humanity back into this space, so it definitely a, you know, a very um, intentional choice of our brand, uh, and, and we like it awesome and that's a great place to end our conversation.

Speaker 1: 23:21

Susan Thomas, chief commercial officer at LucyRx. Susan Susan, thanks so much for sharing your expertise with the audience. We hope you'll come back.

Speaker 3: 23:28

Thank you so much, david, it was great.

Speaker 1: 23:36

I want to give a quick shout out to our sponsor and our producer, hatcher Media. Hey, if you need podcast production or professional graphic design, josh Hatcher is the expert to contact For more information. Visit him at HatcherMedianet. That's H-A-T-C-H-E-R Media dot net.

Speaker 2: 23:54

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