Part 2: Cheryl Larson on What Employers Can Do to Influence Health Plan Decisions

August 27, 2020

Cheryl Larson, president and CEO of the Midwest Business Group on Health, based in Chicago, Illinois, discussed what employers can do to get biosimilars added to their formulary lists and ensure their pharmacy benefit managers (PBMs) aren’t taking advantage of them.

To watch part 1 of this interview, click here.

The Center for Biosimilars® (CfB): Hello, I'm Matthew Gavidia. Today, on the MJH Life Sciences Medical World News, The Center for Biosimilars® is pleased to welcome Cheryl Larson, president and CEO of Midwest Business Group on Health (MBGH). What negotiating power do employers have that enables them to wrest some of the power away from payers and middlemen?

Larson: So, we developed, several years ago, a different way of looking at how to manage drugs by taking some of the power and responsibility away from PBMs [pharmacy benefit managers], the things that they shouldn't have been doing in the first place. We have replicated a model that our employer member Caterpillar has been doing for 15 years. They're saving millions of dollars annually. They're decreasing patient out-of-pocket costs and prescription costs, and they're doing that first and foremost through contract optimization.

I'll often say if your PBM won't optimize the contracts so that you benefit more than they do, maybe that's not the right PBM. But these contract optimization strategies define all contract terms and pricing so that all PBM revenue is transparent and retained by the employer, all relationships are free of conflicts, and you can use any PBM you want. If your PBM says no or they're not willing to do some of these things, find another PBM that will. You must have regular audits integrated into the contract so that conditions in terms are met. This model supports fiduciary obligation to act in the best interests of beneficiaries and the employer as the plan sponsor. And then there's formulary customization so [PBMs are] not deciding what is on the formulary. We're working with a team of physicians and pharmacists, like Caterpillar does, to make coverage decisions based on clinical efficacy evidence, lowest net cost, and the clinical value.

And then, these employers are doing direct contracting with retail pharmacies. This is unique. You don't need 10,000 to 15,000 pharmacies across the country. There's a pharmacy within 5 minutes of most people and if there's not, you add independent pharmacies to that model. And the network is designed to meet the plan sponsors' needs, not the intermediaries’ needs. Again, we're looking at “cost plus” equals “ingredient cost plus the margin,” because they need to make a little bit of money, right? It's really important in your contract that you have carve-out rights for specialty and mail order, because a lot of money is made through that.

And finally, because you've got this independent P&T [pharmacy and therapeutics] committee who is not making decisions based on rebates but on clinical efficacy, you're saving money there and they're helping to manage the PA [prior authorization] process, which is really important. So, I always tell people the 5 things: Ensure your PBM contract has clear objectives and definitions. Collect the money that you're owed. We don't love rebates, but if rebates are on the table, get those rebates, but don't let them drive formulary decisions. Make sure that your contract stays competitive [by] using annual market checks. You have to have those rights in your contract. Also, you have to have the right to terminate your contract early if you want. Long gone are the days where you had a 3-year contract, which is all many PBMs and other players were allowing back then. You need to get a 90-day out clause, or even less than that if they're not meeting your needs. You need to make sure your contract includes carve outs, and honestly, we think eventually there might be employers that are contracting directly with pharmaceutical manufacturers. So, you might want to have that in there. And then, of course, negotiate directly with retail providers.

CfB: Just to build off that, is there much that small to midsize employers can do?

Larson: In terms of the traditional PBM model, there is not until the big PBMs create product offerings on the biosimilar side, or figure out a way to make money on it, or figure out a way to increase money in other areas…. A lot of PBMs tell us all the time that they just do what their customers tell them to do, but we know that there's a lot of things that they don't do, and I can't imagine their customers are saying don't include biosimilars. They need to be educated, and we do that through helping them understand what other large employers are doing.

We become their voice for change. Our model is an example of a model that doesn't have intermediary influence. It's removing a number of things. We're not saying PBMs still can't do data reports or negotiate rebates or do the claims administration. Those things are still important, but there are things that they shouldn't be doing. There are, again, misaligned incentives. So, this model that we created works for smaller, mostly midsize employers. It's hard. If you're fully insured as a smaller employer, you're at the mercy of whatever the plan design is, even though there's an incentive for the health plan to keep costs low. But if you're self-insured as a smaller or midsize employer, and for us that would be in the range of 500 employees to 5000. We can work with you to offer some of these services.

CfB: Can you discuss some key action steps that employers can take to get biosimilars into the health plan?

Larson: Sure. So, one of the first things, and we talk about this in our biosimilars report, is to get that FDA list of approved biosimilars—and you need to get it to your carrier, your health plan, and the PBM—and say that you want them added to your formulary and then figure out how to best adopt them. So, the report talks about [how if] a biosimilar is indicated for administration through the medical benefit, you’ve got to talk to your carrier and consider a carve out to the pharmacy benefit to ensure equal management. When biosimilars are indicated for dispensing through the pharmacy, talk to your PBM and make sure proper medication therapy management measures are in place. That is so critical.

And then, you need to clearly define biosimilars in your contracts. You've got to, like you do with other things, make sure that your contract indicates you have 100% pass through of all rebates received and that audit rights are in place. That still applies. There are a number of other things like tracking utilization, and the list goes on. Make sure you have a link to it. But there are a number of things that employers can do to talk to their stakeholders about how to manage this. Everything from [prior authorization] to clinical criteria.

Even looking at making sure if, based on the disease state and the drugs, there is a firm code genomic test that's part of it. A big one that we don't talk about a lot is value-based benefit design. If you're going to drive that employee using a biosimilar, like you do with the generic, you should incent them through plan design, whether it's reduced or waived copays or changes to coinsurance, or something like that. As we said earlier, we recommend having biosimilars be the first step if you're a new patient, just like generics first.

So, this is going to be a challenge for the marketplace where employers are going to have to educate themselves. They're going to have to empower themselves to talk to their partners. And then, they're going to have to encourage their partners to be more innovative in this space.

CfB: How valuable can employee education be in raising the use of biosimilars. You just alluded to this, but what kind of struggle is involved here?

Larson: So, when we started our national employer initiative on specialty drugs, one of the first things we did was do an employee education or member education piece about what specialty drugs are worth and the importance of compliance, the importance of having a relationship with your physician. The same is going to have to happen with biosimilars, and we'll probably be building that out in the next year. Then, we make this information available to not just our members but any employer in the country, because we think it's that important.

And so, we're going to encourage, just as we did before, our members to cut and paste whatever will resonate within their word count, in their health newsletters, and in their benefits information. But once they make that transition, education needs to go out to employees to help them understand that even though it's not an exact replica of the drug, it is equally efficacious and will cost them less.

CfB: What has been the outcome of biosimilar education efforts so far?

Larson: Since [biosimilars] first came out and we started educating [employers], there was a lot of confusion. There was misinformation. There was minimal support by the community both on the medical and pharmacy side and provider side, I've seen a significant change in the role of educating employers from 6, 7, 8 years ago. This time, employers are paying more attention. They're much more sophisticated about understanding pharmacy benefits. Cost savings are more critical than ever and then, add COVID-19 [coronavirus disease 2019] on to that. So, cost savings are really going to be critical.

They're looking at things that are easy to do, and that's the role of the coalition. So, we do webinars. We've done several reports, as I talked about it, but we're not going to stop doing it. We're going to continue to bring this out. Again, recognizing that we don't want somebody taken off a medication that is working well, but there is definitely a place for biosimilars.

CfB: What are your hopes for a legislative cure. Do you have any hope for the executive actions recently signed by President Trump?

Larson: I do not think anything will happen until 2021. But never say never. There could be some surprise legislation. I just hope it's not misguided and that it is moving in the correct way and not influenced by any key stakeholder. Employers don't have the individual lobbyists on the hill like some of the other major players in the marketplace. There's a right way to do this and not a right way. So, I just don't see anything happening at the earliest until 2021. And COVID-19 has something to do with that, but the election definitely has something to do with that.

CfB: To what extent are biosimilar manufacturers willing to partner with employers? Have you seen any instructive examples?

Larson: They have come to us to talk about their concerns in the last few years about the lack of employer adoption. We recognized already what the barriers to utilization have been, and I talked about those earlier, and those have not changed. But we see this as low-hanging fruit. And [we look for anything] in the marketplace that can be considered a way to better manage costs. Not reduce costs. If you get better patient outcomes or you do reduce costs, that's fantastic but it's about better managing costs.

So, we've got to make the case because we've learned a lot in the last 5, 6 years on what biosimilars are, what the challenges are, and what the opportunities are. There are other nonprofit entities like ours that are doing some great stuff in the space, including your organization. So, getting that knowledge and information out there is key. I think education and examples are going to be critical.

CfB: And lastly, do you have any other concluding thoughts?

Larson: Absolutely. Again, because we represent employers, we're passionate about supporting their needs, and this is a tough time in the country, we are going to continue to bring on best practices from employers that are willing to stick their neck out and be disruptors. We're going to continue to work on better managing the costs and outcomes of specialty drugs, and that includes biosimilars. And we're going to continue to not have the burden of all health care costs in this country fall on employers that don't have the ability to negotiate prices like the government does. By doing so, we can stay in the health care system. There's a lot of changes that need to be made by key stakeholders; they're not ready to do that, and we want to be partners with them. We've been really busy, and we plan on continuing to be busy and supporting the needs of our employer members.

CfB: To learn more, visit our website I'm Matthew Gavidia. Thanks for joining us.