The Benefits of Tight Contract Management

It's time for Employers to ensure they safeguard their interests and shield themselves with robust contracting language. 

Carrier and vendor agreements are often crafted by their legal teams to safeguard the interests of the vendors, which may not always align with the needs of the employer. Far too often, employers have simply accepted these standard contracts, granting vendors the authority to dictate billing practices, define services, and even control data sharing. The moment has arrived for Employers—whether they're managing a Health Plan or acting as the payor—to take charge and reshape our delivery system, ensuring they receive the necessary support for their plans. 

Join our expert panelists as we explore the intricacies of carrier and vendor agreements, often skewed in favor of vendors, and the necessity for Employers to assert their needs.

This episode includes guest speakers:

Brenda Motheral, RPh, MBA, PhD
CEO, Archimedes

Marilyn Barlett, CPA, CGMA, CMA, CFA
Senior Policy Fellow, National Academy for State Health Policy

Stacy Barrow, JD
Partner, Barrow Weatherhead Lent LLP

Transcript

Vital Incite’s The Pulse Podcast Transcript – Episode for 05/22/24

Welcome to The Pulse, produced by Vital Insight, where we keep pace with what's trending and employee benefits. This series was developed to bring together nationally recognized subject matter experts from the health and pharmacy industry as well as top academic and research institutions. Our goal is to provide unbiased information and offer scalable strategies that give you clarity amid the chaos and provide answers to your most burning questions.

I'm your host, Mary Delaney, managing partner at Vital Insight. In today's Health care environment. It's essential that employers ensure that they safeguard their interests and shield themselves with tight contracting language. In this episode, we will explore the intricacies of carrier and vendor agreements, which are often skewed in favor of vendors. Our panel of experts will provide insight into why and how it's a necessity for employers to assert their needs and how doing so and have a valuable impact on reshaping health care.

So let's start with introductions. Today, we are joined by a superstar team that I had the pleasure of working with often. Brendan Motheral, CEO of Archimedes. Dr. Motheral is an award winning scientist and health care entrepreneur and currently serves as CEO of Archimedes, a specialty drug management company that provides analytics, technology and service solutions for employers, health plans and PBMs.

Brenda has a proven record of founding disruptive new businesses and advancing them through growth and acquisition. During her 30 year career in pharmacy benefits, Dr. Motheral has founded and led multiple pharmacy benefit management companies served on the executive team of a Fortune 100 PBM and authored more than 50 peer reviewed manuscripts on pharmacy benefit management. She has received National Research Awards from the Academy of Managed Care Pharmacy and the International Society of Pharmaco Economics and Outcomes Research.

Welcome Brenda, thanks for being here. Stacy Barrow is a partner at Barrow. Weatherhead led a boutique employee benefits Executive Compensation and employment law firm located in Boston. He uses practical business focused approach to counsel his clients on complex employee benefits and executive compensation matters. Stacy has been ranked in the employee benefits and executive compensation space by the premier lawyer ranking service chambers.

He counsels clients across the country on employee benefits matters, including issues arising under ARISA, the Affordable Care Act, and the No Surprises Act is a sought after speaker on all aspects of employee benefit programs and has published numerous articles on issues arising under the Affordable Care Act. Stacy, we are so thrilled to have you join us. And last but not least, Marilyn Bartlett.

Marilyn serves as a consultant focused on lowering health care costs and empowering employer health plans and state policy makers with data to support cost saving initiatives. She recently developed the hospital cost tool for the National Academy or State Health Policy, an interactive online tool which utilizes hospital Medicare cost report data to calculate various hospital metrics used to support hospital and health system financial analysis and health policy.

You may know, Marilyn for her role as administrator for the Montana State Employee Health Plan, where she disrupted the status quo by implementing Medicare rate reference based contracting with all Montana hospitals, enhancing primary care to near site health centers moving to a transparent pass through PBM. Eliminate cheating, duplication of vendor services, and improving data, access and analytics. These efforts increase planned reserves from actuarial projections of -$9 million to $112 million in two years.

For her efforts, Fortune magazine selected Marilyn as number 13 of the world's greatest leaders. Yes, this is my A-Team to support vital insight in disrupting health care. Can you believe anyone would be so fortunate to collaborate with these three individuals? Well, guess what? We get to do this today. So I know from our prep calls this is going to get hot and heavy quickly since this is such a critical topic.

Let's ease into this a bit, Stacy. So many times employers may try to save money by not having a legal person review their contracts. Many even will say the carrier vendor gives this contract to everyone and they have little hope that the vendors are really going to make edits for one employer. Can you lead us off explaining the role of the benefit advisor in reviewing contracts versus the role of the attorney?

Sure. The benefit advisor consultant definitely plays an important role in the contracting process. You know, they are they are great at ensuring that the contract has all of the proper business terms that they've negotiated with the vendor and is oftentimes, you know, a spec sheet or some, you know, discussions leading up to the contracting. And the broker is really good at making sure the business terms are expressed in there where we come in and, you know, when we do a legal review, we can we can do it in various shapes and sizes.

We can we can be engaged to negotiate the contract from soup to nuts, where we can come in and review for showstoppers and red flags. And we do that plenty of time. So it doesn't have to be a major engagement. But it really is important to have legal review that document and point out some of the potential legal issues that the benefit advisor is simply not going to catch.

You know, so sometimes it it involves a lot of negotiation, sometimes it just involves sensitizing the employer to some of the specifics of the contract. Like, you know what what happens if we try to exit in those kinds of things?

So how important, Marilyn, is it that an employer puts some effort into this?

Well, I think it's extremely important. I think that in this contracting process, I think that the employer can actually give a lot of their rights away. I've got a couple of clauses because I do review contracts frequently for employers. Now, I'm not an attorney, I'm a CPA, so I'm going to look at the financial terms. But just to give you a couple of examples, this is taken right from a contract.

I review it now, I'll substitute TPA for the name of the actual carrier. People may have contracts with network providers or vendors that limit the TPA to right to make recoveries or engage in claims. Prepayment analysis. So that right there, it's saying that the contracts that the TPA has with the provider are going to prevail in the payment, and it will limit the right to seek any type of recovery, even if there is an overpayment.

Another one is that the employer or contractor acting on behalf of the employer may not contact any health care provider concerning information on data or services unless the contact is coordinated by BP. The right there. I think you're giving up some of your rights, actually your responsibilities as a fiduciary right in this contract. And Stacy, I have a question for you.

I frequently see most often in these contracts any dispute that can't be resolved between the employer and the TPA must go to binding arbitration. I'd love your thoughts on that.

Yeah, I mean, that's that's more of a decision for the parties. Arbitration can be expensive and it can be something that neither party ends up really being in love with. We do sometimes try to get those changed and just removed and and be able to just have them resolved in court rather than going to arbitration. It it depends on the type of contract, you know, is it are you, you know, one of a million different, you know, employers signing it is the you know, the vendor kind of insisting on arbitration or is it, you know, a unique control act between you and the vendor in arbitration really may not make a whole lot of sense, for for that.

Amazing that that's even written in these contracts. Employers may sign off without even looking at that. So. Have any of you seen the carrier vendor change the contract language when challenged and burned? I know that you put a lot of effort into this, So can you kick us off in the the PBM world, which is seems to be the untouchable, right?

It is. It's the big black box. And we certainly have seen that. And of course, that the ability to have a contract change by a vendor really comes down to your size and your leverage. And part of that leverage is your willingness to walk away from that particular vendor issue that really drives ultimately what they're willing to do.

But with the right kind of leverage. Right, they will make a lot of changes. And so you've got to understand what those things are and ask for them and then make sure you are willing to walk if you don't get what you want. I think when you look in that the PBM world, the focus historically by the the broker or consultants has been really on the the rebates and the discounts and all the things that go along with it.

And there's a lot of complexity in there. But more recently, what I've seen that has been missing and is a great opportunity for employers to add is more about specifically the clinical management of the medications, because it really doesn't matter at what kind of discounts you get or rebates you get. It's it's not the right drug for the patient to begin with or they shouldn't have had anything.

And so that's really trying to see the forest for the trees in the contract. So when you're looking at the clinical component, getting the savings methodology documented in the contract, if the PBM is providing a clinical guarantee, that is really important, right? What is the methodology that they're using to count those savings and is it robust what your advisor should be looking at?

But that's not enough, just like people do with discounts or rebates. You need to have honor rights around those clinical savings and those guarantees and you need to have clear rights are collection right in recovery. And if there's dispute, how is that going to work? And this is basically a complete missing component of most PBM contracts. And on top of that, I want you to get that in the contract.

You need to do those actual clinical audits and review work. And there's not a lot of consultants that necessarily have the expertise to do that. So you've got to focus in and get the right team around that. But I think what you'll find is that there's a lot more gold in those hills, ragged or inefficiency in waste than what there is in other parts of the PBM contract.

And then kind of piggybacking on that is the area of the biosimilars. We now, of course, have this really unprecedented opportunity. What's the biosimilar for Xiomara? And the reality of it is, despite what many employers are hearing from PBMs, it does provide over a 50% savings in moving patients to low cost biosimilars. Net of rebates can be literally up to about a 65% savings.

There were some of these biosimilars, so it is a no brainer at this point that employers want to have that in their benefits and in their contract. So these contracts need to be explicitly excluding HUMIRA and any high cost biosimilars from the contract. And then for the ones that are covered, they need to provide specific discount rates on many times PBMs will try to say that these would be considered new to market drugs and they will give a discount rate which gives them the flexibility basically right to charge varying rates and gives them more gamesmanship.

And so you want to sort of get that out of the gate that we're covering only low cost biosimilars. This is what we're going to pay for this drug. And as part of that, you also need clarity on how biosimilars are being handled. These are the rebate guarantees and that's a longer conversation. But there's a lot of important detail in there that is increasingly really on to your bottom line on the PBM contracts.

And everybody knows I think every employer knows that the cost for medications is rising at a faster rate than medical services. So if you look at medications for the medical plan and the PBM that is rising at a higher rate and a big part of that is the cost of these drugs that are coming to market and then the gain with the rebates.

So nobody really everybody tries to trust the PBM as much as possible, but I appreciate your comments on that. I keep hearing audits and recovery. And Marilyn, why don't you tell us kind of your thoughts about that.

Yes, I have some strong thoughts on that. Being a CPA and being an active auditor and being a plan administrator and trying to get access to my own claims data. I want to read to you to start off with just a few clauses. So back on track that I'm reviewing right now and this one's going to get kind of confusing as I read it, the amount that TPA pays to the health care provider through the TPA contract with the provider may be different than the amount paid pursuant to the plan, because the allowed amount under the plan will be governed by the contract between the TPA and the plan, not the amount between the TPA and the health care provider.

If I could interrupt you, I need you to know that we have found that in the data because we found that what we perceive they were paying, the provider included, add an extra admin fees and incentive pay that the carrier was paying to themselves. And so the perception was they were overpaying the provider. But the reality is they were they had their hand in the pocket taking more away from that. And and we really had to dig deep to figure out what the provider was really getting paid on what the carrier was being paid.

Well, kudos to you because that is not easy to find or easy to gather the data. And so branded, you know, we all are familiar with the term spread in the PBM world, spread pricing. Well, it exists in medical place. And so, you know, we just heard a good example about it from Mary. Then another club, TPA or TPA affiliate, may have a financial interest in network providers through direct ownership partnership, joint venture or other arrangement.

People may share in the network providers profits or in other revenue. And any revenue received by the TPA is retained by the TPA. So there's a financial interest and I would say a conflict of interest definitely right there. Now, when it comes to auditing, the tough thing are the audit rights that are in the contract and the standard audit.

Right. So let me read you to you here. When the Employer Group Health Plan may audit the TPA payments limited to one random sample audit per year, EPA has to approve the auditor no more than 300 claims in the audit sample, and the TPA selects the random sample may not extrapolate the error across the population of claims, though if you find a spread pricing problem in a certain area, you can't then apply it to any other claims.

You could only recover the amount that you paid me on that one and contingency fee based claim auditors not allowed. A contingency fee based auditor is probably going to dig pretty hard because their pay is a percentage of the savings that they find though that totally takes your rights away. And I would always go for 100% of claims as a CPA.

I know we usually profess that a read in a claims audit will provide it, but in this particular segment it is inside Gopher 100%. So I think that that is extremely, extremely serious. And one comment you take is that once you're able to get this audit dated or to groups like Vital Insight, you're able to find these particular issues.

How do you recover? That's overpayments. How do you get that money back? This is an interesting one, a clause from current contract I'm reviewing. TPA is authorized to follow its recovery process. And here's another one quote BPA is not required to reimburse the plan for any recoveries it receives except when gross negligence or intentional misconduct by the TPA caused the overpayment.

And so my comment is, when you are contracting these terms in your contract, they're going to greatly limit your your rights, your responsibilities. And I think it's really, really important for you to know that.

So I will give you an example here. We had a client who clearly duplicate payment between the medical plan and the PBM, the TPA. And we we said it was today's responsibility. We went back to the TPA. We got bogus answers like, oh, no, it was paid the right amount. And then we had to explain no, it's duplicate.

And oh, no, we looked at, you know, it's no, it's correct. It's okay for us to pay like Uber, but like a month between each one. Finally, we sent, you know, when we've been sending the detail the whole time, their final response was, you are correct, this was a duplicate, but now it is timed out because we can only reimburse within 12 months of finding the error.

So now their attorney's looking at where in the contract is this language, who signed that? So Stacy or anyone else feedback on all of this discussion. Anything you want to share?

Yeah. I mean, you know, Marilyn made a bunch of good points, but to piggyback on, on one of them, the lack of abilities of employers to audit the plan is a real thing. You know, Congress is aware of it. There are some is a bill going through the Congress right now. It passed the House late last year. It's called the Lower Cost More Transparency Act.

And there's a number of provisions that are relevant to group health plans. And one of them is called the Hidden Fees Disclosure Requirements. And it builds on the broker consultant disclosure obligations from the Consolidated Appropriations Act. And part of the way the bill works is the TPA agreement will not be will be deemed unreasonable unless it allows the employer to audit or review all to Maryland's point, 100% of de-identified claims and encounter information to ensure that the vendors complying with the terms of the plan and to determine the reasonableness of the compensation received by the entity.

And it doesn't unreasonably limit the number of audits or the number of the identified claims in encounter data. The employer can access during the audit. So none of these games with being super selective with regard to the data on the vendor side and unlike the broker compensation disclosure rules, this law, the way that it's drafted, the noncompliance service provider could be fined $10,000 per day.

It again, this is not law yet. The bill does have bipartisan support. If the elections, you know, go the Democrats way in November, I definitely think this bill will be you know, will come up again. And, you know, we'll we'll be reading more about it in that case.

There's a lot also this case with pharmacy world. I was just going to add as we're kind of focused on the medical benefit right now and really great examples Marilyn's sharing here. You often don't think about pharmacy under Medicare, right? You just think about it out of the pharmacy benefit, as you know, Larry, very well, 30 to 40% of your specialty drugs tend to sitting under the medical benefit.

So it's drugs like Remicade and all of these cancer drugs and the gene therapies and other really high costs medications. And what we find is even if there is some sort of claim monitoring or auditing going on, very often the specialty drivers are missed in that process. And when errors occur at these drugs, they're very significant because the cost of the medications are so high.

Right. The duplicate therapy that you mentioned earlier, that's pretty common with specialty drugs where they're getting covered into the pharmacy and the medical benefit. So you need to look for that. And we've had claims recovery as high as half a million dollars for one patient, for one specialty drug. So keep that on the radar as well. Biology saying about it with the right contractual language that it's really important to include specialty.

So what vital insight does is we collect data from all of these entities and then work to improve our opportunities exist. We put a lot of effort like ridiculous amount of effort to even get the data. And we find things such as scrambled provider names. We actually have an entire carrier that scrambles provider names for self-funded accounts, extra things like this incentive pay for carriers that are added to claim lines.

It is anything but transparent and a lot of employers and advisors will say, Well, there's this new gag clause, this is ridiculous. Why don't you have access to this? But it seems to be getting worse. So, Marilyn, you kind of shared with me how everything that seems to move forward. The reason it's been moving forward is because someone else has found a way to get around it. So tell us what your thoughts are.

Yes, definitely. They have. I think when the US data or what came out and was put into the law, we all thought these clauses would go away from the contracts, but we're not seeing that that gay clause permission in CAA two or when it's really written in the negative, it says that you will not sign a contract that will gag you.

I instead of saying what you will include and we've seen go around a current situation that I'm supporting the law firm on as to do with what we called Skip clauses. And that's where the EPA will sign a contract with the provider. And the provider says, I'll give you the lowest price possible and you can advertise that you're getting the lowest price possible, but in return you will lift your ad.

It's off when you process my claims. And so the TPA and the brokers can say we're giving you the lowest cost. But as all of you know, lifting those edits is going to result in much higher costs. So we were trying to call that a gag clause because it did not allow the employer access to get that information or act.

We were finding this in the data and I'm finding that the TPA and the carriers are very crafty at figuring out ways to say, well, that's not a gag clause, that's my professional clause with someone else. This is not a gag clause, and that has really caused a problem. Now there is a nother bill in Congress, Senate Bill 3548, and there are committees now that are working on trying to get a combined package.

The bill that Stacy mentioned from the House and then the Senate bill, which is bipartisan, is sponsored by Democrats and Republicans together. That particular bill has Section seven, which really is a robust solution. We're hoping for employers, but it says that you will not sign a contract, that that the contract has to allow the responsible group health plan access to all claims and encounter information.

Any documents supporting claims payments, including but not limited to medical records, policy documents or data described in this section also allows for the employer to have full access to all the data on a daily basis. Should they choose and to definitely allow for prepayment audit review. Though I think, as Stacey mentioned, we're seeing a lot of move on the Hill right now.

We're seeing both parties definitely support this legislation, but it's still kind of in limbo. As Stacy noted. Let's hope that something does get passed this year to really enhance that gag clause, empower employers to step up and definitely do that. The other thing that has come out, Health and Human Services has published the documentation for the Attestation report that every employer is responsible for by the end of the year. So take that attestation. Very, very important, very serious.

So, so many good points there. Marilyn, thank you. One of the thoughts I have and I'm kind of going to use this to help us internally here, we do see a lot of generic j codes be paid on the plan. And our question back to the carrier is how do you know what you're paying for, what the right amount is?

If it's a if it's just a generic code, their feedback is, well, this is all we get. So this is the way we pay it. And I'm wondering if that's not because of whatever agreement Marilyn you just described that they have done. So they just pay whatever is put in front of them. That's definitely what we're seeing in some of the work that we're doing.

You know, as you said, employers are being held more responsible. There is this looming case out there that has everybody more worried, thankfully, about their contracts. Stacy, what are your thoughts on J and J.

Sure. And just to again, piggyback also a barrel. And so we're seeing the exact same thing with the guy clauses. It's just not really working as advertised or, you know, largely ineffective. We haven't seen, you know, anyone come back and say, No, thanks, that gag clause. I was able to to get the data I was looking for.

I mean that's just not happening more we're more hearing, oh, you know, that's that's not a gag clause. And what you're asking for isn't really covered by the gag clause rule in the act. I mentioned in the other ones that Marilyn mentioned, too, there are multiple bills that are looking to kind of expand upon and confirm how this gag clause is really meant to apply.

And for example, like it can function or gag clauses can function in a way that prevent pharmacists from communicating lower cost drug options to patients. And you might have seen this at the CBS where the pharmacists kind of conferring with their colleagues and, you know, they want to tell you something, but they can't that if you just pay outside of the insurance, then, you know, it might actually cost you less.

The anti gag clause rule is intended to cover those kinds of situations. But the Johnson and Johnson case, a real interesting case in my opinion. It's a whistleblower case. In a sense, it's a putative class action brought by one person on behalf of 130,000 plan participants. And it's among the allegations made are that Johnson and Johnson breached their fiduciary duty by mismanaging their prescription drug plan, in particular.

With regard to that, they paid inflated prices for generic specialty drugs and that they engaged in steering that resulted in the PBM, the pharmacy benefit manager, steering patients to its own mail order pharmacy, which allegedly results in higher cost to the plan and a whole lot of allegations regarding alleged imprudence in administering the plan and the parties named are Johnson and Johnson.

The plan sponsor the committee. They have they had a benefits committee and then the individual members of the benefits committee were also named in the lawsuit in the suit, made a lot of hay over these markups that they alleged. You know, in some cases they allege the markup to be between 2000 and 13,000%. But, you know, the punchline is for the vast majority of drugs, the plan paid just a couple of percentage points over lists and there were perhaps several drugs that, you know, allegedly were were marked up.

The case also kind of throws a little bit of shade at Johnson Johnson, the broker, which happens to be on the alleged there's conflict of interest there. They refer to the broker card disclosure requirement of the CAA, but doesn't really allege any violations there. I think perhaps maybe they're trying to get their hands on that information as part of discovery.

But we are. And it gets interesting from my perspective, as you know, this case is really trying to to do something, a risk it wasn't intended to do. In one sense, the lawyers involved are trying to replicate the success that other plaintiffs lawyers have had, challenging fees that are paid by defined contribution retirement plans. This case is different in that group.

Health plans are defined benefit plans, and they're also funded largely by employer contributions, where defined contribution plans like for one case or all employee contributions in large part. So they are the fees can really impact the balances in a group health plan. You know Johnson Johnson, they're paying 85% of of the costs and there's nothing under RSA that requires a race to the bottom where the plan sponsor needs to pick the lowest cost provider.

And there's a real good Supreme Court case out there for the plan. And it's the thought case here, Holly, that basically stands for the proposition that participants in defined benefit plans like group health plans, the thought case happened to be a pension plan, but same same deal or DB plans that the participants don't have standing to turn around and sue the plan's sponsor over alleged fiduciary breaches unless the plan completely blows up and goes sideways and can't pay benefits.

And that's just not what's happening here. I tend to think that this case is kind of an improper weaponization of a risk against the plan. Sponsor And with respect to the participant here, you know, like what are her damages? What does she get if she wins? You know, the only thing that participants are ever entitled to are the benefits that are described in the terms of the plan which she's received.

So, you know, she didn't ever allege that her claims were paid. She alleged that the plan overpaid its vendors. Now, if anyone was unhappy about this, it should be Johnson and Johnson. JJ, you know felt the overpaid their vendors. They would be the ones to initiate the lawsuit, not the participants in that case. It's currently working its way through the courts was filed in in New Jersey and the latest movement is there was a letter sent from the Johnson and Johnson lawyers.

I mean, this is part of standard motion practice. When are you going to argue a motion to dismiss? You write a letter to the court explaining some of the points, and they touched on a lot of, you know, what I just talked about, and they said, you know, look, you know, while participants make some financial contribution here, Johnson and Johnson contributed $820 million in 2020 to toward the plan.

So they have every incentive to negotiate the best deal for the plan. And so, you know, one of the the legal issues that I always harp about and spend all the time on when I see some of these odd challenges, like to the Affordable Care Act, when they were trying to invalidate the whole act. It's like, do did the people bringing the lawsuit have standing to challenge the law or have standing to sue the plan here and again, there's there's one Supreme Court case that the whole case that basically says they don't have standing here.

There's another good case out of the ninth Circuit, the Windsor versus Sequoia case that I had some intimate involvement with. That also kind of stands for that same proposition in her. Her claims are a little bit remote in that, you know, one of the allegations is, you know, look, if if Johnson and Johnson didn't overpay express reps, then, you know, that money could have gone to higher salaries.

And, you know, those of us in the benefits world, you know, we know that's not usually exactly how it translates. Right. It's kind of a little remote, the kind of you draw the line there. So super interesting case, You know, So it's going to be a little controversial. I'm going to I'll throw my thoughts out there. I don't see how this survives the motion to dismiss based on prior Supreme Court precedent. But, you know, we shall see.

Stacy Incredible. Thanks for sharing, Brenda. Thoughts on that? Yeah, that that was great information. Stacy, let me let me just take a little bit different angle on this and just dive into some of the substance of. Right. The issues separate from that specific case. As Stacy mentioned, part of what they talk about in there is the drug markup. And I will tell you, we see this repeatedly now, The amount of profitability that's in uncompetitive pricing that's happening with PBMs on is really shocking when you can actually look under the hood.

And we are able to do that because for many of our lawyer clients, they have networks that has come through other deals that we actually manage. And so we'll literally see cases where for a generic specialty drug that should cost maybe 4 to $500 per claim that employers paying $15,000 per claim. And as this goes on for a year, right, you're talking $200,000 per patient in, you know, overpayment.

I mean, these are just incredible numbers that we're finding. So this is very real and it's very active right now on the market in terms of those pockets of margin. And I think the last data point I saw was that something like nearly 40% of Putin's margin is sitting in these pharmacies and these specialty drugs. And it's these types of examples that are driving it, in addition to the self-dealing of the PBMs.

To me, what really is worse is the PBM coalitions through these consulting firms. Right? That's self-dealing on top of self-dealing. And these are, in fact, the people who are supposed to be advocating and working on your behalf with the PBMs. And if that part is not fixed. Right, we're all really kind of do, too, in terms of this market getting to to something more aligned and addressing these conflicts of interests.

Now, with that said, right. And these very real issues, I will say that this case has gotten more attention by employers in the industry than anything that has happened. Right. That the PBMs have sort of been Teflon over the years. We've never really seen the federal legislation come to fruition if for all the reasons we understand. But this was kind of the newest hope that maybe this is going to shake up this industry and we'll see some progress. But sounds like Stacy saying that that's unlikely either way as we speak. Go ahead, Stacy.

No, I mean, I you made great points on, you know, it being uncompetitive pricing and being a real good opportunity for employers to, you know, perhaps engage a specialist to go through these contracts. I've heard from a lot of my broker, you know, clients that they don't use the vendor in this case, that there are savings to be had out there.

And you know, it's it this isn't, you know, a legal comment so much, but it's really important to review and analyze the type of fees and compensation in the agreement. Like is it PBMs? Is it percent of savings or percent of recovery? And then we've made this point throughout. Look at not just the payments from third parties like rebates and service fees, but also payments to third parties like, you know, subcontractor fees.

Before I forget, just, you know, we talked about engaging legal to help with these contracts. There are new requirements under the No Surprises Act consolidated Appropriations Act. It is really good to have the contracts reflect who's going to be responsible for helping with these and to what degree, like the machine readable files, the Oryx DC reporting, mental health parity, non quantitative treatment limitation analysis. That's a huge one that we really have to lean on our CPAs and PBMs to help with. And if you don't have good contractual language, you're just kind of at their mercy.

Let me add one more thing, Mary, before we kind of maybe wrap from this discussion, whether it's the JJ lawsuit or increasingly the requirements that come under, you know, could be share obligations and other things that we're seeing that Marilyn and Stacy talked about. I think my biggest concern, and at least in the PBM space, is that employers are going to put a new processes to make sure that they're sort of following and checking the box, so how they're supposed to behave.

But they may get to know different outcomes, right? So we're still in the same boat. And as Stacy mentioned, they're not obligated to go to the lowest net cost, which is true. But my concern is right, again, because we have so many of these consultants self-dealing, that in fact, they're going to hijack that process to check a box and get to the exact same outcomes that they reached before.

Right. So you don't actually think all these valiant efforts are leading to improving cost efficiency in our system? All right. So it sounds so complicated and so difficult. I would tell you nothing makes me crazier or more upset and seeing what gets passed on is performance guarantees. And we see things in contracts that are below standards of care, even where they're, you know, saying that this is something they're going to do.

And this is we've seen this in an onsite clinic vendor that said, you know, what they were going to do for diabetics is actually below standard of care and gets approved and signed. You know, I would say that the performance guarantees in PBMs as to be the most difficult to to try to figure out. Brenda, any any words of wisdom that employers and attorneys and everyone else involved can consider?

Well, I think, you know, it's been said many times over the years, but just as a reminder, PBMs, they write RFP fees and they bid to win, but they write and negotiate contracts to make money in. You're really never going to win in contracting with the PBM. All you can do with the help of the right experts is minimize the damage and how much right advantage that they have in the process.

And so as you think about, you know, what is that maybe the most effective and cost effective way, I could work through many of these issues as it relates to performance guarantees and the other things that happen in the contracting process. Clearly moving away from a misaligned PBM, whether it's the big three or some others, is going to be the best way to do that because you just dramatically narrowed down the list of issues that you're having to fight about, because once you get the business model and the revenue model aligned, it takes so many of these things off the table.

So it's interesting you say that I always hear or employers will say, So, you know, how do the transparent PBMs compare and how ago, how do you know it's a transparent PBM? That's kind of an oxymoron, but it is real that you have to be able to evaluate it them and make sure you have you're getting the correct partner. Marilyn, do you have any thoughts on that?

I think that was so well put by Brenda is to that is the one thing you can start with as an employer group. But when I was at State of Montana Health Plan, we the plan was with particular PBM and they actually had split it out to seven different vendors. So somebody managed specialty somebody with the rebate aggregator Plan B critical many different parties.

But by the time I was able to analyze all that, we decided let's go with a transparent pass through PBM, as you said, to the best degree you can get. And we saved 23% of our spend that first year. And it was one of the things I did is that CVS pharmacies would not go with our pricing because we set pricing.

And so I kicked them out of the network and that saved us 1.6 million just like that. So there are things to do and I'm glad that brought that up. And Brian, I also want to thank you for bringing up Medical direct. That's huge, that drug hatred, the medical definitely something to look at what I typically see. And I'm curious to know Brenda's thoughts on this is what I typically see in the contracts are that the TPA retains all rebates received on the medical benefit for their services.

That is consistent with what we see. If you're looking at an employer's contracts with the TPA, that's kind of the bad news. The good news of that is the rebates for the medical specialty drugs are quite small compared to what you think about under pharmacy. So they're really not giving up something that I would consider material. The bigger issue is right, what is the motivation and incentives that may be creating in terms of what's being covered by the health plan?

But in terms of dollars, I mean, it's literally probably not even a 10th of what it is under the pharmacy benefit. So if I could summarize a little bit of what I've heard and I want you just to challenge it, that the larger PBMs and larger CPAs have stronger attorneys that are writing contracts, protect them better. They have enough money that they have either bought other companies that do auditing, but then now they're really under their control or they have spun off some of their services as other companies, but then force a health plan to use those entities.

And that's just more and more levels of and layers of admin fees are out there that people can't track. And because the contracts are written, well, you can't get to them. Do you see, first of all, that the larger TPA is and PBMs have contracts that are have this crazy language that Marilyn has shared today and are harder to move or not, or is that not a fair statement?

Well, yeah. I mean, they are written in their favor. You know, whether they have better attorneys or not, I think is a little subjective. You know I, I was at the larger law firms in the world as well for many years. I can charge just as much as those attorneys. We happen to be at a smaller firm now.

But we we bring that large firm experience to our small firm with a small firm rate. So we stack up very well against the attorneys of those other houses and PBMs and pay some of them are my friends and colleagues who were who have gone in-house. And, you know, again, you know, we're not making changes just to make changes like we have legitimate concerns regarding indemnification and limitation of liability and term and termination and things like that.

And, you know, when lawyers get comments from other lawyers on contracts, they respond. They don't just say, no, we don't. We don't you don't negotiate on these. So, like, you know, you you have to explain, you know, if we had a legal position where Y, we want X, Y, or Z, you know, you can say, no, look, we don't do that, you know, And then the client knows, like we're not going to have a partner when it comes to, you know, what we've just asked for.

So but yeah, I mean, the contracts are drafted in their favor. And, you know, like I said, we don't have to negotiate every contract, you know, soup to nuts. But having someone to review it is important, you know, even on the type of contracts that aren't super controversial, like someone has to read it, right. If it's a DOD exchange agreement, you got to make sure it lets you do what you want to do.

We looked at one recently that looked pretty good. It didn't have the, you know, anything legally that jumped out that was going to be a problem. But the way that the authority that drafted the contract drafted it, the vendor who we were representing couldn't do what they needed to do with the data. And they didn't quite see it when they were reviewing it.

We caught it when we reviewed it and then they had to go back and, you know, talk to the vendor and we're going to have to because that's a that's a they won't be able to to perform the services unless we get this change.

Anyone else have any final thoughts you want to share before we wrap things up today? Stacy? 

Don't don't repurpose agreements. You know, not not just in the benefits world, but we see these things all the time where a client will have like, you know, maybe a separation or release for something and they'll use it in another context and it will not be appropriate and it can be a big deal. So you the the contract should always go by legal. It doesn't have to be a 50 hour project, but legal should review it.

Well, it's interesting you say that because everyone's worried about spending money on attorney or spending money on a data analytics consultant, but the amount of money they waste in all of this, gaming of this system is far outweighs you having the rights to be able to take care of yourself. Brenda Anything to share? Yeah. Mary I'll just mention really, just because we haven't had a chance to get to it today and I know it's near and dear to your heart is the importance of getting the contractual rights to your data.

And there's a lot of discussion that goes into that and what that means. But if you have it with your advisors really nailed that contractually, that has to be on your priority list as you go forward. Thank you. I appreciate you stating that. Marilyn.

I definitely agree with that. You have to have contractual access to your data. And we were meeting with Department of Labor earlier this year and we were asked about the CAA. We were asked, okay, what does the employer do if they get their data? And they asked us for some examples on what they do. Of course, my response as a CPA is going to be you got to get somebody that can analyze it.

Just ask for your data and say, okay, I've got my data and do nothing with it. I think that's a problem as a fiduciary. I think that it's very complex. I certainly don't have the skills to really dig in and analyze claims data, though I think you do need somebody like Vital Insight to dig in and look at that data and find all of this for you. So I thought that was kind of an interesting question because DOL was hearing from employers, What do I do if I do get all my data? So I think that that link has to to be out there. So definitely analyze it.

Thank you. I think it's not just have the data. Make sure in the contract then we could do something about it because we find a lot all the time. And I've given you a couple examples of then what has the client agreed to that we can't go out and get that money back. That is something that has to change and that's what I'm hoping, if nothing else, employers hear in this conversation today.

Know it's again, to kind of echo what Marilyn seeing out there in terms of the data, like now that we have access to this data, the machine readable files, arguably more data in light of the prohibition on gag clauses, perhaps we can get access to our DC reporting data. What is that mean for us? Are we compelled to use it?

If so, how and where are the rules for that? And there, you know, there aren't rules that kind of spell out, okay, well, this is what you need to do now with that data. It raises the question, though, as a prudent fiduciary, we know we know a risk requires us to prudently select and monitor our service providers. I think it's suggest then that when we have this data accessible to us, that we do use it as part of prudently monitoring and selecting our service providers. So while it's not spelled out in black and white, you know, it's I think it'd be a best practice to figure out how do I use this?

Well, your thoughts are all giving me hope because I picked just a job that absolutely makes me crazy every day. And thank you guys for sharing all of this today. I'm going to try to summarize this, although it's almost impossible because you guys have said so many very critical things. But what I heard is fiduciary responsibility over and over again.

That is a reality. And you need to be able to do that and perform that objectively. It's critical to invest in the correct people to review your contract. Don't be afraid to ask for edits and do it early. So I know at Alero we have changed our requirements that we now have those requirements in the RFP, so they're not willing to say yes to those requirements in the RFP.

Don't waste your time going to contract negotiation because then you're stuck with the timeline that you need to. If you're going to make a change, you need to just accept what's in front of them. You know, try to get in front of that really early. Be really critical on your definition and make sure that they're well spelled out.

Brenda talked about the clinical component being critical, exclude high cost drugs when there's a biosimilar, just take it out of your contract. So they can't play with what rebate considerations are when when they go to do when they go to, you know, justify their performance guarantees and make sure you have an audit. Right. I think I thought it was Marilyn said the gold is in the hills.

The reality is there is a lot of money out there. We know at least 35% of the health care spend is wasted. If we can get to 30% of that, think of how that could change. Really supporting people effectively with these health plans that are supposed to be beneficial. So with that, I'm going to close Thank you three for joining me today.

Stacy, Brenda, Marilyn, what you do every day makes a difference. Thank you so much. On behalf of all the employers, keep up the good fight. I hope you can. I know I've learned a lot. I always do every time I talk to any of you. And just thank you for being our panelist today, Inspire our audience. I hope your time was well worth it.

And I hope you will join us in our next episode as we explore the magic of the blue Zones concepts that, if you haven't heard or seen, has a great series on Netflix. Our panelists will explore the concepts of what keeps people healthy and vibrant later in life and how those concepts can be part of an employer strategy to improve productivity and reduce the demand on the health care system.

The pulse is produced by Vital Insight. Vital Insight is on a mission to help organizations identify medical spend waste through data driven strategies while helping to improve the health of their employees.

If you want to manage and improve your organization's bottom line while making health care easier to understand, reach out to us on LinkedIn or our Web site at Vital Inside.com. I'm Mary Delaney. Thanks for listening.