Life Sciences

Employer benefit manager talks about customer approach to pharmacy

Medicare & Reimbursement Advisor Weekly, August 28, 2009

Wyndham Hotels had a minus 3% drug spend last year, a sharp contrast to most employers who experienced an upward trend closer to plus 5%. Although difficult to pinpoint one reason, Wyndham pays for at least two genetic tests (one for Coumadin®, one for Tamoxifen) to see whether employees will benefit from those therapies. They also have a high generic fill rate.

“They’re innovators in that way, the exception,” says Mike Thomas, PharmD, who oversees clinical pharmacy operations for Gallagher Benefit Services (GBS), one of the leading U.S. employer benefit managers.

I’ll be featuring interviews with employer benefit managers (EBM) Mercer, AON, and Towers Perrin in one of the next issues. The following is Thomas’ view on some questions. Contact me if you have other questions.

Professional Background

Thomas also has a medical management degree from the University of California, Irvine. He spent 11 years running the pharmacy department for a two-million member plan with $150 million in drug spend. His background as a retail pharmacist, pharmaceutical consultant, and hospital pharmacist lead him to run Express Scripts’ finance operations for eight years before deciding he wanted a challenge: to help employers make rational decisions about benefit design. “I thought it would be too easy to help pharmaceutical companies get their products on formulary,” Thomas says.

EBM background

GBS has 84 U.S. offices specializing in healthcare benefits for employers. Thomas’ team reviews employer drug spend, pharmacy plan design, specialty drug use, formularies, out-of-whack trends, and helps employers choose the right PBM and carve out pharmacy benefits.

Employer customers

About 80% have 1,500–10,000 employees, many in the public sector, with a smaller set above 30,000, such as Louisiana State University. GBS serves countless school districts, the New Mexico Interagency for Retirees and private employers such as Travelocity®, Expedia®, and Wyndham. Total lives are in the “mid-millions,” Thomas says, with about 500,000 lives added in the last two years via request for proposals.

Therapeutic and Formulary Focus

“On formularies, we’ll look at them and often tell employers what they’re missing, tell them if there’s too much on the formulary, help them move specialty drugs appropriately to the pharmacy benefit, and definitely focus on these four areas therapeutically: specialty drugs, cardiovascular, diabetes, and asthma.


GBS conducts comparisons between PBMs to help an employer understand if switching to a new PBM will cause disruption and where (such as a rise in copays for a particular drug used by many employees).

It’s interesting with some employers that the level of discussion often revolves around the PBM process. Two PBMs will bid for an employer contract, one will offer a discount of AWP minus 18%, the other AWP minus 16% (or some other discount off the selling price), and many employers simply want to go with the better discount without understanding that the PBM may have a more expensive formulary or benefit design.

Working with pharma

Thomas used to contract with pharma in the late 1990s, but not anymore. “I know how they contract but I also believe there’s a conflict when we’re dealing with PBMs and employers now, so we stopped doing the contracting with manufacturers,” he says.

Typical pharmaceutical support that generally work includes:

  • Educational programming for employers
  • Health fairs at employer sites (although Thomas says these are infrequent and difficult to coordinate)
  • Employer conferences

Thomas thinks disease state programs have an important place in the medical management of conditions affecting employees, as long as they are provided in the context of education. “There are certainly opportunities around diabetes especially and the specialty area for pharmaceutical companies to provide support. We’d be open to ideas,” he says. How Mercer, AON, and Towers Perrin work with pharmaceutical and bio companies may differ. We’ll see.

What Employers Want, Role of EBMs

The recent wave of interest in Value-Based Insurance Design is surprising to Thomas since the concept started around 1999. “I do see the ROI for employers who support a more open design with zero dollar copays. Pitney Bowes did this 10 years ago, looking at the diabetic population and adherence and had all brands and generics at a low copay, equally available, and found a 4:1 return on investment from this approach, compared to the standard, more commercial-oriented design.” This suggests an appetite for appropriate access on tier 1 and 2 to brands that have a value story.

There’s also a slower movement toward the consumer-driven designs. Just 6% of plans do this. “Louisiana State University does this and it’s actually working very well,” Thomas says, “but I’m not sure it has broad applicability until the model is simplified. It’s very confusing for lay people to navigate.”

But the conversation between EBMs and employers is less about generic fill rates and design. Employers aren’t really openly asking for value-based design. “Instead, they just want us to tell them what’s right or wrong,” Thomas says. This is interesting because it suggests that employers are leaning on EBMs to help them develop the right design for their population, but, in some cases, the most ethical design, as is the case with Wyndham Hotels and its decision to cover certain genetic tests and be open to controlling spend in out-of-the-box ways.

Controlling specialty spend is the most challenging area. “There’s been some increase in cost share put on the employee but not to the level I think it would have increased, and one reason is that compliance/adherence would suffer once you reach $150 for copay,” Thomas says.

The Numbers

Seventy-five percent of employers want the lowest cost design and formularies and 25% want low drug costs but an effective design, one that will really help improve productivity and outcomes. “I spend an inordinate amount of time with employers trying to push the latter and get them to that the cost of their drug spend is not indicative of the value of their drug spend,” Thomas says, adding, “you have to consider downstream costs, but on the flip side, I also tell employers about the incredible waste they have in some drug spend.”

Thomas has noticed a real upswing in interest among employers in the pharmacy benefit and also a lot of employers with formularies that are promoting drugs people don’t need. “Everyone in the known universe doesn’t need Nexium®, for example, or many of the cholesterol medications. I know there are people genetically disposed to high cholesterol and other conditions, but there are other answers outside of pharmacy we advise employers to look to,” he says.

Where do EBMs get clinical info they present to employers?

They can go to the P&T Community and the sites for formulary evaluations. “We follow clinical news from all of the major PBMs since we are linked into their clinical research e-mails,” Thomas says. “We also do our own research if needed.”