Inside CVS Caremark: The Role of PBMs in Drug Costs & Access | SPONSORED
THIS SPONSORED PODCAST EPISODE IS BROUGHT TO YOU BY CVS HEALTH.
In this sponsored episode, James Margiotta, Chief Growth Officer at CVS Caremark, joins Health Affairs Publishing's Jessica Bylander to unpack the role of pharmacy benefit managers (PBMs), their impact on prescription drug costs, and the value PBMs bring to the health care system.
James has nearly 35 years of experience driving innovation, operational excellence, and enterprise value across the healthcare system. In his current role, James leads the team responsible for partnering with clients to identify their unique needs and bringing forward strategic solutions to meet their objectives.
Throughout his career at CVS Health, James has scaled businesses across CVS Caremark, CVS Accountable Care, Minute Clinic, Aetna, and CVS Pharmacy — each with its own challenges, cultures, and market dynamics.
James and Jessica's conversation explores how PBMs help employers, health plans, governments, and unions manage rising prescription drug costs while balancing affordability, transparency, and member experience. James explains CVS Caremark’s approach to controlling costs, dives into the growing demands for price transparency, and how artificial intelligence may transform pharmacy benefits and member navigation services.
Speaker 1: Doctor. Hello, and welcome to a sponsored health
affairs podcast episode brought to you today by CVS Health. I'm
your host and a deputy editor and correspondent at Health
Affairs Publishing, Jessica Bylander. Today on the program
to discuss pharmacy benefit managers or PBMs, we have CVS
Caremark Chief Growth Officer James Marjota. Throughout his
career at CVS Health, James has led and scaled businesses across
CVS Accountable Care, MinuteClinic, CVS Caremark,
Aetna, and CVS Pharmacy.
Today, he and I will discuss what value PBMs are bringing to
the healthcare system. James, welcome to the program.
Speaker 2: Jessica, it's fantastic to be here and look
forward to our time together today.
Speaker 1: So to start us off, there is a lot of debate about
the role of PBMs and whether they can actually drive down
prescription drug costs. So how do you describe the value PBMs
bring to the healthcare system and what makes CVS Caremark
unique?
Speaker 2: Jessica, when we think about the value that PBMs
bring to the healthcare system, we first need to think about who
our customers are. And as we think about that, it's always
centered around our customer and their priority first and
foremost is how do they manage cost? Secondly, how do they
ensure that there is a experience that their members
have in accessing the system? How do they provide an
affordable benefit? And how does that all come together in a way
that helps them execute their strategy?
And each customer is unique in terms of their approach, what
they need to do. And so when you think about the role that the
PBMs play, it's really orienting our infrastructure capabilities,
expertise to help deliver on their commitments and execute
their strategy better than anyone else. And so there's a
number of approaches that we deploy in partnership with our
customers to help manage the overall cost of pharmacy
benefits for their particular members. When I think about CVS
Caremark and why are we unique? I would highlight several key
aspects of that.
First and foremost, we are very customer centric and customer
oriented. We listen to our customers. We understand what's
important to them, their priorities, and we align our
organization, our capabilities in a way that helps deliver on
their commitments and their objectives better than anyone
else. Secondly, when you think about those we serve and the
infrastructure that's needed in order to engage with
manufacturers, in order to create competition, in order to
deliver the greatest value from a price perspective, the size
and scale of CVS Caremark is unmatched and in a way allows us
to work together with the supply chain to optimize in a way that
delivers value to our customers. Secondly, as we think about the
role that we play, it is how are we engaging with the members
that we serve on behalf of our customers to help advance their
strategies in the least abrasive way possible.
When you think about managing the overall cost of prescription
medications and the desire of our customers to have an
affordable benefit, it's important that they take very
active approaches to managing overuse, abuse and misuse of
medications. The third area, and it's one that is a clear
differentiator and franchise for CVS Caremark is our expertise in
specialty pharmacy. Specialty pharmacy represents close to 50%
of the cost of providing prescription benefits, but it
usually only represents about two to 3% of the members. So
there's a very small subset of members that are accessing the
benefit and in doing so represent a significant amount
of the cost. So our ability to actually engage those members in
a way that supports them with their complex condition to help
manage their care is unique and differentiated.
Then finally, how are we engaging the member? As we think
about the trust, the engagement and the work that we're doing,
engaging with that member each and every time they access the
prescription benefit. And the prescription benefit is in many
times the most utilized benefit within any given plan. And so
our ability to actually engage that member to produce a
different outcome, to manage the overall strategy and to help
them manage their care effectively is really a final
area of differentiation for us.
Speaker 1: So when you say customers, you're thinking
employers, the health plans and the members of those plans, is
that right?
Speaker 2: That's correct. It's traditional employers, members
of health plans, but also state and local government and union
and labor customers as well.
Speaker 1: So obviously high drug costs continue to be top of
mind for employers, health plans and those other entities you
mentioned. How is CVS Caremark helping manage those costs and
improving affordability? You touched on this a little, but
could you kind of drill down on that?
Speaker 2: As you think about managing costs, you really need
to understand what are the underlying components that
ultimately produce the cost paid for the pharmacy benefit. And so
we like to think about it in terms of cost equals price times
product times utilization. And so the sum of that equation is
what ultimately will produce the cost associated with providing
the benefit. And so if you look at each one of those three
pillars, if you think about the pricing construct, it's how are
we creating competition within the supply chain? How are we
optimizing in a way that delivers the greatest value to
our customers and our purchasing scale throughout the entirety of
the supply chain to deliver value to our customers.
Secondly, as we think about the product, and so this really gets
into mix and when you start to evaluate and understand how plan
designs are built, how we work with our customers to take a
very data driven approach in terms of what's driving their
costs, what are the conditions that they have within their
population? Where do they want to invest the dollars that
they've allocated for the benefit? You start to think
about that in a way that maximizes generic medications,
which are the lowest cost prescriptions available,
traditional branded products, specialty medications, which are
used to treat high cost complex conditions. And then really the
new emerging opportunity, which is biosimilar medications. And
so these are really generic products for the high cost
specialty medications.
And there's a tremendous opportunity that's being
presented over the past several years and there's a pipeline
that is growing. So part of it is we have to make sure we've
got the right unit cost and price. How do we work to
establish and achieve the best mix given the population that is
being served? And then finally, how are we managing the
utilization? And so when we think about utilization, it's
really understanding the quality, the care management,
evaluating the drugs that are being prescribed, working
closely with the physician and the member in order to advance
the approval of certain medications.
But you're really trying to ensure that you're managing the
overuse, misuse, and abuse of medications and ensuring that
the medications that are dispensed are appropriate for
the given diagnosis that a member might have. And so we
really think about those kind of three key areas that make up the
cost equation. And then how are we executing strategies,
leveraging our infrastructure, our ability to engage with the
member, our digital assets, the front engagement that we have is
we're connecting with those members in a way to help support
them on their care journey. And so when you bring all of those
together, it really creates the outcome that helps our customers
manage their overall cost, which is the role that we play.
Speaker 1: Great. Yeah, I know that utilization adherence,
those are all really key issues and also the availability of
generics and increasingly biosimilars is something we
follow a lot. So really interesting points. So what
challenges are customers facing as they decide on their pharmacy
benefit coverage? Like, they even aware they're using a PBM
and so on?
Speaker 2: Oh, they're absolutely aware of the
relationship that they have and what's really happened over the
past several years. And I think back to when I first started,
I've been in the PBM business for over thirty years. And at
that time it was really a mail service as a voluntary benefit.
And so as it's evolved over the past period of time, it's very
much a foundational aspect of the benefits package that a plan
sponsor offers to their members. And so it's continued to grow in
its cost and ultimately its focus when you think about truly
at the C suite level and understanding the cost and the
acceleration within the pharmacy benefit.
It's one of the least expensive ways to treat conditions when
you think about alternatives of being inpatient or other
particular therapies, but it's continued to accelerate in a way
that it represents more than 50% of the costs that typical plan
sponsors are spending. And it's continuing to grow and trend
based on disease progression and continued increases. So it's at
the C suite level, clients are very much aware of the growing
cost and really the focus of the need here because it touches so
many members and it's accelerating in a way that they
truly need the help of PBMs and experts like CVS Caremark to
support their strategies.
Speaker 1: Right, so strategies and sort of controlling those
costs as they continue to increase.
Speaker 2: When you start to think about how they have the
ability and what's top of mind in terms of their offering a
benefit, affordability and cost is the number one criteria and
area of focus for our customers. But fast following that, it
really gets into the experience and think in terms of the member
experience. So as you're managing and trying to provide
an affordable benefit that all of the members can use, you have
to also manage the experience that the member goes through as
they're accessing the benefit. And so those are two of the
primary areas of focus for our customers. And then what's
continuing to emerge is ensuring it's compliant, it's
responsible.
And when you think about the overall legislative and
regulatory environment, that it's also very responsive to the
ongoing changes in evolution and really an area that CVS Caremark
has taken a leadership position in terms of our overall approach
relative to what's important to our customers.
Speaker 1: Right, there's a lot of developments on the policy
side, a lot to follow. And so we know plan sponsors are looking
for more transparency in drug pricing. What is CVS Caremark
doing to respond to this and how do transparency models work?
Speaker 2: This has been a movement that's been underway
for several years in terms of a desire to understand and to be
more transparent and really connect how you think about the
overall supply chain within the pharmacy benefit management
arena. And so we very much support our customers in terms
of their desire to understand the underlying economics and
have really taken a leadership position over the past couple of
years in terms of introducing new models from a pricing
perspective, how those models manifest themselves in terms of
benefit design, all the way from how we're purchasing from the
manufacturer down to how the member actually pays for the
medication. And so really looking at how do you align the
purchasing with what's ultimately paid, not just by the
plan sponsor, but ultimately by the member. And so we very much
support the transparency requirements and understand the
regulatory environment, taking a leadership position and really
think about this as an opportunity where our clients
are looking to us for guidance in a very dynamic market in
terms of how do we manage through this in a way that
allows us to maintain the affordability of the benefit.
How does the economics change when you start to think about
underlying drug pricing, still leveraging strength of CVS
Caremark to deliver the best value across the cost equation
that we talked about earlier, but ultimately in a way that
allows them to understand the cost of the medications and true
net cost of the medications.
And this is one of the areas that becomes challenging, which
is there's the discounted cost of a medication and then there's
the rebate that you receive from manufacturers at a future point
in time. And so really when we think about supporting our plan
sponsors and making the very best decisions, they need to
understand the true net cost of the medication. And that's
really an area that we're supporting our customers in
because it also helps them to make the best decisions in terms
of coverage and also the affordability of the benefit
down to their members and constituents.
Speaker 1: So I'm wondering now how CVS Caremark is using
technology innovation, including artificial intelligence or AI to
transform pharmacy benefits and the member experience.
Speaker 2: Jessica, that is a paramount area of focus for our
organization. We announced over the next ten years, we'll spend
$20,000,000,000 as a company to deepen and advance our focus on
using advanced technologies to enhance the delivery of our
services across the CVS Health ecosystem and CVS Caremark is
benefiting meaningfully in that regard. There are several key
areas that I would highlight that have been paramount from
our perspective. And so you really have to think about this
in a way and it really builds upon one of your earlier
questions in terms of how CVS Caremark is differentiated when
we think about the cost, the member experience, but really
advancing in a way and thinking about us as a really technology
services company and evolving in a manner that allows us to not
only support the plan sponsor from a strategic planning
perspective using data and insights, how are we engaging
the member in a way that identifies opportunities and
helps prompt them to take the next best action. As we think
about the models that we're deploying and identifying those
opportunities and leveraging data, but also how are we
engaging with the provider?
And that's one thing that we haven't talked about throughout
the entirety of all of this, Jessica, a prescription doesn't
get dispensed unless a provider prescribes it. And so this is an
area that we've invested very heavily in from a technology
perspective and it's leveraging our connection deep within the
electronic medical records across the industry in order to
work within the healthcare ecosystem to understand
information relative to our patients and our members'
conditions, how they're accessing medications and
leveraging that from a prescribing perspective. Let me
give you an example. We, Myra went a biosimilar within the
past year and a half or so. And it was one of the most
successful conversions that ever occurred within the biosimilar
industry and the adoption of the product.
What we were able to do by leveraging our advanced
technology, our connection into the healthcare ecosystem through
the electronic medical records is we were able to engage
directly with the physicians, identify the members that were
on the branded medication. And then we were able to work within
the system, within the provider flow to communicate with the
physician, to convert them to the biosimilar medication. And
so we've achieved over 90% adoption and conversion to the
biosimilar saving our customers $1,800,000,000 plus and in doing
so reducing the cost for members, many of which moved to
a $0 copay. That's just one example of how we're leveraging
technology, but also how it's connected and wired deeply into
the healthcare ecosystem to produce a better outcome, to
reduce member abrasion and to manage and drive down the cost
of care. We're also using it for traditional prior authorizations
where we're able to identify areas of opportunity.
A great example is a plan sponsor has determined that they
wanted to more effectively or closely manage a therapy and
require a prior authorization. And this is an area that's
received quite a bit of press in terms of the abrasion and the
impact that has on physicians and ultimately members. And so
we've used artificial intelligence to help us extract
the data, understand the clinical criteria, apply the
critical criteria and determine what additional information we
might need, how we might connect back into the provider to
receive that information. How do we keep the member informed as
it progresses through the prior authorization approval process,
and ultimately move through the disposition of that request. And
so we've accelerated into minutes the time that if all the
information is there, that the prior authorization is approved.
And so that minimizes abrasion to the member. It gets them on
therapy faster. In the event we need more information that's
handled in a very electronically oriented way. And ultimately,
there's a decision that the prescription should not be
approved, there's a human in the loop to make that decision. We
do not use AI or advanced technologies to make decisions
against prior authorizations.
We would always have somebody evaluate that. We're using it in
our call centers to enable in the event we get an outbound
call from a member asking about their benefit, we're using it
inside our call centers to anticipate, to listen to the
members as we're engaging in the conversation, to present the
representative with the information that they need in an
anticipatory manner to allow them to best serve that member
because our customers contract with us not only to help manage
the cost, support the care that they're investing in for their
members, but their employees and their members are there to serve
their mission, not to navigate the healthcare system and the
benefit that we've provided. So we think about this in a way
that how do we make this most efficient while managing and
balancing the totality of what's needed. And then the final area
is how are we using technology to predict, anticipate, consult
and bring forward advanced strategies to support our
customers really in a prospective way, given the
continued trends and dynamics within the pharmacy benefit
landscape.
Speaker 1: So, yeah, this just sounds like a really interesting
new frontier, you know, EHR prompts to kind of change
provider prescribing and also just using AI to speed up some
of these processes that can can feel a little slower. This
sounds like a really interesting new frontier kinda using
technology and AI to to kind of attack some of those pain
points, like substituting generics or biosimilars for for
the brand name and and also kind of speeding up some of these
these processes. So interesting and definitely something to
follow.
Speaker 2: Jessica, I'd like to add what really, and you kind of
think about the next frontier, right? So we think about the
foundational elements of what you historically think about in
terms of what we've done and how we're helping our customers
manage the cost of pharmacy benefits. But you also have to
think about it in a way that the trusted relationship that we
have with those members creates an opportunity for us to engage
them and work with them in a different way to help support
their care and support them on their journey. We recently
launched Health one hundred, which is we believe a
meaningfully differentiated consumer health engagement
platform that will really create an open access environment for
our customers and their members to have a single point because
this is one of the things that is most challenging for our
customers and their members is just how fragmented the
healthcare system is. And so the core system is fragmented.
And then if we think about how various point solutions that
might be enabled to support a given therapy are enabled, It's
very challenging for a given member to determine where to go
for what, when and how do you best support in an environment
where most people don't have a primary care physician. If they
do, they're not consistently seeing the primary care
physician and as time progresses, disease progresses
and that becomes very, very problematic. And so what we've
launched is really a first and meaningfully differentiated
given the number of members we serve every day and the trust we
have is Health one hundred. And think about that in a way that's
really meant to be the one stop shop for not only CVS Caremark
members, but broader members that we serve to access a
trusted source that is deeply integrated into the broader
healthcare system with other partners outside of the CVS
Health family to help our members support and navigate
care. Think in terms of providers participating, other
health plans participating, our customers participating, it's
really an exciting time and one that is very much relevant given
the challenges that our customers are facing in
particular their members.
We'll also be deploying an AI coach and support the members
that engage in the platform. So there's some really exciting
times and things that are coming from CVS Health and CVS Caremark
generally, as we think about controlling costs and thinking
about costs, not only around pharmacy, but how do we think
about the total healthcare costs of those we serve?
Speaker 1: That's really interesting. James, thanks again
for joining us on this sponsored Health Affairs podcast episode.
This episode has been brought to you, the listener by CVS Health.
Thanks for listening and be sure to subscribe to all of Health
Affairs Publishing podcasts, A Health Podyssey and Health
Affairs This Week, wherever you listen to podcasts. Thanks.