Rae Woods (00:02):
From Advisory Board, we are bringing you a radio advisory, your weekly download on how to untangle healthcare's most pressing challenges. My name is Rachel Woods, you can call me Rae. In the last year, we've talked a lot about high cost drugs. In fact, I think I've spent more time in the last year on the podcast talking about drugs than I have since we launched this podcast back in 2020. We've talked about new innovations, we've talked about equity, we've talked about my own personal anxiety over high cost drugs, and all of the excitement around weight management drugs. I can add all of those episodes to the show notes if you want to check them out.

(00:41):
All that's to say, there's just a ton happening in the drug space right now. There are folks talking about rising costs, there's legislative and regulatory changes, and if I reflect on what the industry is doing, I think a lot of folks are taking a wait and see approach. The reality is though, the new era of drugs is already here, and I'm not sure that healthcare organizations can afford to sit around today and strategize later. That's why this week, I've invited advisory board pharmacy experts, Rachel Peroutky and Chloe Bakst, to discuss how stakeholders should be preparing for this new era of drugs. Hey, Rachel. Hey, Chloe. Welcome to Radio Advisory.

Rachael Peroutky (01:25):
Hi, Rae.

Chloe Bakst (01:26):
Glad to be here.

Rae Woods (01:28):
Rachel, is this going to get confusing for you, or is this why maybe the nickname helps me?

Rachael Peroutky (01:34):
Nickname helps me.

Rae Woods (01:36):
There haven't been many Rachels who've come on Radio Advisory before, so this isn't often a problem for me.

Chloe Bakst (01:43):
I don't think I've ever called you Rachel in my life, so don't worry about that.

Rae Woods (01:48):
It's a bit jarring when it happens at work. I never expected my nickname to become my professional persona, and my full name to become my personal persona, but here we are. Here we are.

Rachael Peroutky (01:59):
I've long aspired to be a Rae, so I'm a little jealous, but I'll hold it in. It never stuck with me.

Rae Woods (02:06):
I'm going to be honest, there is so much happening in the drug space right now. I know that the two of you live and breathe this as researchers every day, but as someone who's not as intimately involved in the research, I have found it difficult to keep up with everything that's happening. We've got all these high cost drugs coming down the pipeline, the policy landscape is changing. When it comes to all of this stuff that's in flux, what are the key things that you two are watching?

Rachael Peroutky (02:34):
It's two main things for me. One is, like you said, a lot of high cost cell and gene therapies, as well as some new competition for the weight loss drugs, so it's those exciting new innovative treatments. And then, the other side is the policy pressure that's coming from both sides of the aisle and expanding to encompass different stakeholders across the industry, at this point.

Chloe Bakst (03:02):
Like Rachel said, I think there's a lot of new things coming down the pipeline, but that's entering into an environment where we already have a lot of high cost drugs that have been impacting drug spend for the last five years, and so we're just seeing that really ramp up in the upcoming few years.

Rae Woods (03:21):
The ramp up is probably what I am feeling, and the folks that I'm talking to are feeling, the most right now. We're not just talking about one new drug, or one new category of drugs, which adds to this swirl of, oh my gosh, how are we going to wrap our arms around this problem? Which is perhaps exactly why we see the government trying to run at this challenge, and they're doing that, at least as of recently, through the Inflation Reduction Act, they're also doing it through proposed PBM reform bills. Level set with us. What does this legislation promise to do, and is it actually going to be enough to solve or get at the drug cost problem?

Chloe Bakst (04:02):
I'll start with the IRA. I'll answer your second question first, no, it's definitely not going to solve-

Rae Woods (04:09):
Not going to solve the problem, all right, we got that out of the way, great.

Chloe Bakst (04:09):
Not going to solve the problem. Wouldn't that be great? I think the problem is just, we talk about the drug cost problem, there are so many different misaligned incentives, stakeholders, processes, players, in the drug value supply chain, that there's not going to be one piece of legislation that can solve all these things. I think what we're likely going to see, and what the IRA is a first sign of, an increased focus and attention from all players in the government space, states and federal, focusing on discreet issues within drug policy, and trying to change those things.

Rae Woods (04:47):
Is it really that something like the IRA isn't going to solve all the drug problems, or is it that it's just not going to solve it soon? I'm thinking about the listener that might be going, hold on, didn't the government say they're hoping to save... Isn't it $100 billion? Why is that not going to be enough? Why is legislation not going to be enough?

Rachael Peroutky (05:08):
Every time the government tackles one thing, we're still innovating faster than those changes can be implemented, and we're still aging faster than we can control the spend. No matter what the government does, our population's going to keep aging, and we're going to be seeing the fruits of all of the genetic innovation of the last two decades. In some ways, it's good things, we're in a time of some exciting innovation in the treatment landscape, but it's hard to catch up and try to put a damper on that spend, especially anytime in the short-term.

Chloe Bakst (05:46):
I think we need to think about legislation as something that happens in phases, so a lot of the PBM reform bills that we're seeing floated, or they're most likely to make it through Congress, at least from my personal perspective, are ones that are focused on transparency, or just getting a better sense of what PBM practices are, or ensuring 100% rebate pass through, or cracking down on spread pricing, the type of things that won't necessarily have huge impact in the way that PBMs operate, because I think a lot of them already do these things, but it's more so dotting the i's and crossing the t's to making sure that the industry is doing what it's supposed to be doing and lowering drug costs. And then, once we have greater insight into how PBMs are operating, or if there are things that actually need to be regulated more severely, this is the first step to that.

Rae Woods (06:41):
And I think it would be reasonable for our listeners to, at this point, be frustrated, because they want someone else to step in and solve some of these problems, but I actually think that this is a moment where our listeners and health leaders need to take action and dig into their own responsibility in responding to these challenges, so I want to go there next. I know we've talked on this podcast, and Chloe, you've been on episodes where we've talked about all of the different challenges that purchasers have when it comes to just paying for high cost drugs and ultra-high cost drugs. What do you want purchasers to be doing today so that these innovations, as Rachel described, these life-changing drugs, can actually get into patients' hands?

Chloe Bakst (07:25):
I hate to say this, because it's so unfair, but there's really not much you can do other than get ready to spend a lot of money, and the wait and see period is closing, you have to start experimenting, you have to start acting, think about what solutions make sense to you. There are options for solutions out there. We have some advisory board deliverables, I'm sure we can plug here, that list different things that we've seen. But we also have to start thinking about what's beyond the price, because the reality is, we're going to be spending this money on these drugs, there's really no way to get around it, we have new technology, we have to pay for it, so let's start thinking about the bigger picture beyond the price tag.

Rae Woods (08:13):
And I do want to acknowledge the fact that taking on these costs looks different for different purchasers. It's going to look very different for a national health plan versus a small regional health plan, it looks very different for a national huge employer versus a small employer. But beyond this idea of just thinking about how much money I'm going to have to spend, what are some of the other things you want purchasers to be thinking about?

Rachael Peroutky (08:37):
One of the things they can start considering is what opportunities open in a world where we have more competition in the high cost drug space. So in the next year, we're going to be seeing some cell and gene therapies for the same indication coming out almost simultaneously. Sickle cell is a good example of this where there's two treatments under review by the FDA right now, so that opens the door. What else do you want to talk to the pharma companies about besides list price and rebates? Does this open the door for outcomes-based contracting? We're seeing some examples of that in the space, but maybe there's more to go on in the world of competition.

Rae Woods (09:26):
Or think about the larger relationship that you have with this massive stakeholder in healthcare, and sure, you might be getting a hit in one place, but what else do you need to be thinking about in terms of your relationship, partnership, with these other stakeholders?

(10:28):
You mentioned quickly outcomes-based payment, and I have to talk about this for a moment, because I'll admit, I've had some frustration, to Chloe's point, about the wait and see period, which, as you said, is closing. How are we starting to see purchasers actually experiment with new payment models, ideally sustainable payment models, to think about how they're going to cover these high cost drugs?

Chloe Bakst (10:53):
I'm going to push back on your question a bit, because I think that purchasers really want to do outcomes-based contracting, but in a lot of these situations, the manufacturers don't have a lot of incentive to enter those types of agreements if they're the only drug on the market, especially if they're the only drug in the market for a specific disease state, like a rare disease gene therapy.

Rae Woods (11:15):
'Cause they just may cover it, or there's no option for this particular group of patients, even if [inaudible 00:11:22].

Chloe Bakst (11:22):
Right. So there's no reason, if I'm a manufacturer, to enter into an agreement where I'd have to pay a rebate if the drug doesn't work if you have to cover the drug anyway. But if I have a competitor in the market, and they enter into an outcomes-based contract, and if the payer says, the only way I'm going to cover this drug is if you enter into this outcomes-based contract with me, and now I have the competitor giving me that incentive to do that, now we have a ball game, now we have some momentum going-

Rae Woods (11:52):
Yes.

Chloe Bakst (11:53):
... and we can get outcomes-based contracting to pick up some speed.

Rae Woods (11:58):
This is really interesting to me, because I think that most folks look at the enormity of the changes in the pipeline, and they are feeling really paralyzed by it, but you're actually saying that it might create new opportunities for things that purchasers want to do anyways that maybe wouldn't have been on the table before if we were just talking about a handful of drugs.

Chloe Bakst (12:17):
Yes. I think the more drugs, like Rachel said, the more opportunity.

Rae Woods (12:24):
Wow. Is that true for provider organizations? I got to say, on this podcast, I feel like oftentimes I'm talking about providers are getting the short end of the stick on many things happening in healthcare. How are they impacted by, again, the number of drugs, rising competition, and rising costs?

Rachael Peroutky (12:48):
I think we're seeing, unfortunately, some of the same issues continuing in that the profit around drugs for providers is really low. We talk about high drug spend and high drug costs, but in terms of what providers are actually getting reimbursed for the drugs they're buying, or same thing with pharmacies getting reimbursed for the drugs they're distributing, things are really tight, and providers are having to figure out maybe some other options.

Chloe Bakst (13:23):
But I also think there's a world where we can take these high cost drugs and create new... Providers can, at least, create new opportunities to build revenue streams or build service lines around them. And I think it's similar to the purchasers in the sense of acknowledging the fact that these drugs are now changing how we're approaching care for certain patients, so let's roll with that-

Rae Woods (13:51):
Yes.

Chloe Bakst (13:52):
... and think strategically about how you can take some of these medications or some of these treatments or new therapies and build your brand name, create a sickle cell service line, or do something that is moving us forward, instead of, again, lingering behind or getting overwhelmed by all the negative things that we've talked about.

Rae Woods (14:16):
I wonder if we can talk more about that, or maybe even if you have an example of someone that's done this successfully. 'Cause if I think about the traditional delivery system, procedures are really at the center of what health systems in particular do, but what's changing so, so quickly is that drugs are suddenly becoming the new metric of access, the new way that we're actually treating many, many of these conditions, and that's something that we, as an industry, aren't necessarily prepared for, but providers are really, at least in my mind, fearful of what this means, like take weight loss drugs in particular, they're going, uh-oh, what's going to happen with my bariatric surgery volumes, with my orthopedic surgery volumes? Chloe, we talked about that fear on this very podcast. What does opportunity look like for those providers?

Rachael Peroutky (15:07):
I think, Rae, you said it, with the weight loss drugs, that is where we're seeing a lot of providers experiment a little bit. It's been so fun talking to different health systems who are taking what's essentially a drug spend issue of the rising cost with GLP-1s and turning it into an opportunity. They see the demand for obesity care, and they're trying to build out different service lines to help people with their chronic obesity management that's not just giving people the weight loss drugs. Sometimes, you mentioned the competition with surgery too, the weight loss drugs are that direct comparison of where we might've been shuffling people to the bariatric surgery option before, now there's this new option. And so, people are trying to stay on top of how do we manage the utilization of these really costly drugs, but also leverage the demand surrounding them?

Rae Woods (16:13):
So what I'm maybe hearing both of you saying is that the opportunity when it comes to drugs is not actually about reducing spend, even though, if I think about the conversation more broadly, that's what the Federal Government is trying to do, that's what we're seeing new policy changes try to do. But you're saying within the healthcare system, if we look at purchasers, if we look at payers, if we look at providers, the opportunity is less about spend and more about different levers, maybe even levers for revenue, in this case, it's just different than what perhaps those stakeholders traditionally relied on.

Chloe Bakst (16:48):
I don't even know if it's that different. I think there's an argument here about you don't have to reinvent the wheel to be innovative in this space or to approach high cost drugs in a new way. A lot of what Rachel just described with the weight loss drugs, people are already doing a lot of this work, even if they don't realize it. You probably have a bariatric surgery arm, or a nutritionist on staff, or behavioral health specialists who can help manage patients who are on a weight management journey. The key is really integrating them and bringing them under one umbrella so that a patient can enter into that space and get any of the obesity care that they need.

(17:30):
And the same thing with managing, I think, a gene therapy. It's not like we haven't built out ways to manage ultra-high cost drugs before. We've had ultra-high cost drugs for a long time. We're only seeing the price tags get higher, but the need to have somebody in charge, a care navigator or somebody in charge of the revenue cycle end of things, and really managing patients on an individual basis, that's not new, we're just saying we're likely going to start seeing health systems experiment with building that out on a larger scale.

Rae Woods (18:06):
That's interesting. Is that something that you think that everyone should be experimenting with? Should everybody be experimenting with what it would mean for gene therapies to be delivered at their, let's say, let's keep it with the provider, health system? Should everybody be thinking about the holistic wraparound services they invest in around the weight loss drugs? Is this an option for all, or is this going to be an option for a few?

Chloe Bakst (18:33):
My answer here is that it really depends. So there are some drugs, and this goes back to our conversation, Rae, a couple of months ago about not all high cost drugs are the same and we have to think about them differently.

Rae Woods (18:46):
Yeah.

Chloe Bakst (18:46):
You have to be really strategic in how you're going to build... What opportunities you're interested in seizing. If you're a health system and you know that your population has a lot of sickle cell, and that you really want to be the leader in your market in treating those patients and that's what you want your brand to be, then yeah, it's probably worth building out some sort of sickle cell support services and service line around these upcoming therapeutics.

Rae Woods (19:19):
And that might look a little bit more, I don't love this term here, because I think it means something specific, but it might look a little bit more akin to a center of excellence, right? Let's actually establish and be a hub, that's probably a better word, a hub, for this novel therapy for this population, which, to your point, has to do with, what does our market look like, but also, do we have the infusion centers? Can we invest in these things? Is this the right, again, to your point, Chloe, the strategic move for my organization? But you might have one organization that says, we're going to have a sickle cell center of excellence, and another one that says, gosh, what's another... One for adrenoleukodystrophy.

Rachael Peroutky (20:00):
To the question on what can everyone do versus what might certain health systems do, I think when you look at things like the cell and gene therapies for the rare diseases, you're hopefully starting years ahead, so that you know can capture at least some of the small population that will be eligible for that treatment by looking back years before to know you have that market share, versus something like obesity care, most health systems have a market already, very few people actually access obesity care today compared to who's eligible to potentially access obesity care. So that's one thing where I think everyone could benefit from building that capability out.

Rae Woods (20:54):
What about back to the payer purchaser side? I'm guessing that maybe, again, it depends, there are moves that all payers should take, and some that only a handful should. What does that look like?

Chloe Bakst (21:07):
I think from a payer perspective, I'm expecting to see a lot more partnership strategies, or patient steerage can have a negative connotation to it that I don't love, but the idea of partnering with the hubs, partnering with the centers of excellence, so it's not a question of whether or not you're going to cover the medication, but how and when and for whom.

Rae Woods (21:32):
Yeah. And maybe I'll put even a finer point on that, it can no longer be a question of whether or not you're covering some of these medications, especially when we're talking about curative treatments in some cases, we're talking about the only option for a cure for rare diseases in some of these cases. Not all, but certainly some. I'm trying to reflect on our conversation thus far, and there's one word that's at the front of my mind, and I wonder if you think that this is right. When it comes to drugs, when it comes to this new era of drugs that we're in, is the thing that all stakeholders need to keep in mind experimentation? We can't sit back, so we need to test, we need to partner, we need to build, we really need to experiment. Is that right?

Chloe Bakst (22:23):
Yeah, I think you're right, Rae, and I think that experimentation is going to look really different for all different health systems and healthcare stakeholders, and we're going to need to see folks get comfortable putting themselves out there and taking risks.

Rae Woods (22:37):
Taking risks, and not being able to rely on just reinventing and repeating what someone else did, which you're right, is uncomfortable. My last question for the two of you, which, given the context you just shared, Chloe, is going to be a hard one, is if we need to experiment, and if that experimentation may need to look different, what are the handful of things that you want all of our listeners to do, knowing that we can no longer be passive in this new era of drugs?

Rachael Peroutky (23:09):
One thing that I want people to remember, experimentation is a sister word, in my mind, for innovation, which was our theme of research the whole year, and so as you're experimenting, as you're innovating, remembering that innovation sometimes leaves behind health equity. And so, how can you put health equity in the center of your experimentation when you are trying to tackle these different problems?

Rae Woods (23:40):
Yeah.

Chloe Bakst (23:41):
I think I would encourage everyone to remember that you don't need to, as I said earlier, you don't need to reinvent the wheel to meet new challenges. Think about the infrastructure that you have already at your organization, what your strengths are, and build from there.

Rae Woods (24:04):
Well, Chloe, Rachel, thanks for coming on Radio Advisory.

Rachael Peroutky (24:08):
Thanks for having us.

Chloe Bakst (24:09):
Thanks for having us.

Rae Woods (24:16):
Experimentation and innovation must be at the center when we think about the new era of drugs, and I got to be the one to tell you that the amount of change that's coming in the drug space isn't going to be slowing down anytime soon. As much as I want health plans and health systems and providers to be innovating, particularly on payment models, remember, the life sciences companies are innovating too. We have to start getting things right now, because the pace of change is just going to continue. But remember, as always, we are here to help.

(24:54):
If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts, and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Rae Woods, as well as Abby Burns, Kristin Myers, and Atticus Raasch. The episode was edited by Katy Anderson, with technical support by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Carson Sisk, Leanne Elston, and Erin Collins. Thanks for listening.