Relentless Health Value‪™‬ Stacey Richter

Yeah, so while the commercial payer marketplace is completely boring, the reasons it’s boring are not.
Let me walk you through this conversation I have in this healthcare podcast with Jacob Asher, MD.
First, we establish that the relative number of each carrier’s commercial members in California don’t seem to change year over year … and this has been true for years. When you rank order carriers by member count, the song remains the same. It’s Groundhog Day. Here’s a link to the 2022 CHCF (California Health Care Foundation) enrollment almanac, which shows for the large group market, Kaiser has captured and retained just over half of enrollees. Anthem comes in next with 14%, Blue Shield gets 9%, and then bringing up the rear we have UHC, Aetna, Cigna, Centene, and all others in descending order splitting the remaining 21%. Hmmm … intriguing, the whole idea that these relative member counts remain so consistent.
Then Dr. Asher and I dissect what is anybody actually doing to cut into the Kaiser market share or try to grab share from the two blues plans, if anything.
Dr. Jacob Asher was a great guy to have this conversation with. He was a practicing head and neck surgeon with Kaiser Permanente, and then he also served on the Permanente Medical Group Board of Directors.
Then he changed careers and became a full-time health plan chief medical officer for, first, Anthem, then Blue Cross, then Cigna, then UHC (UnitedHealthcare). Now he’s “retired” and reflecting back on unsolved and unaddressed issues within healthcare. And we’ve covered one here: Why is the commercial payer market as boring as it appears to be in California?
Now, after I had this conversation with Dr. Asher, I called up Wendell Potter, who everybody already knows (EP384), and Lauren Vela, who everybody also probably already knows, but she has spent her career at various employer coalitions and now works at a big employer transforming their health benefits (and she lives in California). I learned a few things that really helped me frame my thoughts on some of the issues that surfaced in the conversation that I had with Dr. Asher and that you’ll hear today. So, let’s get to it. Why doesn’t the relative market share of the big payers change year over year in California in the commercial space. May I present six reasons:
1. Everybody I talked to—Dr. Asher, Wendell Potter, Lauren Vela—first thing right out of the gate that practically everybody mentioned is employer inertia. Trying to get an employer to switch carriers is like trying to pull Excalibur from its stone. And right, not so surprising, it’s disruptive and obnoxious for employees and also benefit teams if carriers are switching all the time.
2. EBCs (employee benefit consultants). They have deals with carriers and others, and they also have a lot of power over employers. Listen to the show with AJ Loiacono (EP379) and Paul Holmes (EP397) for more on this.
3. As Wendell Potter put it, “The commercial market is [as a whole] stagnant. No real growth nationally. And in many states, the real money for carriers is not in the self-funded market; so they don’t care much about aggressively competing for market share.” Given that chart that just came out the other day showing the insane relative gross margins that carriers are making on Medicare Advantage patients, which is over double other lines of business … yeah, totally.
4. Just keep this in mind before we barrel into reason #4 here for a stagnant and maybe not exactly competitive market. Kaiser excluded, all of the rest of the California payers have what amounts to largely the same provider network. I’m exaggerating slightly here, but largely the same hospitals, the same consolidated integrated delivery networks.
And one thing that’s pretty clear (not just in California but across the country): Plans who bring the most members get the best prices from these hospitals and other provider organi

If this were a video show, I would stare into the camera with steely eyeballs right now and say that I have a special message for employer CFOs. If you aren’t a CFO, pretend that you are so that you get the full effect here.
So, now that we’re all CFOs, let’s pull up the company P&L (Profit and Loss) statement. This is what keeps us all up at night, right? Making sure that the net profit line at the bottom looks good.
We could decide to lay off a few people. Reorg something or other. Beat up a vendor. Stop buying the gold paper clips. We also could go over and have a strident conversation with sales leadership about what they can do to jack up their sales revenue. Top line begets bottom line, after all.
Or, here’s another idea: In this healthcare podcast, I am speaking with Paul Holmes, who is an ERISA (Employee Retirement Income Security Act) attorney with a specialty in PBM (pharmacy benefit manager) contracts, especially the PBM contracts from the big PBMs that get jammed in employer plan sponsor faces by whomever and which they are told look fine and that the employer plan sponsor should just go ahead and sign.
Now, if we, meaning all of us CFOs, sign that paper, or someone on our benefits team signs the paper … fun fact, our company just spent 30% to 40% over market for our pharmacy benefits. That contract we just signed contains all kinds of expensive little buried treasures—treasures accruing to the PBM and other parties, to be clear, and coming at our expense. There’s 17-ish very common treasures in your typical PBM contract, and none of us will ever spot them unless we know what we are looking for.
But let’s dig into this for a sec, especially for all of us newly minted CFOs because the real ones already did this math.
Say our company spends whatever—we’re a bigger company, and we spend $100 million a year on our drugs. That’s a minimum of $30 million that we got taken for … $30 million a year. That’s a metric load of our cold hard cash that got dumped out back and burned.
Because of the huge dollars at stake (30% to 40% of drug spend), it’s certainly the advice of almost anybody that you talk to who’s an expert in PBM contracts to have a third party—not your EBC (employee benefit consultant), which we’ll get into in a sec, but somebody else (a third party)—review every PBM contract.
I mean, what’s the worst that can happen for anybody considering having an independent third party review their PBM contract? It costs a couple grand in lawyer fees, and they give it a stamp of approval. Knowledge is power, and now we know.
But let’s just say this third-party review doesn’t happen. We all go with a “devil may care” about this whole PBM overcharging us by 30% to 40% possibility. And let’s say the PBM contract is, in fact, a ride on the Hot Mess Express, but we don’t know it. Here’s two pretty bad downsides, especially now, this year, since the passage of the CAA (the Consolidated Appropriations Act) at the beginning of 2022.
Number one bad thing: Plan sponsors may get sued as per the CAA for ERISA violations. It’s not just the company paying that extra $30 million, or 30% to 40%, right? It’s also employees. This is risk exposure, bigly. Just like it was on the 401(k) side of the house, which Paul Holmes, my guest today, mentions later on in the interview. He talks about just how much those lawsuits cost and, yeah, exposure.
As I mentioned three times already, today I am speaking with Paul Holmes about PBM contracts in all their stealthy glory. The one thing I came to appreciate is that these things are works of art … if you’re into those paintings of pretty flowers where, if you look hard enough, you spot a skull tucked in the greenery (memento mori).
Paul is a longtime ERISA attorney. He has dedicated his career to helping plan sponsors in their negotiations with PBMs and trying to help them reduce drug spend, especially drug spend tha

There are two facets of the Humira biosimilar market and launch that Anna Hyde, my guest in this healthcare podcast, talks about. One is market dynamics. The second is provider and patient confidence. These two concepts are tangled up together and cannot be separated.
But let me back up a sec and explain, although Anna Hyde covers this really well and offers context in the interview that follows.
So, first facet: market dynamics. This means fostering competition so the price of something goes down. That is the basis of capitalism. After all, you need competition to get in there and try to steal customers from each other by scuffling over price. In 2023, there’s supposed to be 12 biosimilar products for Humira that come out. So, we’ll see scuffling and lower prices?
Hmmm … maybe not so fast.
Second intertwined facet: provider and patient confidence that the biosimilars are as effective and have similar side effects (ie, there is confidence that the biosimilars are actually, for reals, interchangeable with the so-called reference product [ie, Humira]). Bottom line, if providers and patients are not confident in the biosimilar, then no prescribing is gonna happen.
Couple those provider and patient clinical concerns with a concern about manufacturer financial assistance. If providers and patients are worried that the out of pocket will be too high and the biosimilar manufacturers are not gonna offer any financial assistance, then, again, no confidence, no prescribing.
So, if either or both of these concerns is present and the no prescribing is the result, this vote of no confidence means there will be no or limited uptake of the biosimilars.
And what does the no uptake mean? It means no lower prices. Having competition per se isn’t gonna lower the prices because the monopoly remains the monopoly. It’s having uptake of the competition that will erode the monopoly. It’s having patients who are willing to migrate to the competitive products.
And this is pretty vital here because, right now, there’s a lot of cynicism out there about this biosimilar launch and that it is not really going to lower the cost of these drugs much for plan sponsors. And, you know, is anyone terribly surprised given it sure seems like AbbVie, who is the manufacturer of Humira, still has a lot of dominance in the market? “How do they still dominate the market even though their patent thicket years are officially over?” you might ask.
For one, they have payers over a barrel because members who need the Humira molecule are still 100% on Humira. Thus, AbbVie can still demand contract terms for Humira like the demand that Humira has the lowest patient out of pocket for patients or has an equivalent out of pocket to any formulary biosimilars. And this is currently going on. (Listen to the show with Dea Belazi [Encore! EP293] for why that matters so much from a market dynamics standpoint.)
A second reason why Humira can still dominate the market even after their patent expiry is that plans and PBMs (pharmacy benefit managers) are, as Chris Sloan put it in episode 216, “addicted to rebates”; and Humira offers big rebates, which they will likely increase to match any pricing pressure from biosimilars.
Here’s a quote from the Goodroot white paper on this Humira biosimilars business, which is otherwise known as the “hottest topic in pharmacy.” Goodroot says, “Given the cost-rebate power play—and the monetary loss that PBM[s] ... assume when rebate dollars are removed—we don’t anticipate any significant shift to biosimilars or cost savings as Humira biosimilars become available.”
So ... doom? Not so fast.
The Goodroot white paper continues with this next quote, and this is exactly what Anna Hyde also talks about and gives some historical proof points for, actually. Goodroot says, “There may be a tipping point in biosimilar pricing where the net cost differential will be significant enough to force [pla

Well, this episode is suddenly incredibly relevant again just with all the stuff going on with co-pay maximizers. If you’re gonna understand maximizers, though, you really have to start here.
In a nutshell, this whole thing is a battle royale between co-pay cards and patient assistance programs offered by pharma companies versus co-pay accumulators and co-pay maximizers deployed by health plans and PBMs (pharmacy benefit managers).
I just want to start by getting everyone grounded on a few really key points.
#1: Drug abandonment is a thing. Patient goes into the pharmacy to pick up their Rx and the out of pocket is too expensive, so they leave without their drug. This can happen on the first fill, like, “Oh, wow, I guess I don’t really need that new drug my doctor just told me I should pick up.” Or it can happen downstream, like in January when, all of a sudden, a deductible kicks in. But in all cases, we have a patient getting sticker shock on the out of pocket for a med and then going without the drug … or pill splitting or rationing or doing other things to save money.
#2: How PBMs shake rebates out of pharma manufacturers is to use what I just said (that whole abandonment possibility) as a leverage point. Pharma goes into a PBM that controls access for drugs for, I don’t know, 100 million lives. The PBM says, “Hey, you, Pharma! If you want to be on our formulary, you gotta kick out this much in rebates.”
Pharma says, “No, that is too much rebate. I cannot pay it.”
PBM says, “Well, then … OK, you’re not on formulary or you are poorly positioned on formulary. And let me translate what that means. Now the out of pocket for your drug will be so expensive that patients are gonna walk out of the pharmacy without your drug because I, the PBM, have control over patient out of pocket and I will make it very expensive.”
From a pharma’s standpoint, all those patients that aren’t picking up the drug … that means a loss of market share. And that market share can translate into a lot of lost revenue for the pharma company.
And thus begins the whole war of the co-pays/out of pockets. So now, let’s fast-forward through the past, say, 10-plus years. It’ll be like one of those movie montages with the action sped up so fast you don’t need words to see what’s going on … except this is an audio podcast, so I guess you do need words.
Alright, so this is what happens next: Pharma starts raising its prices combined with there’s more super expensive specialty pharmacy drugs. Reaction by the PBMs to this was to try to get more aggressive with Pharma demanding increasingly high rebates and other concessions, keeping in mind the prize and leverage point that the PBMs offered Pharma to secure those PBM rebates was lower co-pays or out of pockets for patients.
Again, it’s a well-known fact that the higher the patient out of pocket, the lower the market share of the drug because the higher the patient cost, the more patients abandon at the pharmacy counter. It’s the old supply and demand curve at work.
At a certain point here in all of this, the pharma companies start to get really pissed about their dwindling net prices as rebates start going up and up and their market share kind of doesn’t because the PBMs are keeping the money and maybe not passing it along to plan sponsors or patients. It’s a zero-sum game fight over the money, and Pharma feels like the PBMs are getting more than their share.
And they’re pretty smart, these pharma manufacturers. So, Pharma comes up with a Houdini move to escape PBMs holding Pharma hostage for rebates by using their control over how much patients pay or don’t pay at the pharmacy counter.
Fasten your seatbelts and let the games begin.
Pharma decided to hand out co-pay discount cards. Then Pharma doesn’t have to pay PBM rebates to get lower patient out-of-pocket costs. They can finesse lower patient out-of-pocket costs all by themselves. Take

Thanks, shurx, for this review on iTunes entitled “Prepare to Learn.” Shurx wrote:
“[RHV] provides key insight from experts that you won’t find anywhere else. It paints the picture of how our healthcare is tangled, and who benefits because of it. Whether it’s drug pricing, PBM shenanigans, hospital billing, or market trends that are challenging the status quo, this podcast is worth your time. I’ve shared many of the episodes with my pharmacy colleagues who have replied, ‘I didn’t know that’s how it worked.’ Now they do thanks to Stacey and her team.”
I wanted to kick off this particular show with this review because today we are again digging into the business of hospital care in this country. That’s actually how Sanat Dixit, MD, MBA, FACS, put it on LinkedIn recently. He said some of the hospitals these days aren’t in the healthcare business; they’re in the hospital care business. And when I say some hospitals, I mean some people in decision-making roles at some hospitals.
There was an opinion piece in the New York Times the other day by Eric Reinhart, and here’s my highlight from his essay. He writes, “But the burnout rhetoric misses the larger issue in this case: What’s burning out health care workers is less the grueling conditions we practice under, and more our dwindling faith in the systems for which we work.”
Relentless Health Value is here so that our Relentless Tribe has the information that you need to influence what goes on in some of the boardrooms where some of these decisions are being made. With that, let’s move on.
You know why my guest, Brennan Bilberry, got into his current line of work battling hospital chain anticompetitive practices? He got into it because this behavior, which is normalized in healthcare, would never be tolerated in any other sector of the economy. No one would get away with it because these anticompetitive practices are, hey, anticompetitive. They spell the death of functioning markets.
We kick off our conversation, Brennan and I, going through the typical hospital system consolidation playbook and how anticompetitive practices are kinda part of the typical gig here. It’s quite clever, by the way, for hospital system executives to think this way. I mean, it’s illicit and, some would say, unethical but clever if your main metric is revenue maximization. Anticompetitive contract terms are, after all, a flywheel. You consolidate to get enough market power to effectively force everyone to sign your anticompetitive contracts. And then step two: After that, you break out your anticompetitive contract terms spatula and you scrape out any remaining competition from your area. Which leads you to step three: Rub your hands together and raise prices and donate to politicians so legislation becomes even less likely. And then step four: Continue to raise your prices. Don’t you love it when a plan comes together?
In this healthcare podcast with Brennan Bilberry, we talk about four contract terms that any self-respecting anticompetitive hospital contract should include and how each of them restricts competition unfairly and causes higher prices for communities, taxpayers, patients, employers … basically everybody, including people who work at the health system, who wind up needing medical care.
In a nutshell, here’s the four anticompetitive contract terms that we dig into in this episode:
All-or-nothing contracting, wherein a hospital system says if you want us in your network, you must include every single facility that we have in your network and at the monopoly-level prices we demand, even in areas that might be competitive. There is a reason why a hospital system might be all hachi machi to buy a rando not super profitable hospital in a rural area. The payer must include that hospital in their network then because of network adequacy or whatever. And then from then on, all of their care settings are now in network—even the lower-quality

You would think that hospitals with the most money would offer the most charity care—trickle down and all of that. If my health system is big and I have lots of money and profitable commercial patients, I can stuff more dollar bills into the charitable donation balance sheet bucket, right?
Except, in general, it’s a fairly solid no on that.
Let’s talk about some of my takeaways from the conversation that I had with Vikas Saini, MD, and Judith Garber from the Lown Institute. During the conversation, there’s also mention of a powerhouse of a New York Times article.
So, let’s circle up on but a few of the more interesting (according to me) reasons why some rich hospitals fail to offer the level of charity care that you might think they could or should:
#1: Chasing commercial contracts because they are very profitable means building in areas where there are frankly not a whole lot of poor people. You see hospital chains doing this all of the time and saying at the 2023 JPM (J.P. Morgan) conference that they intend to do more of it, opening up in a fancy suburb with no affordable housing.
When this happens, there is just less opportunity to offer charity care. The need for financial aid in that ZIP code is just less.
#2: The Ambulatory Surgical Center (ASC) movement, which is weird to say because, in other respects, I’m a big fan. There are a lot of services and surgeries moving out of the hospital into ambulatory surgical centers or just the outpatient setting, and this is going on for a bunch of reasons, including Medicare and employers being very on board with this to save facility fees.
But here’s a consequence: Surgeons and other docs are now not in the hospital. So, indigent patient shows up in the emergency room and needs an emergency surgery or some intervention. But wait … those physicians and their teams are no longer in the hospital. And now the hospital doesn’t have the “capability or the capacity” to serve that patient. I heard from a surgeon the other day, and when he’s on call at his hospital, he’s getting patients shipped to him on the regular from hospitals in other states.
Now, about this “oh, so sorry … we can’t possibly help you so we’re gonna stick you in an ambulance and take you to another state” plan of action. I called up emergency room expert Al Lewis. He told me that if this “ship ’em out” is being done routinely as a pattern by hospitals who have an ER, you could call it evidence of an EMTALA (Emergency Medical Treatment and Labor Act) violation on several levels. You can’t have an emergency room and then routinely not be able to handle emergencies, especially when the emergencies you can’t handle always seem to be of a certain kind and for a certain kind of patient.
Speaking of violations, one more that reduces the need and level of charity care is canoodling with ambulance companies to take the poor people to some other hospital and the rich people to your hospital, which was allegedly transpiring in New Jersey, based on a recent lawsuit.
#3: [play some foreboding music here] This last one is the big kahuna underlying reason why some very rich hospitals may not offer the level of charity care which you’d think they would. This was superbly summed up by Tricia Schildhouse on LinkedIn the other day. She knew a physician leader who would go around saying, “Non-profit and for-profit is a tax position, not a philosophy.”
Bottom line, this whole thing boils down to what has been normalized as OK behavior at some of these rich hospitals. You have people in decision-making roles taking full advantage of their so-called tax position to jack up their revenues—revenues which they have no interest in frittering away on charitable causes. Why would they do that when they can use the money to, I don’t know, stand up a venture fund or make Wall Street investments?
Don Berwick’s latest article in JAMA is entitled “The Existen