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Kristen Begley on Drug Pricing Transparency with Capital RX

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Mabel Jong interviewing Kristin Begley at thINc360 event

In this enlightening interview, Kristen Begley, Chief Growth Officer of Capital RX, discusses the pressing issue of drug price transparency and the innovative steps her company is taking to address it. She highlights the significant impact of NADAC pricing and per member per month guarantees in revolutionizing the prescription drug market. Discover how these strategies aim to provide affordable healthcare solutions for consumers.

You can view the full video interview here

Key Takeaways

  1. Transparency in Drug Pricing: Capital RX uses NADAC pricing to ensure consistent drug costs nationwide, preventing manipulation of drug prices.
  2. Per Member Per Month Guarantees: Implementing per member per month guarantees holds PBMs accountable for drug mix and cost, leading to more affordable healthcare.
  3. Alignment with Consumer Interests: The company focuses on clinical decisions over profit-driven motives, promoting the best cost medication without biases towards higher rebates.
  4. Unique Conference Value: thINc360 brings together a diverse group of healthcare stakeholders including consultants, employers, and payers, fostering comprehensive discussions and solutions.

Addressing Drug Pricing Transparency: Insights from Kristen Begley of Capital RX

Host Mabel Jong – thINc360:

“Welcome back. I’m Mabel Jong, and I’m so pleased to have with me now Kristen Begley, who is Chief Growth Officer for Capital RX. Thank you so much for being here, Kristen.”

Kristen Begley:

“Thank you for having us.

Host Mabel Jong – thINc360:

Well, the complaint about drug prices is not new. I mean, people are talking about that a lot all the time, but transparency seems to be a goal that people want to head towards, but we’re not seeing a lot of headway. What is Capital RX’s role in this?”

Kristen Begley:

“We are the fastest growing healthcare technology company, and I will say by way of background, I’m a pharmacist. I spent my whole career, graduated pharmacy school in 2000, trying to change how drugs are priced.

Back in the day, one of the big three patted me on the head in my 20s and said, ‘Kid, you’re going to go out of business. Nobody cares about transparency; it’s a fad.’ And I thought that can’t be true.

For almost 20 years, I beat my head on the industry, trying to get it, and I really couldn’t massage the industry from a consulting point of view into doing the right thing and being truly transparent because there was all this misalignment when it comes to how they made their money.

I actually left the PBM industry because I said no one’s going to fix this. One of my co-founders, our CEO, started Capital RX, and he used two different methods that were unusual in the industry.

One, he used NADAC, which is something that the OIG developed after the First Data Bank had a lawsuit against artificial inflation of drugs.

The reason they did this was everybody made more money when drug prices went up. Retailers made more money. PBMs made more money because they made a portion of the drug cost.

He started this PBM using NADAC, which means he couldn’t manipulate drug pricing; someone else was setting it, and it created equity when it came to drug pricing.

Lipitor costs what it does in California, New York, everywhere. The other thing he did, which is when I came back to the payment industry, is he decided, ‘I’m going to go and put a per member per month guarantee out there.’

A per member per month guarantee is not a discount; it’s not a rebate. It holds the PBM accountable to the mix of drugs. So what do they approve? Because they have the control on formularies.

How many units do they put out the door? It’s one of the biggest problems in the country is the people who make money on the cost of drugs are the ones approving the medications.

Unfortunately, in this country, we advertise drugs on TV just like New Zealand, but no other country does that. The doctor’s in charge, but in America, we become our best doctors, and we see a commercial on TV and say, ‘I want that drug,’ and doctors still like to say yes.

So it’s a complete role reversal, and it’s also an improvement in technology. The infrastructure within health plans on the medical side and on the PBM side really haven’t evolved for years and years.

So building a new infrastructure that allowed new models to evolve and became more operationally efficient was how we attacked the industry. We’re very pleased to say we are the fastest healthcare technology company today.

I think that we can become the pipes and really enable healthcare health plans. We work on that side of the house. So we work as backbones for them and also PBMs.”

Unraveling the Basics: Capital RX’s Model for Prescription Drug Transparency

Host Mabel Jong – thINc360:

“I think I understand what you’re saying. There are so many stakeholders involved that see no benefit from really changing the way they do things.

Kristen Begley:

Right and they’re beholden to their shareholders. They need to make money on the cost of drugs. That’s how they’ve built their entire models, taking small pieces of rebates, small pieces of the spread, more units out the door.

That’s how their economics are made versus we change the model completely to be agnostic to that and to make pure clinical decisions or help them revolutionize their models.”

Host Mabel Jong – thINc360:

“Okay. So what are the basics of how the model works?”

Kristen Begley:

“So Basics relative to Capital RX or prescription drugs?”

Host Mabel Jong – thINc360:

“Prescription drugs in general. The trials for the drugs are where a lot of the issues come into play.

Kristen Begley:

If we went back to your questions about where the basics were.

Host Mabel Jong – thINc360:

What are the basics of how your model works?”

Kristen Begley:

“It’s not so dissimilar to how the rest of the industry works. If you think about how drugs are manufactured, the manufacturer has a price per pill, which is sold to the wholesaler, who has a price per pill.

We don’t use words like brand or generic; there are numbers: NDC, NDC 11. That’s what describes what that pill is and what the price is. Then it’s sold to a retailer for a price per pill.

Somehow the PBM gets involved because they negotiate with the employer or the payer. All of a sudden, we call it a dual ledger. They have a price that they sell for and a price that they buy for.

The real purchaser, which is how a healthy economy would work, you could have supply and demand, and you would know what you’re paying, could see both sides of the ledger.

That doesn’t exist in the PBM industry, which is one of the reasons that it’s just not that transparent to people. You don’t have real economics playing in the industry. So we’ve changed that model on the pricing side.

That’s the unit cost. The second piece of it is drug mix, which is where that alignment that I talked about earlier comes into the picture.

Alignment is, if I’m making the decisions of what drugs are preferred, am I preferring more expensive drugs with higher rebates because I get a piece of it, or am I choosing the best cost medication? Drug mix is really what’s driving costs in America.

If you follow most information out there, drug costs, the units are going down. It’s about what drugs get prescribed. If I had to talk about Capital RX and our secret sauce, I would say 20 percent of it is the fact that we use NADAC, so the unit cost for us is going down.

But 80 percent of it is because we’re aligned to our customers. We have no reason to change the price of the drug or promote a more expensive drug. That’s really what’s driving costs down.

Just a fun fact, interestingly, we’re one of the handful of companies that are B Corp certified. Most healthcare entities don’t put the effort into B Corp certification, which says not only do I do the right thing for you as my customer, the inpatient has to have the right decision made for them.

I can’t make a good decision for you but then drive their cost up. It has to be good for everyone. It’s kind of like Tom’s Shoes or any of those number of companies. Unusual for healthcare. That is not the way healthcare is set up.”

Consumer Benefits and Regulatory Challenges in Prescription Drug Pricing

Host Mabel Jong – thINc360:

“It doesn’t sound like that we’ve seen this around before. Who would benefit the most? Does the end user, the consumer, benefit in the end from this model being more commonplace?”

Kristen Begley:

“I would say so. If we think about prescription drugs, they should be the most accessible healthcare benefit. It is the most accessible healthcare benefit.

If it’s unaffordable, then the snowball effect of more hospitalizations happens because you couldn’t afford your medication. If you’re choosing between your rent, your kids’ food, it’s pretty easy to cut the prescription drugs off.

I think it’s one of the few bipartisan moments in this country where both Republicans and Democrats say we need to make drug costs more affordable.

You see a lot of it in the legislation, particularly during election years. As that starts to gear up, everybody’s behind the bandwagon of how do we make this more affordable.

If you follow prescription drugs in the paper, you will see a number of people trying to get transparency and make drug pricing more fair. Prior to COVID, it really was pharma and the PBMs throwing mud at each other about who makes drugs more expensive.

But I think there’s a pretty square look at what are the PBMs doing to inflate the healthcare balloon here and how can we make drugs more affordable. I think it starts with people understanding what the costs are.”

Host Mabel Jong – thINc360:

“Right. Built into that cost also is the development. When we don’t say generic or the brand, we’re saying just a number on the drug. There’s already a cost built into each price of the pill already, correct?”

Kristen Begley:

“Correct. It’s a capitalist system here. America, or there are other countries that really put forward a lot of effort towards manufacturing.

Without that behind it, we wouldn’t have all these cures, and we wouldn’t move things to market as quickly as we do. In that way, it’s good.

What I don’t like is that other countries’ governments generally negotiate what drugs cost, and there could be some level of government regulation.

We don’t have that here, so it’s more of a free market. I think it’s different and a little unfair that other countries can get drugs at half or less what we pay in the United States.

We are bearing the burden of development in the U.S., where other countries receive the same drugs at a price their governments negotiate.

I’m not advocating for government price controls, but this is a massive market to have zero regulation around it—absolutely zero regulation.

That’s why I think you’re starting to see legislative efforts move into this space. It’s a very confusing space. It is the most complex thing you could look at.

If you haven’t been looking at prescription drugs for 20 years, you probably don’t exactly know what’s happening because it’s a different language.”

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The Unique Value of thINc360 for Healthcare Stakeholders

Host Mabel Jong – thINc360:

“And you’d be shocked. Exactly. It’s a powerful message, Kristen. Why was it important to bring it here to thINc360?

Kristen Begley:

“I’ve been doing this for years, and I will say thINc360 is one of the most unique conferences out there because it has consultants, it has employers, it has unions, it has health systems, and it has payers.

Very few conferences in the country, and the biggest ones that you could name out there, sometimes they focus on point solutions, sometimes they just have payers, sometimes they just have employers.

This is one of the most unique conferences, in my opinion, that you actually have that mix of all healthcare stakeholders. There’s also this unique mix of consultants here that are kind of lifetime achievement folks.

They’ve been doing this for 30 years. They’re in it not for the paycheck; they’re in it to make healthcare better. It’s a really interesting group of people that come to this one.”

Host Mabel Jong – thINc360:

“Great. Well, Kristen, thank you so much. It’s very interesting. I think that people do wonder, how does it all start? Thank you for clarifying that.”

Kristen Begley:

“Thank you so much for the time.”

Host Mabel Jong – thINc360:

“Kristen Begley, Chief Growth Officer at Capital RX.”

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