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Jun 13, 2019

Will the Health and Human Services (HHS) proposal materially impact Pharma’s ability to “pay to play” on pharmacy benefit manager (PBM) formularies? We have that HHS proposal that is now at the stage where they’re trying to figure out how to implement it. What’s at stake right now is that implementation flowchart and who exactly is involved in adjudicating the something like $186 billion in potential charge-backs.

Since any middleman who gets himself involved in any flowchart of this sort takes a buck, there is a massive land-grab opportunity that all these heretofore hidden players are battling over. My guest today, AJ Loiacono, CEO at Capital Rx, can shed light on the hidden complexity of what goes on in the dark middle of a pharma drug transaction and contracting—and that is very relevant right now.

Anthony J. “AJ” Loiacono is a successful entrepreneur, with over 20 years of experience in pharmacy benefits, finance, and software development. As the CEO of Capital Rx, his mission is to change the way pharmacy benefits are priced and administrated in the United States. Prior to Capital Rx, AJ was a co-founder of Truveris, where he served for 8 years as CEO, chief innovation officer, and board member, leading the company to record growth. Prior to Truveris, AJ co-founded SMS Partners, a joint venture with Realogy (RLGY), and in 2010 exited the partnership with a buyout. In his first venture, AJ started Victrix, a supply chain consultancy, and successfully sold the company to Chrysalis Solutions in 2007.


01:42 HHS’s plan to remove safe harbor from the rebates that Pharma pays to PBMs to buy their way onto formularies.
01:53 Creating more transparency by eliminating the anti-kickback.
03:06 What the anti-rebates process flowchart looks like.
03:39 Changing the term from “rebate” to “charge-back.”
04:13 Charge-back at the point of sale rather than post-adjudication.
04:28 How putting the pharmacy in the middle of the transaction changes everything.
05:43 “From a cash flow perspective, this matters.”—Stacey
07:24 “Who is in charge of this payment workflow?”
09:31 “Why the switch?”
11:18 The potential players in the role of paying pharmacies: PBMs, wholesalers, the switches (McKesson), banks/fintech, government contractors.
12:33 The likelihood that this will spill over into commercial medicine.
15:10 Who considers himself a wholesaler?
16:44 Why PBMs want to maintain the status quo, and how that works.
18:37 “Where there’s variability, there’s variable profitability.”
20:25 How do you check that the patient is getting the charge-back amount they deserve?
21:36 Is it still possible to pay to be on a PBM’s formulary?
22:16 Can you ever get away from the pay-to-play formulary?
28:03 “If you think about it, who’s writing the checks at the end of the day?”
31:58 What questions should employers be asking right now?
34:24 The problem with implementing HHS’s primary goal.
35:30 The cause of the inflection point.
37:57 “We want to get back to transparency.”
41:01 “It’s all about optics of price.”
41:17 “Really what we should be focusing on is, ‘What are we solving for?’”
41:47 EP206: Turns Out, High-Deductible Plans Don’t Drive High-Quality, Cost-Effective Health Care, With Ashok Subramanian, CEO and Founder of Centivo. 
42:08 Why employers purchase office supply contracts more effectively than pharmacy benefit contracts.
44:33 Capital Rx and what they do.


What’s @HHSGov’s new plan revolving around the #rebates that #pharma pays to #PBMs? AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

Creating more #transparency by eliminating the anti-kickback. AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

What would the anti-rebates process look like? AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

Changing the term from #rebate to #chargeback. AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

Changing the point at which the #chargeback occurs and how this changes the status quo. AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

Why putting the #pharmacy in the middle of the transaction changes everything. AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

“From a cash flow perspective, this matters.” AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

“Who is in charge of this payment workflow?” AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

Why #PBMs, #wholesalers, #switches (McKesson), #banks/#fintech, and #governmentcontractors could all potentially pay the #pharmacy. AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

What’s the likelihood that this will spill over into the commercial side of things? AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

Why do #PBMs want to maintain the status quo? AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

“Where there’s variability, there’s variable profitability.” AJ Loiacono of @cap_rx explains in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg

Can we ever get away from the #paytoplay #formulary? AJ Loiacono of @cap_rx discusses in our newest #podcast episode. #healthcare #healthtech #digitalhealth #healthcarepodcast #hcmkg