AH016 - The Intersection of Pharmacy, Government Requirements, and Medicaid with Jessin Joseph, PharmD, MBA

May 3, 2024

Capital Rx

In this episode of the Astonishing Healthcare podcast, Jessin Joseph, PharmD, Senior Director of Pharmacy Benefits Administration (PBA) Services at Capital Rx, joins Justin Venneri for a discussion that starts with his journey from pharmacy school to Kentucky Medicaid, twists through acronyms like NADAC, AMP Cap, and M3P; and ends with why some states are using or interested in preferred drug lists (PDLs) and single PBA solutions.

Jessin highlights the changing rebate landscape for Medicaid (and Medicare) plans, the financial implications of M3P for plans, and the importance of transparency, education, and collaboration in providing care to a vulnerable population. Listen below, and remember to subscribe on Apple, Spotify, or YouTube Music!


Lightly edited for clarity.

[00:27] Justin Venneri: Hello and welcome to this episode of the Astonishing Healthcare podcast. I'm Justin Venneri, your host and Director of Communications at Capital Rx. And today we have Jessin Joseph with us. Jessin is the Senior Director of Pharmacy Benefits Administration Services here at Capital Rx -- PBA for short. And we're going to be discussing some topics related to Medicaid, and we're going to do that in what I think will be a relatable and understandable way. At least that's our goal. Jessin, thanks for joining us today.

Jessin Joseph: It's a pleasure. Thanks for having me.

Justin Venneri: So, Jessin, and one just funny thing to start, it seems like every time we're on a Zoom together, somebody says your name or my name and we both start talking. It's just a - I'll try to enunciate clearly.

Jessin Joseph: Oh, no, you're good. I was going to say, I always tell people my name is Justin, but my parents forgot the T.  

[01:12] Justin Venneri: Good stuff. So, Jessin, tell us about your path to Capital Rx and what exactly you do here.

Jessin Joseph: Yeah, so I am a pharmacist by training. My path started initially in analytics. So, after pharmacy school, I went back to school with the University of Kentucky to focus on neurocognitive research, so, things like opioid use disorder, substance use disorder. The University of Kentucky has access to Kentucky Medicaid data, and that was part of the reason for me to move over to the state and the university to help the cabinet make clinical decisions, or at least policy-related decisions, around what they can do to help that population.  

What ended up happening, though, is once I had access to the data, the state of Kentucky started passing a lot of PBM reform. And as a pharmacist on staff, on the analytics team for the cabinet, they had tasked a few projects to me about understanding PBMs, and MCOs, and specifically Managed Medicaid MCOs and their contracts with their downstream PBMs. What that led to is probably a whirlwind two years of me just focusing on drug pricing, contracting, kind of the full breadth of what a PBM does for a help plan. And then eventually the state did ask me to become the pharmacy director for the state, which I took on for about four years total. We did a number of initiatives. A lot of times it was regulatory based.  

One thing is part of that role was to manage the fee-for-service benefit – fee-for-service Medicaid, typically in this country, operates on a NADAC (national average drug acquisition cost) model, so an acquisition cost plus model for their reimbursements to pharmacies. And when I heard about Capital Rx having a NADAC-based network, it was a question around, is Capital Rx in the health plan space? Is it getting built up in the help plan space? Where does that sit? And that transition from the state back to working for the private sector kind of occurred for me in mid to early 2021.  

But again, in my eyes, it's a simple model in terms of what the single ledger does. And so, it's something that I'm very familiar with -- something, again, that the states have been utilizing. But I think what I noticed in the trend was if Capital Rx was going to service health plans, this is something that we're kind of already ahead of since either the state legislatures or the country is really focusing on getting to that level of transparency around drug pricing. And Capital Rx was already pushing for that.  

So, from there, been here at Capital Rx now a little over two and a half, three years and been focusing a lot on our health plan clients, not just from an operational perspective, but also kind of the integration between what help plans need and what we can deliver on. So, taking advantage of JUDI, its system itself and then obviously educating the market on the NADAC price point as well.

Related Pharmacy Benefit Administration & NADAC Content

[03:55] Justin Venneri: Got it. We'll get into that a little bit in a little bit more detail later in the discussion. And as you mentioned, working with health plans, you're talking to health plan executives all the time. So, let's try to make this episode as helpful or interesting as we can to folks managing pharmacy benefit programs. So, like our episode with Jason Barretto, let's tackle a couple of pain points that are going to be interesting or topics that you're actively discussing with people in the space and how they can be addressed. Maybe we'll start off with AMP Cap. Can you explain what that is and who it impacts?

Jessin Joseph: Yeah. So, AMP Cap actually comes from the world of Medicaid. You know, when ACA passed, there was a rule that said that manufacturers had a cap in terms of the rebate that they had to pay back to states for the federal rebate. And the federal rebate program, the Medicaid drug rebate program, has been around since 1992. And essentially what this does is it caps the total amount of rebates at 100% of the average manufacturer price. So that price point is kept by CMS. And again, it basically said that there's penny pricing for drugs, right? When you pay 100% a rebate, you get into as close to a free drug as possible for Medicaid.  

When the American Rescue Act passed in 2021, I believe, during COVID, that cap actually lifted (ARP Overview CIB (medicaid.gov)). So, what it meant for manufacturers is there are going to be situations in which certain manufacturers with certain drugs are going to have to pay states more than what the cap was essentially stopping them at. So, for the first time, there was going to be a situation where manufacturers were going to have to pay states to have their drug covered by the state.  

I think this led to a bunch of different market dynamics. What you saw is manufacturers reacting pretty quickly around updating their WAC prices for insulin, for example, or changing the price list for a lot of brand name drugs that have typically been a little bit more expensive in the commercial market. But in Medicaid's market, it was usually a best price product or something that where the AMP Cap was favorable for the state. So, this changed the rebate landscape, how you define these products and from rebate guarantees down to what the actual product is, from brand generic, specialty definition wise. But it is a big impact in that, for the first time, a Medicaid implication was going to impact the entire commercial Medicare market too.

[06:17] Justin Venneri: Interesting. And so these, this rebate structure is materially different from the rebates on the commercial side, right? Because it’s very structured?

Jessin Joseph: Yeah. The Medicaid drug rebate program states -- there's actually an algorithm or an equation that's in a CMS final rule that allows the states to calculate what the rebates going to be for each product. So, when they did the math with AMP Cap removal, some numbers were getting into the negatives, which meant that the payment from the manufacturer to the state would occur versus never getting to that negative, right? Getting to that sub-zero level.

[06:49] Justin Venneri: Interesting. And what's the impact on health plans of this program more specifically?

Jessin Joseph: So it depends on the lines of business that the health plan is operating in. And honestly, the state as well. In some states they do allow Medicaid managed care plans to collect any supplemental rebates that they want. Some states say, no, there are no rebates that you can collect on managed Medicaid lives.  

For commercial and Medicare lines of businesses, there are changes in terms of how those drugs are going to be classified under rebate guarantees. So again, a lot of health plans from a budgeting standpoint need to have an understanding of what their rebates look like, what their rebates are going to look like downstream. And so, this change has kind of marked a pretty significant change in how we calculate those guarantees, not just from a PBMs perspective, but again, from a health plans perspective of what dollars are they actually going to be able to get back and at what price point are they actually spending on the gross cost of that drug itself?

[07:45] Justin Venneri: Got it. And then we talk a lot about, and you mentioned it in the opening about NADAC – National Average Drug Acquisition Cost – and that index and drug prices. What's the most common question you get from pharmacy directors or other folks in the industry about NADAC and pricing?

Jessin Joseph: Well, I think it's more of an understanding of NADAC. NADAC was built primarily for the fee-for-service Medicaid program, and that's not a health-plan-oriented program. And so there's a lot of education about what NADAC is. How does it work? What's the survey look like, what's the methodology for calculating it? A lot of that stuff, again, is handled by CMS. CMS does outsource a number of things to Myers and Stauffer, an independent consulting firm that actually helps them conduct the surveys.  

But I think one thing to note upfront is -- NADAC is, while it's not perfect, it's the best solution this country has to acquisition cost pricing. And again, this is something that I'm very familiar with in terms of communicating with CMS, communicating with Myers and Stauffer, communicating within the four walls of Capital Rx, as well as outside entities. It's clear that we know what the methodology is, who's being surveyed, what the pros are, and the limitations of it. But it's about that level of transparency, I think, that NADAC brings to the market that you can't say AWP brings as well.  

Down to the NDC 11 level, we can have a price point for each unit. So, each tablet, each capsule, each milliliter of a product, knowing what that price point is, we can then give that back to our clients. The difference, and I think something that Capital Rx pushes more than really any other PBM in my eyes, is pushing the Single Ledger passthrough model. You can audit us at any point in time and see what the NADAC price of a drug is, but that's exactly what we pass back to our plan sponsors. There's no manipulating that price because we don't own that price. We don't have a way to manipulate that to get to a discount guarantee. Right? It is the price for that day, plus whatever dispensing fee that Capital Rx has negotiated with the dispensing pharmacy.  

I think that level of transparency, one, helps to have an understanding of what we're providing to the table. But that philosophy kind of goes beyond just NADAC for us as a whole. Right? We want to get down to the rebate level. We want to get back to our administrative fees. We want to talk about the service that we're providing our clients. It kind of expands as you talk about a little bit more, but really, it's about the education of NADAC upfront and kind of the pros of what NADAC brings to the market. And generally, I will say that NADAC is just as competitive as AWP discounts when we're going up against clients for business. And I think that's very important to know as we get into the spreading of NADAC across the industry as a whole.

[10:24] Justin Venneri: That makes sense. I feel like I've seen multiple bills that include the potential expansion of NADAC. What would you put the odds of that happening anytime in the near future?

Jessin Joseph: Well, I think we've seen a lot of state bills. It depends on each state. Again, NADAC, in my eyes, is not perfect, but it is a very good indicator of what the market's doing. I don't have specific odds, even though sports betting is legal in some states. I don't know what the number would be in terms of getting that across the board to the finish line.  

But we see it already happening. We've seen some states already pass it. So based off of Department of Insurance regulations, we're going to abide by it, you know, as these changes come about. And if your state hasn't actually passed anything yet, I would, you know, again, if I'm a betting man, I’m betting that conversation is happening at some level with legislators in a state that hasn't passed it. Because again, it's pushing towards a level of transparency that I think pharmacists have been asking for, health plan payers have been asking for, employers have been asking for just a matter of how it gets written, drafted, and then passed through from the legislature standpoint.

[11:28] Justin Venneri: Okay. And then, I think most states are on an acquisition cost price index model. Right? Is that true?

Jessin Joseph: For Medicaid fee-for-service? They are. That was a CMS rule from 2016 to move to something like that.

Justin Venneri: Got it. So like AAC is another one?

Jessin Joseph: Yeah. If the state doesn't have a NADAC backstop, they will have an AAC backstop.

[11:51] Justin Venneri: Interesting. Okay. I guess one more question. Just given your Medicaid experience, what are your thoughts on, you know, single PDLs, or preferred drug lists?

Jessin Joseph: Yeah, that's a, that's an interesting one. So, from a state perspective, there's a rationale for states to do this, right? And everything from making things easier for the providers and the members to maximizing MDRP rebates – the Medicaid drug rebate program rebates – that are going to be available. That's usually the driver here of why the state would move to a single preferred drug list.  

Within the last 20 years, I think you've seen most states move to a single PDL. It essentially streamlines for providers what products on a formulary, are covered for the entire Medicaid population. Right? And if you're in a state with multiple managed care organizations, what providers typically talk about is the fact that there are different formularies. They don't know which formulary covers what product. Okay, we understand that.  

But, at the end of the day, the responsibility of the managed care organization is to provide savings to that member, plus provide the managed benefit of seeing both the medical 360-view of that member. So the medical plus the pharmacy.  

I would say that most states, again, are moving towards this model, if not valuating it more and more. But a lot of that is also driven financially and you'd be wrong to say that that doesn't play a factor because those federal rebates are a lot of dollars, especially when we're talking about things like AMP Cap.

If we're talking about getting almost 100% of the ingredient cost of the drug back via rebate, there is a very good rationale why the state would evaluate that. That's a lot of money coming back to the states. And so, states are looking at it from both ends, both from provider disruption, member disruption, the dollars that receive back from the rebates. But I think at the end of the day, talking about certain states that can handle that, there's a lot of communication that needs to occur. There's a lot of transition policies that need to be taken into account. And then again, Medicaid is a very vulnerable population. So, talking about the sickest of the sick and identifying a lot of behavioral health needs, right> You don't want to disrupt that level of care if something is already working for that member.  

So, a lot of considerations to take into account. But what we've generally seen in the last 20 years is a transition towards single PDLs and kind of advising on, if that is the decision, you know, how do we do this effectively and what can we do to support this if that is the case?

[14:09] Justin Venneri: That makes sense. One thing we talked about recently with Jason, who I mentioned, who's our Vice President of Program Operations, we talked a little bit about the Medicare prescription payment plan. And I know this isn't specifically your wheelhouse, however, you are in the weeds, so to speak, talking to clients and prospects about this. Are there any updates you can share on the discussions you're having in and around M3P?

Jessin Joseph: Yeah, M3P’s a very interesting move by the federal government and CMS. I think, you know, just like how Medicaid managed care organizations are on the hook to providing a level of care to Medicaid managed care members, through a capitated model, this is now putting a lot of onus on health plans to take a different type of risk because these are now dollars that they may not see, especially if there's rogue actors here.

And so, understanding the intent and then kind of following through and just meeting the intent of what CMS is putting out there, I'm seeing a lot of health plans, evaluating multiple options. One thing, again, just kind of taking a step back at the industry, you see a lot of PBMS providing a level of solutions. But what we're also seeing for the prescription payment plan is a lot of financial technology companies coming to the market now, kind of showing their technology to say, here's how we can help with the M3P rollouts. The unfortunate thing with how we're kind of doing all this is the timeline is pretty crunched. You know, one, we're talking about a process rollout that has to occur pretty quickly and especially for an October start date. That pushes a lot of strains and decision making to occur pretty quickly.  

So, we're monitoring that as best as we can. Obviously, Capital Rx has our solution that we offer into the marketplace, but it is very evident that if you are a Part D plan sponsor, this is top of mind and something that if you haven't made a decision on, you are evaluating pretty rigorously right now to make a call on it. So yeah, it's different. You know, the only other thing I'd probably add is CMS will learn from this. And so likely next year there will be changes to the program as we kind of get this off the ground for the first time. But we're all kind of in this together. So, there is that, that level of comfort if, you know, folks have questions, we're obviously here to answer as much as we can and learn more about the industry as we roll this whole solution out.

[16:21] Justin Venneri: Got it. So one question I ask everyone, and the last question for today, Jessin, what is the most astonishing thing you've seen, that you can share, of course, that relates to what we've been talking about on this episode?

Jessin Joseph: Well, you know, we are a PBA. And I'm actually coming off of AMCP, which was last week. And one thing that seems to be a little more present now that I didn't necessarily think was present before were states considering moves to single PBM models, meaning they move all of their managed Medicaid lives to one single PBM or single PBA and then go live with that for everybody.  

So, it takes basically a single PDL and puts it on steroids because now everybody is on the same system as well. It's not just the formulary itself. So, I'm seeing that conversation occur more and more, and I'm hearing that both from pharma, because that has implications to what they offer states or to manage Medicaid plans. But I'm also hearing the same thing from states and from managed Medicaid organizations.  

So, it's interesting that there is a push to that. I think the big trial here is, does that provide savings? Right? With the PDL, you should be able to determine what your rebates look like, what your admin fees are, and then see how that works out. Because on top of all that, there's the intangibles of measuring, provider satisfaction, member satisfaction, disruption, all of that. Single PBA is its own beast, right? It's a full movement of a lot of different things. And so, seeing that conversation kind of boil over now to other states as well, it is an interesting move. Because historically the country's been pretty cyclic around what actually occurs in Medicaid managed care. There's always been pharmacy carve-outs and then pharmacy carve-ins. Right. Those two options have always been on the table.  

But now with the new single PBA model on the table, it’s where does that fit in for states that are trying to make a change or are pushing legislation. So, I think the best thing that I can do, and it reminds me of my Kentucky Medicaid days, is to continue to watch state legislations as they come forward, the bills that come forward, and then obviously the number of rewrites, the drafts. So, I'm sure we're going to see some more astonishing ideas from everybody as this industry kind of grows in the next 510 years.

Justin Venneri: That's a good one. Okay, well, Jessin, thanks so much for joining me today. It's been great to have you on the show, and I'll include some links in the show notes to some of the topics we've discussed here for reference and look forward to having you back on.

Jessin Joseph: Awesome, thank you.

If you would like to learn more about Capital Rx’s full-service PBM or PBA solutions, including our clinical programs, CLICK HERE to get in touch with our team.

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