Podcasts

AH063 - What's New with Medicaid PBM? With Jessin Joseph, PharmD, MBA

April 25, 2025

Capital Rx

This episode of the Astonishing Healthcare podcast, we welcome Jessin Joseph, PharmD, MBA, back to the studio. Jessin's focus on the pharmacy benefit administration side of the business and experience at Kentucky Medicaid and working with health plan clients inform the discussion about the impact the new administration and appointments in Washington, D.C., may have on health plan partners, MPPP (M3P), various models of Pharmacy Benefit Management (PBM) for Medicaid, including the single PBM and carve-out/unbundling approaches, and how the drug price benchmark can influence access to medication for plan members.

In Episode 16 - The Intersection of Pharmacy, Government Requirements, and Medicaid, Jessin highlighted the momentum that discussions around single PBM seemed to have, and this time around, nearly a year later, he dives into why everyone is talking about unbundling the pharmacy benefit!

Listen below or on Apple, Spotify, or YouTube Music!

Transcript

Lightly edited for clarity.

[00:28] Justin Venneri: Hello, and thank you for joining us for this episode of the Astonishing Healthcare Podcast. This is Justin Venneri, your host and senior director of communications at Capital Rx. And I've got Jessin Joseph, PharmD, MBA, in the studio with me today. He was our guest on Episode 16. It was actually just about a year ago. Jessin, glad to have you back.

[00:46] Jessin Joseph: Glad to be back. Thanks for having me.

[00:48] Justin Venneri: So that episode was titled The Intersection of Pharmacy, Government Requirements and Medicaid. And a ton has happened since then, so we're going to get right into it. But before we do, anyone who hasn't heard you speak before or doesn't know you, give us a minute on your background, your role at Capital Rx and something new. What's your favorite food?

[01:07] Jessin Joseph: You got it. Yeah. So, Jessin Joseph, I'm a pharmacist here at Capital Rx. I work specifically on the PBA team, so the Pharmacy Benefit Administration team. I work a lot with our help plan clients, help plans and prospects to get an understanding of Capital Rx to figure out the gaps that we can help fill for them as they look to service a population on their end. Specifically obviously in the pharmacy benefits space. Prior to joining Capital Rx, I was the pharmacy director for Kentucky Medicaid. So did a lot of changes over there in my four years and even prior to that I was an executive advisor to the commissioner for the state at the time.

I will say that my favorite food is... is pepperoni pizza. I am addicted to a good slice of pepperoni pizza.

[01:51] Justin Venneri: It's a good one. I like it. So last time you were on, we talked about the changing rebate landscape for Medicaid and Medicare plans, the financial implications of M3P - or MPPP now - for plans, and the importance of transparency, education and collaboration in providing care to a vulnerable population. I know that's broad, but there are some updates here and before we get into the updates on the discussion topics, there's obviously the new administration and new appointments within that. So you know, Dr. Oz, RFK [Jr.], how does the uncertainty in Washington D.C. influence our health plan partners from your perspective?

[02:29] Jessin Joseph: Yeah, I think we're all still waiting. So I think we see some movement at the federal level that are forcing plans to reevaluate how the current infrastructure is set up. I don't think it's necessarily going to be monumental overnight or anything like that. Obviously, CMS has their own process of promulgating rules, they have proposed rules. The way this country obviously works is there is an opportunity to provide feedback as those rules are set up.  

So I think the nice thing is we can at least provide feedback as the administration puts together kind of their thoughts on how they want to approach healthcare. But I will say for Capital Rx and the clients that we work with, specifically our health plan clients, I think the most important thing that we can do is have our ears to the ground and really figure out what we're expecting to see and then be ready for the full gamut of potential next steps by the administration. And so that's kind of the goal. I think there's a lot of folks here that like to do that. I will tell you that it's a personal passion of mine to kind of figure out what the rules of a state are or the rules of the federal government are going to be. So obviously something that we're always happy to talk about.

[03:35] Justin Venneri: Now on the state side, it's interesting because I went back and just took a look at that transcript from a year ago and there was some recent news about a state using a single PBM solution and the results that it's seen. And you had talked about the momentum for those sorts of discussions or considerations for that PBM model and the sort of surprising momentum those discussions had in the marketplace amongst people you were talking to, curiosity about it, how it works, what have you. So here we are, maybe remind us of the different flavors of the PBM solutions that exist for Medicaid. And if you want to start with a single PBM model, because it's in the news recently, that'd be great.

[04:15] Jessin Joseph: Yeah. So, there's a number of different ways states have put together their pharmacy benefits specifically in Medicaid over the last, I would say 20 or so years, if not more. And so single PBM is probably one of the newest approaches, one of the more novel approaches. Essentially, it's similar to a carve out model. So, carving the pharmacy benefit out of the managed care plans and putting it back into the hands of the state. And so the state would be the one that goes out, selects the PBM for the state on behalf of all Medicaid members. The state and the selected PBM would set up everything from the state network to the formulary or the PDL in Medicaid, make sure that rebates are handled, prior authorizations all things that a typical PBM can provide back to a plan sponsor. It's kind of where it sits.

[05:01] Justin Venneri: And PDL is Preferred Drug list.

[05:03] Jessin Joseph: Yeah, sorry, I get into the acronyms all the time. So yes, Preferred Drug List. That's what states use to really set apart kind of their formularies in the commercial space. So preferred drug list, and then they have their non preferred products as well. So a little bit similar to the tier model that we see in commercial formularies, but yeah, so that's what they'll do from a single PBM standpoint. There are also states, again, similar to a single PBM where they'll actually just carve it out entirely and the state will handle everything. So the capitation rates for the pharmacy benefit aren't paid to the managed care plan. So all of the expenditure for the pharmacy benefit's going to run through the state.  

Other flavors kind of sit in kind of a hybrid model or completely outside. And so you do have a single PDL state where managed care plans are still there, they're still taking care of members. And so their capitation rates are dependent on the drugs that members are utilizing. The difference there is the managed care plan does not dictate the pdl. So the state will actually determine what the PDL is. It's uniform across all managed care organizations in that state. And the expectation is the managed care plans execute on that PDL for the membership of the Medicaid program.  

And then you have kind of, I think, the last flavor and one that again, kind of is the one that is typically where the managed care plan start with. It's the model in which the managed care plan will handle their own PDL. So each managed care plan has their own PDL. They might be separate, or they might be different, they might be alike. But the state does not step in and determine what products should be covered minus what's required by the federal law. Again, we're looking to make sure that all covered outpatient drugs are covered per 42 CFR. But at the end of the day, the managed care plans will be the ones that dictate which products under 42 CFR are covered.

[06:46] Justin Venneri: Okay. And capitation is the amount per member they have to spend to provide care, right?

[06:52] Jessin Joseph: Yep. So the way Medicaid managed care would works right now is based off of kind of actuaries taking a look at what the expenditures for both medical and pharmacies are. They'll put together a capitation rate. So typically every month based off of the utilizers within that plan. The State will pay those managed year plans a fixed amount month over month, just again based off utilization and the cost of care for those members.

[07:15] Justin Venneri: Okay, got it. And one thing that comes up a lot reading commentary on our industry, when you say carved out and I think virtual PBM model, unbundled PBM model. Are these things exactly the same thing or are there different nuances of them? Can you kind of walk through that a little bit?

[07:32] Jessin Joseph: Yeah, happy to. There is a difference. And so the way that I look at carve out, and I think the way the states are looking at carve out is it's carved out of the managed care program. So the managed care organizations do not have the pharmacy benefit carved into them. Instead, it's carved out. And so that's really the terminology used in that space. When it comes to the unbundling in the virtual PBA model, that's a little bit different in the sense that we don't dictate who the plan sponsor is. It's going to be the plan sponsor's decision to see if one PBM or multiple PBMs are going to service the different things that a PBM can do today.  

So, for example, some PBMs have their own retail networks. You might say, I really like the retail network provided by X PBM, but I really like the technology behind Y PBM. And so the virtual PBA model allows plant sponsors to pick and choose what is in their best interest to be able to service their members. And so it's a little bit more of the unbundling item that you had mentioned, Justin. So it does give them kind of a little bit more control over multiple pieces of the larger Lego blocks. But at the end of the day, the plant sponsor is still responsible for ensuring all those different pieces do talk and work with one another to provide a cohesive pharmacy benefit.

Related Content - MPPP, Partnering with Health Plans, and a New PBM Model

[08:49] Justin Venneri: And what sort of trends are you seeing in the marketplace from prospective health plan clients or folks that are doing their due diligence right now?

[08:57] Jessin Joseph: When we're talking to health plans, a lot of times what we're hearing is that there is a lot more interest to take over full control and ownership of their pharmacy benefit.

[09:06] Jessin Joseph: I think what health plans have seen historically in the marketplace is when they kind of hand over all the functions to one specific PBM, they're kind of left in the dark as to how everything does coordinate with one another. We see a lot more unbundling today than we did a year ago and two years ago. And so we might see health plans asking about, can you be just our specialty drug network Provider, can you provide just the retail network? Can you provide just the claims adjudication? And can you provide just the rebates or the formulary management?  

For us, when these health plans are breaking apart all these different facets of a PBM, the expectation is they have visibility into each of these different services and they can then control, essentially control from a fiduciary standpoint, but also from an operational standpoint and make decisions that are in their best interest and obviously for their members. So we're seeing a lot more of that. I will say that a lot of times, is the plan ready for it? Is the plan engaged enough? You know, is the infrastructure there on the plan side already? It does require a lot of integration, it does require decently sized implementation.

But you do need somebody that can kind of handle everything at the end of the day. And in my eyes, it's the claims adjudication piece that needs to be the one that's coordinating as much of that as possible. Only because at the end of the day, if the pharmacy benefit doesn't work, it's because the claim can't adjudicate appropriately. And so that selected vendor really does need to hold the keys and hold a lot of those vendors accountable.

[10:35] Justin Venneri: That makes sense. And it's interesting because we will often say, like sometimes a large employer might be like a health plan, but I think what you're describing is a little different. And that's why the pharmacy benefit administration side of the business is a little different and more involved because these plans have so many different systems and so many different plans compared to like a commercial plan, right? Are there any other differences that should be called out?

[11:01] Jessin Joseph: I think one thing that we tend to have a fairly lengthy conversation with our health plan clients about is how they want to operationalize their different government lines of businesses. Those tend to be obviously the most important from a compliance standpoint. And so risk wise, we want to be fully buttoned up, we want to make sure they're fully buttoned up. But I think to your point around kind of how these commercial plan sponsors have been operating in the space, certainly the larger ones have taken advantage of such a model. But especially help plans that have multiple lines of businesses, they might have multiple TPAs, they might have multiple third party solutions, turnkey solutions vendors that they're coordinating with and kind of our, the benefit of kind of coordinating at the end of the day from a claims processing side is we have to have the ability to integrate. And so I think we provide that fairly well here. So it's kind of the goal is to make sure that there are options in the marketplace.

[11:51] Justin Venneri: And then new developments for Medicaid this year. MPPP, M3P that went live. Any others? And any update on M3P, how's that going?

[12:03] Jessin Joseph: So for the M3P program itself, we're seeing varied responses in terms of planned enrollments. So depending on the plan, we're going to see either high uptick in enrollment or we'll see low uptick. Really, there's a lot of different factors that go into that. Right. The type of plan that they're offering, a number of, I'm sure, external variables within those service areas. But it is a solution that came to market, I think, with really good intent for these members. Obviously, from a copay smoothing standpoint, I think this was what the federal government really wanted.  

But I think what we're seeing now is conversations about is: is it meeting the intent that it was meant to do from the beginning? And so there is a little bit of uncertainty that we're hearing both from our plan clients as well as from other external stakeholders obviously involved in the Medicare space. I think it's going to be interesting to see kind of how this new administration moves forward with M3P. Obviously, our goal is to be able to service our clients as best as we can. And so if there are new regulations or if there are new rules promulgated around the M3P program, we just want to be able to ensure that we can advise our clients as best as we can to at least get something off the ground for them.

[13:10] Justin Venneri: And then how about Medicaid overall?

[13:12] Jessin Joseph: So Medicaid is interesting right now. I think some of the new recent developments coming from DC - funding has been cut to some extent, budget passing. And so we should be expecting states to react appropriately accordingly to what their state budgets are requiring them to do. I think at the same time, it is something where states are going to have to maneuver fairly well and fairly quickly to ensure their Medicaid budgets are still sound. I think just the way this new administration has been approaching the market, they've been a little bit more keen on watching dollars. And so the cuts aren't necessarily a surprise. It's just more so where they're cutting. And so again, the Medicaid program kind of being payer of last resort, but really the lifeline for a lot of Americans, at the end of the day, it's still something that I feel is going to need to be supported. And so I think just continued conversations with D.C. understanding how the Trump administration wants to Move forward, working with legislators, especially at the state level, about kind of where those budget impacts are going to be. It's going to be better for us to have a full grasp of it and see how both the states are going to react. And then obviously the managed care organizations.

Who are the state's partners in administering the Medicaid program. So it's wide reaching at the end of the day.

[14:25] Justin Venneri: All right. You're kind of one of the resident drug pricing experts in house, given your past role and your interest in drug prices and drug price benchmarks. And so I thought it was interesting in particular that “reduction of spread” was called out in the state single PBM example we were discussing earlier, where they use an average acquisition cost-based survey. I'm wondering – any recent developments that you're observing, anything interesting you're seeing as it relates to other benchmarks worth mentioning or reviewing, like maybe NADAC?

[15:00] Jessin Joseph: Yeah, I mean, I am a child NADAC. At the end of the day, obviously, coming from the state government side, I will say in any fiscal analysis it's very difficult to get to the true number on any type of move like this. Right. Even from a traditional managed care program to a single PBM there are assumptions taken into account, caveats taken into account. Really at the end of the day, you do have to work closely with actuaries. The number of different stakeholders, the number of independent variables that can really impact your methodology is almost limitless.  

Good researchers, good studies take into account really the largest factors. But at the end of the day, I think I'm comfortable saying that it's really, really difficult to get to an actual number. And so what we typically see are ranges at the end of the day in terms of like what a fiscal impact could theoretically be. But again, from our end, you really do have to take a look at both the theoretics of such a move and then all the different factors that would play a role here. Right.  

So everything from clinical care to utilization to drug mix. Right. And then brand new managed care organization into your state. Right. So that throws another wrench into the thing. So fiscal impacts, I think are worthy endeavors. It's just you have to take them with a word of caution in terms of how those are measured.

[16:19] Justin Venneri: I'm glad you brought up drug mix. I was going to ask, just in your experience, like one thing that comes up a lot is what proportion of the potential savings or control a health plan can achieve or potential impact on the community via the pharmacies. What are the real impacts of having a better grasp of the actual price of the medication that a member is picking up at the pharmacy or is being delivered to the member via mail order, or what have you?

[16:47] Jessin Joseph: I liken all of that topic, really, to access of care, right? When a drug is affordable, we're talking about having access to that medication. And so what we typically see, or what I've seen historically in my experience, is when you have price points, benchmark pricing, such as something like a NADAC price, right? You can have an idea of what pharmacies are able to stock in their inventory and then therefore provide access for members that are. That you're servicing. And so we do take a look at that. We do want to be cautious of what drugs are available in the marketplace, what drugs are available in the marketplace at appropriate price points. And so then members can then still have access to that medication. Now, I will say Medicaid is a little bit nuanced in the sense that.

Co-pays are a little bit more minimal in the Medicaid world than they are in the commercial space, in the Medicare space. But still, it's still a conversation about what inventory is available for them, what drug products are available for them, and then the conversations around how those P and T committees are set up, those rebates are evaluated to ensure that you have a PDL that's appropriate for your membership. So all things that you still have to consider because at the end of the day, you're doing all items for the member.

[17:52] Justin Venneri: Okay, we're at the last question here. And ask everyone. I asked you last time, and you had a pretty good answer regarding the single pbm. So I'm curious, what's the most astonishing or interesting thing that you're seeing out there right now as it relates to our discussion today?

[18:05] Jessin Joseph: All right, so if I'm one for one on single PBM, I think I'm going to double down on what I mentioned earlier about, or I think you kind of teed it up. For me, it's the unbundling of the pharmacy benefit. I think this is a wave that hasn't fully reached its peak. I think we're still in a very early stage of plan sponsors who are looking at their fiduciary responsibility, who have the infrastructure to be able to service members on their pharmacy benefit, on their medical benefit, but to be able to provide back a health benefit at the end of the day that is transparent, in which they fully control and they fully understand. I think that's coming.  

I think, again, the fact that we're seeing more and more conversations happen, both from the employer side as well as the helpline side, means that the conversations haven't fully gotten to their full potential. But I fully expect in the next two to three years, these conversations to continue to pick up. And I think I expect some seismic shifts in how the PBM landscape will look in two to five years. So that's where I'm doubling down.

[19:07] Justin Venneri: Awesome. Well, Justin, thanks for joining me today and I hope you have a great rest of your day. Awesome. Look forward to having you back on.

[19:13] Jessin Joseph: Thanks Justin.

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