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Hello, everyone. This is Jacob Emerson with the
Becker's Payor Issues podcast. Thrilled today to be
joined by a special guest. Matt Gibbs is
senior vice president and chief pharmacy officer at
Blue Shield of California.
Matt, thanks so much for taking the time
to be with me on the podcast today.
Hey, Jacob. Thanks for having me. Yeah. Absolutely.
And before we dive into everything we wanna
talk with you about, can you tell us
a little bit more about yourself, your career
background in health care, and what it is
that you're doing today at Blue Shield?
Sure. Happy to.
My name is Matt Gibbs, and I'm a
pharmacist by background.
I've been kind of in non traditional pharmacy
roles, for the last twenty seven years. I
can't believe I can say that.
And have mainly been in the pharmacy benefit
management or PBM space for majority of my
career. So, was there in the early days
when there were
what are called PBMs,
around called PCS
and Medco and all those old names and
have recently spent time in the mid market
transparent PBM space, both at EnvisionRx
and at Capital Rx. And most recently here,
I've been at Blue Shield of California for
about a year and had initial responsibilities
for launching the pharmacy care reimagine
offering and, getting that stood up for the
Blue Shield
plan itself. And now as chief pharmacy officer
having oversight for all of pharmacy services and
transformation as we move forward into the rest
of 2025.
Fantastic. Well, let's talk a little bit about
transformation, Matt. Obviously, there's been a lot happening
at Blue Shield of California
earlier this year. There's the creation of Ascendiant,
a new parent company.
So a lot of major changes happening across
the enterprise.
In that vein, what's your vision for pharmacy
care for your members
moving forward?
No, good question. And while our corporate structure
is interesting, I think the goal with what
we wanna provide
to members is the same.
So,
I look at it at pharmacy care reimagine
this way.
You can have the best member digital tools,
you can have the best decision support, you
can present, you know, hundreds of options to
a patient or member in terms of how
they can,
have more informed healthcare decisions.
But those tools are only as good as
the data that goes in. And I think
what has been missing in pharmacy for so
long, at least in my entire career, is
that the information presented to a patient or
member is often mired
with other,
forces
that don't necessarily
present accurate information,
meaning the actual cost of a drug. Are
you actually seeing what a drug costs as
a certain pharmacy on a certain day? Are
you seeing what
your PBM or insurance plan is presenting to
you? So our goal is to break that
apart to say, if we really wanna leverage
these great digital assets,
we need and we owe
the member
the actual information that
is based on the cost basis of a
drug itself. So then they can make an
informed decision
without any other interested parties saying, Hey, this
may be more expensive, but you should use
mail service because we own the dispensing facility.
Or, Hey, this is your specialty drug, but
we want you to use this one because
there's a higher rebate on it for us
as a pharmacy benefit manager.
Stripping all that away so that you can
really give the net cost to a member
is our ultimate goal. That shouldn't be hard
because we don't do that anywhere else in
our economy, except in drugs where you never
actually see the price of a drug as
consumer.
And our goal is to break that down.
So just like when you make a decision
over a certain potato chip brand or another,
the price is in front of you at
the grocery and you can make a decision.
It's not this fictitious number that leads you
down a path for some other interested party
to make money
on your back. So that is our goal.
It sounds simple, but it's revolutionary
because again, this is one part of The
US economy where real price is rarely presented
to the consumer.
Absolutely. So you're really advocating for transparency
on behalf of the member, Matt. And and
I will say we've spoken with many Blue
Shield leaders in the past, and they always
emphasize
the need for systemic reforms within the pharmacy
space to improve transparency and accessibility
to to drugs.
So so what strategies or initiatives are you
prioritizing
as you've come into this new role to
drive these changes?
Right. So the the first thing that had
to be done was, as a health plan,
take back
our management of pharmacy.
Health plans throughout the country have outsourced
their pharmacy
department, their services, even their clinical reviews
to pharmacy benefit managers. And now they're scratching
their heads saying, gosh, why are my costs
going up? Why do I not have flexibility
in what drugs I cover? Why does my
PBM always want to change my contract when
I want to do something maybe direct with
a manufacturer, or maybe I want to work
with a different pharmacy?
And health plans are waking up to the
fact that pharmacy is no longer 10% of
your, of your total healthcare spend. It's 30,
it's 50%.
And taking control of that function is key
to your future existence as a health plan,
no matter how big or small you are.
And you saw the big health plans early
on, the Uniteds, the Cigna's, the Aetna's, they
all merged with big PBMs because they saw
it coming. They knew that pharmacy had to
be an owned and controlled asset if you
wanted to control your healthcare destiny.
And Blue Shield is right behind that saying,
Hey, we wanna do that too, but we
don't wanna be owned by or own a
big BBM because we know there's lots of
problems there. We wanna break it apart
and kinda go back to the way that
things were in the nineties when health plans
owned and managed their own pharmacy,
benefit and department. And so Blue Shield is
ahead of the curve on that saying, we're
gonna blow the traditional PBM model away. We
did that in '24 by dismantling certain parts.
And we use five different service providers
to uniquely contract and supplement our pharmacy offering,
where we own the relationship, we own the
contract. So, I have a mail service relationship
with Amazon Pharmacy.
I have a retail network relationship with Navitus
Health Solutions. I have a claims adjudication
relationship with Abarca Health, and I have a
specialty relationship with CVS Health. All these combined
don't allow what happens in a vertically integrated
PBM in terms of, you know, taking from
an area point from another. I'll give you
a good rebate, but maybe I'm going to
make more money at mail service. There's all
these levers that are pulled on you as
a health plan And then downstream to our
employers
that don't necessarily work when
you have all those vested interests in one
entity. So pulling that apart, separate P and
Ls,
they're operating separately.
Amazon doesn't care what Abarca is making. Abarca
doesn't care what Navitus is making.
And that allows me to negotiate in a
much more linear fashion
and also really describe the services they're providing
and give me the flexibility in the contracts
that allow me to get to this more
transparent net price. So pulling it apart, removing
the vested interest is key. And until you
do that, you can't do all the transparency
things that you wanna accomplish.
No. It's it's fascinating to hear you talk
about this. And and, obviously, Blue Shield made
national headlines
a few years ago when the company decided
to to, as you said, match, shake up
the traditional PBM model and partner with companies
like like Amazon and Mark Cuban's cost plus.
So so since that partnership went into place,
any updates to share in terms of how
how that's all, worked out, what you're hearing
from members,
actual health outcomes resulting from from these partnerships?
Any updates to share about this?
Sure. So most of our updates right now
are operational because we're not even sixty days
past go live and you could argue yeah.
And you could argue January for even if
we weren't changing things, everything changes in January
because you have formulary changes, you have benefit
changes, you have cost share changes. And so
you really don't want to evaluate your financial
impact until probably slightly after the first quarter,
because there's a lot of nuances, flu season,
a whole bunch of things. So, but early
indications on the operational side
are excellent.
We've literally just had our launch party in
three of our California offices,
yesterday.
And we were able to celebrate many things.
You know, one of which was we we
launched in in green status with an initiative
this big, which is very rare.
And we were able to close out most
of our incident issues. We're down to a
normal what we have our normal kind of
business as usual incidents, meaning things that may
have been built incorrectly,
benefit designs that maybe needed to be tweaked
after testing. We are already at what we
call our our regular business operations, and we've
removed daily,
command centers, which were leveraged to make sure
that everything was working in January.
You know, like anything, you have your challenges,
but a lot of the things we experienced
really had nothing to do with our modular
approach and the complexities that are involved around
that. It had more to do with other
market changes that happen. You know, some retail
network changes around,
cost plus networks, which are coming out. Many
states that now have minimum reimbursement standards that
went into to place around using national average
drug acquisition costs plus the dispensing fee. So
there were many things that happened, just
industry wide, which definitely impacted
our launch, But very few are related to
the actual fact that we dismantled the fully
integrated PBM and went to the route of
a modular solution approach.
Probably the most staggering piece is that we
integrated five unique vendors
and 18 different data systems all within our
experience cube.
So that's what's unique about our model. Blue
Shield built an experience cube where all the
data comes in from our service providers and
we bifurcate it back out. We don't want
a PBM at the center of that doing
that work, because then what's the point? You're
basically back in the same model that we're
trying to move away from. So what that
allows me to do is at any time,
if somebody goes out of business, if we're
not happy with their service, maybe I have
a client that doesn't want to use one
of our service providers,
I'm able to leverage that experience cube and
those same APIs
and redirect to another provider. So this flexible
solution allows me to be flexible, not only
for Blue Shields, but hopefully for other loose
plans to come.
Absolutely. Well, clearly, a lot of innovative work
happening at Blue Shield. So we look forward
to all the updates there, Matt, and the
partnerships,
about about that those those updates.
But one last trend that I wanted to
ask you about is is something that we're
seeing with insurers all over the country when
they report their earnings,
and when they publish,
financial data.
And often and we're hearing about this on
the health system side too from CFOs
in terms of
managing high specialty drug costs.
And that includes GLP ones, which are often
specifically called out by name. So what's your
perspective on this ongoing
cost trend and and the future of,
managing these these high cost specialty medications moving
forward?
Right. So if you look at the, there's
a nephron study, which shows
the
areas where fully integrated PBMs make their money.
And everybody is obsessed with talking about rebates
or what they call retail spread, meaning they
pay the pharmacies one thing and build their
clients another.
But the lion's share of revenue made by
any PBM today, 39%
of their revenue profit is actually coming from
specialty pharmacy.
And that causes a pause for me as
a health plan.
Because now their biggest revenue driver to their
earnings is based on the highest trend item
for me as a health plan. And that
does not align very well. So what you
have to do, it really two things. One
is you want to make sure that your
specialty arrangement is a cost plus arrangement, meaning
that you're getting acquisition cost at the specialty
pharmacy, plus the dispensing fee at every drug
level. Many health plans will contract across all
their specialty drugs, and there's an average and
all these games are played. And, you know,
unfortunately they get taken advantage of.
The second piece that you really want to
make sure you nail down on the specialty
side,
outside of
the nuanced acquisition part
I mentioned, is that you have the ability
to do direct contracting on certain specialty drugs.
And what I mean by that is we
went to market,
for biosimilar Humira
and it was in a Bloomberg article where
they showed our price of $5.25,
lowest
in the market anywhere. And why? We waited
a little bit because we knew there were
several launching
in mid or early to mid twenty twenty
four,
some other health plans and the larger PBMs
either leverage their quote unquote white labeled,
branded
products.
And we knew that that ultimately wasn't the
best idea because you're not taking away that
motivation of I make money the more
drugs I dispense as a PBM and we
don't want that dynamic. So we went out
and contracted
along with our partner Evio.
And we were able to secure with Fresenius
Colby,
what's called unbranded Adacio, which is a biosimilar
for Humira, the world's most expensive drug. And
we are at $5.25 a month, significantly
below
the big PBMs who are well over a
thousand dollars a month. So it's just fascinating
to me. We now have one example, we're
gonna have more examples as we go into
2025, as we look at other biosimilars in
particular,
where,
this is why the costs are going up
because the hand is still in the basket,
whether they're manufacturing,
white labeling,
house branded biosimilar, whatever you call it, it's
all a motivation
for profit. And it's not typically in the
best interest of the health plan consumer or
our downstream employer clients, or most importantly, our
members. So we're cleaning that up as much
as we can. It's one drug at a
time, but you have to have that flexibility
in your contract or you can't even perform
those those functions.
Sure. Sure. Well, that's an amazing example you
shared there with Humira. So I appreciate you
sharing that with us, Matt.
Before we go, what else are we missing?
I mean, you've got a lot of health
plan leaders listening in right now. Any other
final thoughts or bits of advice you wanna
offer them?
Definitely.
And I I think every pharmacy director, chief
pharmacy officer, VP of pharmacy
out there at any size health plan,
I hope I'm hoping is shaking their head.
Yes. When I say this is that
health plans need to wake up and understand
that pharmacy
is the future. Whether it's gene therapy, more
specialty drugs,
you gone are gonna be the day of
testing and surgery. We're already seeing it in
many areas.
And I hate to break it to everyone
at the executive team at every health plan.
If you don't have somebody in pharmacy,
either on your senior team or on your
executive team,
you don't have the right voice at the
right level.
And it's critical, even more critical that you
don't have diluted data coming to leaders within
a health plan where you don't have the
subject matter expert talking about the business of
pharmacy and the clinical aspects.
And I really applaud Blue Shield for elevating
pharmacy to where it belongs.
Sadly,
that's not the case in a lot of
health plans. And they wonder why their pharmacy
spend is out of control because they haven't
prioritized it. So I'll get off my soapbox,
but the answer is very obvious. It's just
getting the attention and understanding what you need
to do structurally,
what you need to do from a talent
acquisition standpoint, and what you need to do
from a member readiness standpoint to really position
your success in pharmacy moving forward.
Well, it's great soapbox advice for our audience.
So Matt, I wanna thank you for taking
the time to sit down with us and
for sharing your insights with our listeners. We
really appreciate it. It was a pleasure. Thanks,
Jacob. If you'd like to listen to more
podcasts from Becker's Healthcare, you can visit beckershospitalreview.com.