A Value-Based Approach to Pharmacy Benefit Management - Karthik Ganesh, CEO of EmpiRx Health


“We're the richest country on the planet, healthcare access has to be core to who we are,” says Karthik Ganesh, CEO of EmpiRx Health, one of the fastest growing healthcare services companies in the country and the industry’s only value-based Pharmacy Benefit Manager. Ganesh and his team believe that radical changes are needed in the country’s healthcare system and they’re working to create a better experience for patients, providers, businesses, and insurance companies alike. Ganesh has deep experience in the healthcare insurance industry and health data management with stops in his career at Aetna, Express Scripts and Deloitte, and he's also the author of The Happiness Model: A Roadmap to Inner Peace. In his conversation with host Michael Carrese, Ganesh talks about why employers need to learn more about value-based care, and how healthcare needs to become a less transactional relationship with the provider. He also touches on some of the key factors that make EmpiRx different from traditional PBMs. “We are as equally focused on health outcomes as we are financial outcomes.” Mentioned in this episode: https://www.empirxhealth.com/




Michael Carrese: Hi everybody, I'm Michael Carrese. Today we're going to take a look at a major player in the healthcare system that few people really understand despite the impact they have on the cost of care. I'm speaking of Pharmacy Benefit Managers or PBMs, companies that function as intermediaries between insurance providers and drug manufacturers. Some PBM business practices have raised concerns in the past among watchdogs and lawmakers at the state and federal level, and they remain a source of scrutiny.


Well, our guest today Karthik Ganesh is going to help us understand more about PBMs and share how the company he leads, EmpiRx Health, is taking a different approach to this function that's based on the value-based model of healthcare. Mr. Ganesh has deep experience in PBMs, the healthcare insurance industry, and health data management with stops in his career at Aetna, Express Scripts, and Deloitte. He's also the author of The Happiness Model: A Roadmap to Inner Peace. Thanks so much for being on the show today. It's nice to have you.


Karthik Ganesh: Thank you, Michael. Glad to be here.


Michael Carrese: So, we always like to start with learning more about our guests and what first got them interested in their field. In your case, that would be insurance and pharmaceuticals. How'd you get there?


Karthik Ganesh: Actually, not pharmaceuticals. I have spent the least amount of time in the pharmacy benefit space. I've been in healthcare for twenty-three-plus years. Started with Ernst and Young back in the late nineties, and that's when E&Y was the largest healthcare consulting practice. I got into it, realized it felt comfortable, realized it was also an industry that in a lot of ways...I don't know, Michael, if you've heard the Mark Twain phrase that when the world comes to an end, he wanted to live in Kentucky.  All due respect to Kentucky, but he felt Kentucky was always ten years behind the rest of the world, so he wanted to live in Kentucky when the world came to an end. When I joined healthcare back in the late nineties, it was evident that there was so much that was one, just not working, and two, was ripe for improvement. It felt like an exciting place to be and I never left.


Michael Carrese: So, you really felt like you could dig in and make some kind of an impact. Was there a particular area where you first felt that was possible?


Karthik Ganesh: I've always found it interesting that whether you look at leaders or you look at companies, in a lot of ways, what you take away from it are lessons learned more so than best practices. So, versus telling you the places where it felt I could be impactful, the things that stood out for me were the things that were less impactful, which kind of opened up the aperture significantly in terms of places I could be impactful. It is an industry that continues to be misunderstood and it has done very little to change the misunderstanding. 


The misunderstood component is that with 80% of healthcare premiums in this country being picked up by employers, people say, "Well, you know what, my insurance didn't pay for that." Not really. Your employer didn't pay for that. Your health insurer was merely a facilitator of your employer's wishes in 80% of the instances. What's interesting for me is in that spectrum, health insurance -- for all the money spent on advertising on a multitude of different fronts -- they don't ever want to step back and say, "Guys, timeout. It's not us. We're just doing what we're being asked to do." That's the first thing. The second thing that continues to intrigue me –and intrigued me when I joined – is it's just fascinating to see how as a country, we've embraced Einstein's definition of insanity as it comes to healthcare, right? 


We lost HMOs thirty years ago, whether we liked HMOs or didn't like HMOs doesn't matter. The one thing that HMOs brought to the table was this notion of you needed a PCP. With a PCP, you had a singular quarterback of a patient's care. We've lost that. Tomorrow, I could go to hospital A and get my hips done; hospital B to get my knees done; and hospital C because let's see I had COVID. A would not talk to B would not talk to C because they're three completely unique transactions in my health continuum. 


The fact is that as a country, we haven't gravitated more towards trying to figure out how to look at whole person health. I feel like it's almost cultural for us. Whether it's retail, whether it's healthcare, whether it's in some cases intrapersonal, being more transactional feels like a security blanket even though in the long haul, it gives us more unhappiness more so than happiness. But healthcare has become a transactional relationship with your provider. 


So, when I look at it this way and I look at the first component I talked about -- the transactional aspects of it -- all of these for me have really been motivators for me to stay focused on the little nooks of healthcare where impact can be made. And that's what we've done with EmpiRx. When you introduced Pharmacy Benefit Managers, Michael, you said they act as intermediaries between manufacturers and insurance providers. It's interesting. We never say that about health insurance. We never say they're an intermediary between your doctor and the patient. because we feel like they're doing something in healthcare. 


Pharmacy Benefit Managers have done their level best not to behave like healthcare companies. Yet, pharmacy benefits are 30% of an employer's healthcare spend and growing at a furious pace. What we have done fundamentally differently is we have said there are a ton of constructs that are core to current pharmacy benefits that are very retail-like: rebates, discounts and arbitrage. While those have a place in any setting where you are buying and selling anything, they can't be at the core of it. At the core of it, it has to be a healthcare and a care model about patients done right.


Then you marry that with the fact that healthcare economists tell us that 25% of all healthcare spend in this country is waste. So, on four trillion dollars of healthcare spend, we have a trillion dollars of waste. We've married a very advanced and highly focused care model and clinical discipline with an obsessiveness around waste management as it pertains to costs, with another level of obsessiveness around patient and employer/union satisfaction. I use the term obsessive because at the end of the day, we're a service organization. I love it when people say, "Well, it's white-glove service." Well, did the white glove get muddied along the way?


Nothing's more personal to us than health and wealth, and you don't have wealth without health. So really, the most personal thing to us is health. If nothing is more personal than health as a service organization in that space, we can't afford to be good enough. We can't afford to even care enough. We have to be unrelentingly obsessive. So, we've brought all of that to the table and we've created a model that is just completely different from the market.


Michael Carrese: Help us break that down in practical terms. So, take the PBM operating in more of a traditional model. Explain how they interact with all the stakeholders, and then what it is that EmpiRx Health is doing.


Karthik Ganesh: In its simplest form, I'll take you back to the simple concept of volume versus value. Most of what we do in healthcare services, and especially pharmacy benefits in our country, is volume based. The more drugs that leave the shop, the more monies the PBM makes, and the more drugs that get dispensed. I think it was two years ago, Michael, when we were squarely in the middle of COVID, that one of the largest health insurers in the country -- they're also one of the largest PBMs -- had their Q2 earnings call and the CFO said, "Because utilization is going to spike the second half of the year, we're going to have a banner year." And everyone clapped. I listened to the call and I thought to myself, “We just saw one of the largest healthcare companies in the country say they were going to push more drugs into the system and people thought that was a good idea.” 


The incentive model for your traditional PBM has been volume equates to more revenue equates to more pocketbook impact to the insurer, or the PBM with a piece of it being shared with the employer or the union. On the other hand, our model is value in its purest form and I say value not as defined by empirical, but value as defined by the Institute for Healthcare Improvement. The Institute for Healthcare Improvement laid out the “triple aim” which morphed into the quintuple aim. But the triple aim in its purest, most basic form was improved per capita costs by deploying pay-for-performance models. 98% of EmpiRx Health's contracts are pay-for-performance. If our client wins, we win. If our client loses, we lose. That's one. 


The second aim from an IHI standpoint is improving the health of populations. It comes back to our conversation around episodic transactional interactions versus populations and whole-person health. We deploy a Johns Hopkins driven model that is population health management in its purest form. Every one of our clients has a population risk profile that is created for them that is both clinical and financial. Every one of our patients within those clients has a risk score that is both clinical and financial. And the clinical and the financial are not just here and now...it also projects what it could be based on their comorbidities that are going on with them. So, we're improving per capita costs, improving the health of populations, improving patient satisfaction, employee satisfaction, staff satisfaction, and health equity. 


Health equity became the fifth aim of the triple aim, if you will, and we've put all of that together and built a model where we win only when our clients win, we lose when our clients lose. We are obsessive about service. We are as equally focused on health outcomes as we are financial outcomes. So, as a result, we've created a mousetrap that is extremely good for the employers’ pocket book or the plan sponsors’ pocketbook. It is fantastic for the health of their employees and their families, or their members or their union members, and we have a very significant union population. If we think of the HR teams or the fund administrators as being caregivers -- because they really are in the business of providing benefits to those employees -- we're taking care of them with a 24x7 service model as well. So, taking care of the caregiver. We've looked at it from a clinical, financial and a service aspect and delivered a trifecta that is completely divorced from driving more volume.


Michael Carrese: We're basically talking about value-based care here, which was something created as part of Obamacare, but it has seemed to struggle to get a deep foothold in the healthcare system in this country. I'm wondering, if you agree with that, why you think it's had trouble gaining traction, and can PBMs help it along?


Karthik Ganesh PBMs don't help it along. A value-based benefit player like us does help it along. There are two reasons why it hasn't gained traction. The first reason is value-based care in this country has continued to be about payers holding providers accountable. But the question is who's holding the payer accountable? The payer keeps getting richer. No one's holding the payer accountable, that's one. 


The second is, you know, Michael, employers pick up 80% of the healthcare premiums in this country. No one has taken the time to explain to them why value is a more important lever than cost and access. I was at SIIA annual conference last week, which is the Self Insurance Institute, and you had a bunch of risk administrators, employers, plan sponsors in the room, and the questions were about PBM? What is working or not working? What do we like? What don't we like? I said, "Guys, we could talk about this for the next ten years and we could come back fifteen years from now, ten years from now and have the same conversations. If you as employers don't demand differently, we're going to be stuck with the same things. If you as employers have heard about value-based care, trust me, no one is going to take the time to explain it to you. Demand more. And if you didn't demand more earlier -- coming out of COVID or at least trying to come out of COVID right now -- you've got to ask for more." So, there's a lack of education in the market which has really caused this, and I think payers haven't done themselves or value-based care any service by making it an insider healthcare story versus a broader healthcare conversation.


Michael Carrese: Give me an example of what kind of difference you think EmpiRx Health is making. You talked about when clients win, you win. What does that look like, particularly with the patient in mind?


Karthik Ganesh: We were in Forbes last week because of a study that we published. We saw, like everybody else, mental health costs have been going up right? Mental health utilization has been going up. We saw a 9.4% increase in mental health utilization across our book. But more importantly, what we saw as a part of that was a 12% increase in antidepressants. So, most folks would say, well, it increased, which means cost went up as well for those employers. No. For our clients, their cost per claim for mental health, for antidepressants, went down by 2%. For ADHD, the utilization went up by 20%. The cost per claim for our employers went down by 9%. 


Here's the even more exciting part. With all of the depression and the mental health tsunami that we've been under, we've seen opioids just kick off into a higher gear in the last couple of years. We had a 10% reduction in opioid claims. We had an 8% reduction in patients who were on opioids, and on antidepressants, and we had a 14% increase in patients who are diagnosed with opioid use disorder, and now sought treatment.


We have a model where we are not trying to peddle more drugs, and optimize utilization. We’re trying to make sure that people get the right drug the first time. When you do that, you're working in concert with the physician who is always incentivized to do the right thing. You are focused on building care models around the highly compromised or highly complex patients who need more care. 


If you're on an antidepressant today and you've called EmpiRx more than once, we assign a dedicated clinician to you who is going to be your personal care concierge from that point onwards. As a country, and we hear this all the time, we’ve got a small percentage of people who haven an over-weighted need for care. But yet, we generalize that overweighted need across the board to everybody and as a result, we have an overly bloated healthcare system from a cost standpoint. That's where all the waste comes in. 


At EmpiRx, 2.6% of our patients are driving about 48% of our services. We've created care models to wrap ourselves around the 2.6%. We're improving their quality of life, we're improving their health outcomes, we're helping them stay focused on their medications and take their medications, we're helping them navigate the healthcare continuum. As a result, we're reducing their isolation and helping them move towards treatment alternatives that might get them away from opioids.


Michael Carrese: So, this really is a departure from the PBM model. How did you think that this was going to work...that you were going to be able to move the system in a way that this could work?


Karthik Ganesh: A brilliant founder who fundamentally came to the table and built the company originally with the thought process that there had to be a better way, and that there was too much waste in the system. We built a company around a thought process that if 25% of the healthcare spend is waste, there's at least 25% of opportunity out there. That's a great starting point. That's one. Second, that opportunity isn't going to come by reducing access, because that's healthcare done wrong. Let's chip away at that opportunity by really doubling down on care -- better care, more care – which can result in reduced cost. Because if I've got a patient in front of me who's got a mental health situation – and mental health is health -- if I double down as a service provider, take care of that person and get that person to a better place mentally, it's going to get that person to a better place physically, as a result. It's going to get that person to a place where they're utilizing less meds. More care equates to less spending. 


Yet, as an industry, the approach has been ‘let me chip away and create barriers to access and maybe people won’t show up and as a result, costs will go down.’ All of that chipping away came back to bite us with COVID. 40% of American counties, according to a recent study, are considered pharmacy deserts where there isn't a pharmacy within a five-mile radius. We're the richest country on the planet. Healthcare access has to be core to who we are. It's not, which is why our mortality rates and our healthcare rates are consistent with what you would see in parts of the world where healthcare is a luxury.


Michael Carrese: Right. We're not getting the value for spending. I'm gonna forget the exact number, but people will reference the problem with folks filling a prescription but not taking it. If somebody was on top of that and made sure they were taking the prescription, well, then maybe they’ve got a chance -- if the treatment protocol is correct -- that they're gonna feel better. But, if they just sort of fall through the cracks, then you're not getting anywhere but they're still buying a drug.


Karthik Ganesh: That's exactly right and if you now make that drug more affordable -- not because it is at a better price point, but because you've put them on a med that's going to help them physically but also put them on a med that is clinically appropriate, yet lower cost -- they're not only going to fill it, but they're going to be incentivized to take it because they can afford it.


Michael Carrese: Well, this is super informative and educational. But we're not done asking you for things that we need to learn about! We love to ask our guests to provide us with some direction, actually, and tell us about something that they wish more people knew about or fill in a gap or bust a myth. What's something that you're particularly interested in that you would say "Osmosis, you should make a video about that?"


Karthik Ganesh: Minimalism. The number of people who've come to me after that CNBC article and said, "Well, eighty-seven things...how do you manage with eighty-seven things, Karthik?" When I think about minimalism, it's not about your material possessions. I think about minimalism in terms of your mindset, in terms of decluttering your mind, in terms of giving yourself the breathing room, the headroom, to just focus on the things that need to be focused on. It’s really important for any students listening to this.


Michael Carrese: And let me just back up a little bit, you really, actually only possess eighty-seven things correct?


Karthik Ganesh: I do. Yes.


Michael Carrese: Talk about how in your case -- and you're probably seen this now with other people around you -- how does that decluttering impact their mind and play out into their professional life?


Karthik Ganesh: You know, I've been a firm believer in life, as I've had some really significant personal challenges, and life has continued to teach me that dispassion is more important in a lot of ways than passion. The fewer things you own, the less attached you are to them. As a result, you have fewer anchors as you need to pivot in your decision-making. It's just incredibly freeing because you're not being bound, or handcuffed, by material things. You're not being handcuffed by ideas in your mind that have passed their expiration date. You've got the headroom, you've got the wallet room, and you've got the physical and the mental space to be able to do the things that are important to you. 


So much of what we get caught up with in life, so much of sadness in our life, is because we build these hopes up based on things we want. We build up hopes, and then the hopes result in expectations and then when those expectations aren't met, we call that a bad outcome because we immediately rushed to qualify the outcome and then we're disappointed and sad. What if we just took life as it is? What if every single thing wasn't a good or bad outcome, it just was? What if all we controlled was giving the journey our absolute best, with absolutely no what ifs, knowing the destination could be whatever it needed to be? That really is what my book is about as well. My book is about embracing the journey and letting the outcome be a byproduct.


Michael Carrese: I'm wondering if it's one of those things where you don't realize how handcuffed you are until you start the decluttering process.


Karthik Ganesh: You're exactly right. As you start decluttering, you realize there's one fewer thing you need to worry about. The more you do that you realize, "Hey, I don't need to be thinking about those things anymore." We are a slave to our minds. When we can flip that equation and control our mind and not let our mind tell us ‘this thing's good, that thing's bad’... when you've built the muscle memory to say that thing doesn't bother me one way or the other because it doesn't exist anymore, you're completely in control. At that point, success or failure are immaterial because it's just another event that took place. You just move on from it.


Michael Carrese: Fascinating. Really, really fascinating and so much food for thought for everybody listening today. I’m so pleased that you've spent some time with us.


Karthik Ganesh: Thank you. Appreciate the time today.


Michael Carrese: Thank you very much Karthik Ganesh for being our guest today. I'm Michael Carrese, and thanks for checking out today's show. Remember to do your part to Raise the Line and strengthen the healthcare system. We're all in this together.