Harsh Thakkar (00:02)
All right, welcome to the show, Michael. We've had one of your colleagues here in the past, Jesse Mendelson, and I believe you're also working with him at Model N and you're the Vice President of Product Management.

Michael Grosberg (00:16)
I am and Hirsch, thanks for having me. I really appreciate being here. I've been a Model N for about four years, but funny enough, Jesse and I actually went to college together and we didn't know that when I joined Model N and it took us a minute to figure out that we had actually known each other some many years later. Jesse's a hard act to follow, so I hope this is as much fun.

Harsh Thakkar (00:27)
Wow.

Yeah, yeah, he was, I think he set the bar pretty good because when he came to the show, he was pretty hyped up and he shared a lot of interesting stuff. yeah, so I want to talk to you about, know, just yesterday, somebody was asking me like, hey, harsh, you you're doing consulting. Like, do you do you have any people on your team that know commercialization, market access, pricing, all of that stuff? Right.

To be honest, I don't have much experience in that area. I know a few people, but I don't put myself as a provider in that area. But this is a very important topic, right? You talking about pricing, cost of prescriptions. And from what I've researched, we know that because of the ongoing Medicare price wars, it's forcing the manufacturers to negotiate with PBMs and for...

For those of you who don't know PBMs, that's Pharmacy Benefit Managers. And the goal is we want fair affordable pricing, right? Everyone wants that. It's a very tough spot to be in. So I wanna start off by asking you, what kind of collaboration is needed? What kind of alliances are needed to make this a reality?

Michael Grosberg (02:00)
Well, Harsh, you clearly know at least two people with experience in the area, myself and Jesse, of course. don't sell yourself short there. But I think you're right. Affordability of medicines is our common collective goal here. And affordability is really two things, Part of it is when you show up at the pharmacy counter, what is the copay?

Harsh Thakkar (02:06)
Mm-hmm.

Yeah.

Mm.

Michael Grosberg (02:29)
What are you being asked to pay to actually receive that dispensed drug? But it's also affordability of your healthcare coverage. where PBMs were supposed to have an important role to play is they claim that's the argument PBMs make is that the rebates they extract from pharmaceutical manufacturers are supposed to drive the cost of insurance.

Harsh Thakkar (02:37)
Mmm.

Michael Grosberg (03:00)
Medicare negotiation introduced by the Inflation Reduction Act is likely to negatively impact the availability of those rebates. The reality of course is that in the process of collecting rebates from pharmaceutical manufacturers, PBMs, for-profit businesses, have also extracted significant profits and benefits for their shareholders.

Harsh Thakkar (03:09)
Hmm.

Michael Grosberg (03:28)
And the value of reduced pricing at the pharmacy counter has been diminished over time and the complexity of the system has been difficult. You know, the complexity of the system has increased exponentially. So it puts us in this really, really weird situation with just regular people being able to afford the medication they need.

Harsh Thakkar (03:43)
Hmm.

Yeah, that's a very interesting point. And again, I have had this similar discussion with another guest on here and we were talking about, you know, GLP-1 medications for weight loss and the shortages and how, you know, like people weren't able to get medicines like Ozempic, Wigobi, Mujaro, all these other ones. And that sort of created this opportunity, you know, for independent pharmacies to come in because

statistically, know, PBMs are handling 80 % of US prescriptions, but this guest was, you know, basically shedding light on this topic that we're going to start seeing a lot more, you know, relationships and collaboration between pharma manufacturers and independent pharmacies. So what are your thoughts on that?

Michael Grosberg (04:45)
Well, I think there's a couple of things that we have going on here. Of course, shortages of GLP-1 medications are real. And even in my family, there are people who have been prescribed GLP-1s because of diabetes. And it's difficult to procure those medicines under prescription because they're so popular. Given the last, you know, the last

Harsh Thakkar (04:55)
Hmm.

Michael Grosberg (05:15)
three or four weeks in Washington DC, it's tough to predict what's going to happen. But we do know that the Center for Medicare and Medicaid, intends to negotiate for the prices of Zempek and Vigovia and others in their round two of Medicare negotiation. That's going to put further pressure on the supply chain. On the other hand, compounding pharmacies, they're not

Harsh Thakkar (05:19)
Mm-hmm.

Michael Grosberg (05:45)
the same as pharmaceutical manufacturers. They take the raw ingredients and they sort of make the drug for you. But there are safety concerns that supply chain is not as well monitored. It is not as well protected as it would be for your standard pharmaceutical manufacturer. Even if in Australia, their version of the Food and Drug Administration

had placed very restrictive controls on compounded GLP-1s. Not the case in the United States, but the safety concerns remain. I would say too that there's a difference between the compounding pharmacies and also the relationship of the pharmaceutical manufacturers with small independent pharmacies.

Harsh Thakkar (06:23)
Hmm.

Hmm

Michael Grosberg (06:40)
Of course, here in the United States, you have CVS and Walgreens and Kroger as major pharmacies. But the independent pharmacies that actually serve rural areas, that serve inner city areas, they are much more likely to have tight partnerships with pharmaceutical manufacturers because their interests are starting to...

And they're interested in serving the patient. It's access to people who have little opportunity otherwise to access a pharmacy. Even there was a New York Times article about it a few months back, profiling a pharmacy in central Pennsylvania where I lived for a long time. And they talked about the razor thin margins that independent pharmacies operate on.

Harsh Thakkar (07:08)
Hmm...

Hmm.

Michael Grosberg (07:36)
and how the pharmacy benefit managers are squeezing those pharmacies not only by reducing the reimbursement rates, but also by withholding cash. Even if on paper those pharmacies are maybe okay, the cash flow is so constrained that they can't afford to stay in business.

Harsh Thakkar (08:00)
So like, this is an area where I don't have enough clarity, and maybe you can oversimplify this, that's totally fine. But let's say hypothetically I'm a pharmaceutical company and I say, this drug is worth $500. How does that trickle down with all these different stakeholders eventually?

when it gets to the patient and can you maybe share like who gets how much off that $500.

Michael Grosberg (08:34)
Yeah, and I'm a data and policy wonk, so absolutely. So here is, I think, let me start by with the assumption that you made that a drug is worth. How much a drug is worth is a really tough determination because to determine the actual price of the drug, have to kind of

Harsh Thakkar (08:38)
Yeah.

Mm, mm.

Michael Grosberg (09:01)
value the human life improvement. It's a really complicated process. What we typically see and what we typically read about when we talk about price increases, we talk about the list prices. But the list price is not something that practically no one in the United States pays the list price for a drug. First of all, when the drug is

The drug goes to your typical, not biologic, not specialty drug, but your typical prescription medication goes through several stages. It goes from the manufacturer to wholesaler and then to the pharmacy. And the wholesaler buys at the slish price. But then the provider will have an agreement with the manufacturer to buy for less.

So the manufacturer will reimburse the difference to the wholesaler. The wholesaler will keep a little bit, a very small percentage, as the administrative fee. Then, think, where the kicker is, is how does the pharmacy get paid? Part of it is your copay. Part of it is if you're a commercial insurer, or you're insured by one of the government insurance programs like Medicare or Medicaid, or if you're a veteran.

then your insurance company will reimburse the pharmacy and then your insurance company will go back to the manufacturer for the rebate. So why do they go back to the manufacturer for the rebate? Why would the manufacturer agree to pay the rebate? It all comes back to this formulary business. Probably if you work for an employer or if you're Medicare insured, you're familiar with the formula. It's a big list of

Harsh Thakkar (10:37)
Hmm.

Michael Grosberg (10:58)
of all the possible drugs for all the possible indications and it will say for this drug your copay is zero and for this drug your copay is $50 and for this drug your copay is $1,000. So if I am a pharmaceutical company I want my drug to be in that tier with a low copay or no copay.

Harsh Thakkar (11:11)
Hmm.

So

you owe less to the, yeah.

Michael Grosberg (11:25)
Well, because so that the patient can access that drug without having a copay, right? As a pharma manufacturer, I want the patient to get the drugs. I have done, we've, pharma manufacturers have done a ton of research that the lower copays substantially improve adherence, right? Going back to refill your prescription and lower copays mean people can access the drugs easier. And so

Harsh Thakkar (11:29)
I see.

Hmm.

Michael Grosberg (11:55)
I want to be in that high tier on the formula where the copay is low. And so the PBM comes back to me and says, I want the rebate. It's a pay to play situation. that's what's driving the rebate, this rebate culture. What is really, really weird, and this is where the math screws us up, right?

Harsh Thakkar (12:06)
Hmm.

Hmm.

Michael Grosberg (12:26)
The PBM got the rebate. But for me as a patient, my copay is calculated based on this fictitious list price.

Harsh Thakkar (12:41)
Hmm.

Michael Grosberg (12:41)
My insurance company didn't pay the list price. But my co-pay is calculated based on the list price. So if the manufacturer increases the list price, the PBM demands higher rebate, they're okay. I as a patient...

Harsh Thakkar (13:01)
Pay more, Yeah, it's very hard to know as a patient or as an end consumer, especially if you're not in pharma, you don't even know what players are involved. If you work in life sciences in a company, maybe you know some of these things by talking to your internal teams, but even then, subjects like this are never discussed with everybody in the company.

It's more like educational, like, hey, here's how we come to the pricing. Because like you said at the start of the question is that who decides how much is it worth, right? Because we've got medicines worth $20 and $2 million.

Michael Grosberg (13:46)
I will say that at Model N, where I work, we are very fortunate. We have really good health insurance. And every year, the folks from our HR department do a little training on how health insurance works. They hate it because we're such educated consumers. And we have questions that are, you

Harsh Thakkar (13:52)
Hmm.

Hmm.

Yep.

Michael Grosberg (14:15)
very atypical for employees. But it is a really complicated topic. And it's very difficult for individual patients to navigate that and to be able to get the medicines they need.

Harsh Thakkar (14:33)
Hmm.

Yeah, I feel like one of the big takeaways here is that there has to be an innovative approach for negotiating these prices between the insurance, whether it's insurance agency like Cigna or United, or if it's Medicare and the pharma and the pharmacy benefit managers. Because like you said, the math

it doesn't really make sense. And it seems like the impact of that math is the most on the patient. So what do you, like, let's say you had a magic wand to do something to decide how this workflow goes or how the math is recalculated. Have you ever thought about like, I wish it was this way?

Michael Grosberg (15:31)
If I were to try and fix this healthcare system, yeah, I certainly, you know, I don't think I have, you know, visions of grandeur to the point where I think I can do it. A lot of smart people have been working on it for a very long time and the problems are very, very complicated. But I do think that there are positive steps that we can make.

Harsh Thakkar (15:33)
and

Mm-hmm.

Michael Grosberg (16:01)
And I think some of the positive steps can come from common sense PBM reform that had been proposed during the last Congress, where we would create better transparency. Just this morning there was a headline about PBM transparency laws in New York State. So if it takes state activism to do it, know, so be it.

Harsh Thakkar (16:10)
Mmm.

Michael Grosberg (16:30)
I think it is important that I believe that transparency improves government. I believe transparency improves business. And so if we can have a better understanding of what the PBMs actually deliver, the value they deliver, if we can have better accounting for where the money goes, where do the rebates go versus where do the fees go?

How are the rebates and the fees by the PBMs determined? And if we can change the individual contribution structure to be based on the final cost to the insurer rather than the fictitious list price. I think those are incremental changes that can substantially improve access and substantially improve

Harsh Thakkar (17:21)
Hmm.

Michael Grosberg (17:29)
what you pay at the pharmacy.

Harsh Thakkar (17:32)
Right. this is another maybe a little bit off topic, but I've worked at some companies or worked with some clients where you go to that pharmaceutical or biotech companies page for their commercial products and they have this statement like, if you can't afford this medication, fill out this form. And it's like, you don't have to pay anything. So how...

what happens in that case where the patient is not owing anything for that drug?

Michael Grosberg (18:07)
Yeah, no, I'm glad you asked. It's a really great topic. These things are called patient assistance programs. In fact, we work with a lot of pharmaceutical manufacturers who have those programs. I think it is a really great way for pharmaceutical manufacturers to ensure that the drugs get to the patients they need them in. What they do is they say,

Harsh Thakkar (18:14)
Mmm.

Michael Grosberg (18:36)
Look, we ended up on the formulary, right? And we know the copay is going to be $150. So we can offer you a coupon, copay card, or, you know, similar program that will refund some or all of that copay, right? Rather than paying the PBM, we will pay the patient directly.

Harsh Thakkar (18:58)
I see.

Mmm.

Michael Grosberg (19:06)
so that the PBM can do whatever they want, we can end up on whatever formula position we want, they will charge you a copay, but we as a pharma company, we want you to be healthy, we want you to take a drug, so we're gonna refund you that money. So it's a great idea, and it's really patient centric. Unfortunately, there are folks in the insurance industry who got smart and said,

Harsh Thakkar (19:23)
Right.

Hmm.

Michael Grosberg (19:35)
well, if that is how you cover your ko-pei, it doesn't count towards your deduction.

So normally if you think about how your insurance works, there is a deductible or like an out of pocket maximum that you had for a year and then everything is covered. it's like saying basically that, oh, well, if you use your money, it counts, but if you borrow money from someone else to pay your healthcare costs, well, that money doesn't count. It's like different money. It doesn't make any sense.

Harsh Thakkar (19:53)
Yep.

Yes.

Yeah.

Michael Grosberg (20:17)
but

they're called accumulators and it is a really, really terrible practice. And it is a reality for patients who can get those, who can get that kind of copay assistance and it is a significant copay assistance. But then of course there are people who take advantage.

Harsh Thakkar (20:24)
Wow.

Mmm.

Hmm

Yeah, thank you so much for going into that. I love how you explain these things because like I said, we could talk about this topic for hours, but we've covered so much in the last 20 minutes or so, talking about the different stakeholders, talking about the different pricing structures and how the math works and what we can do to make it better. I want to ask you because Model N is a

From what I understand, it's a revenue management software that a lot of companies use to identify different criteria and parameters that go into figuring out what their drug price should be in a simple sense. When you are discussing with your colleagues at Model N or you're going to other industry presentations and whatnot, what role do you feel...

technology can play and are there other companies that maybe exist or need to exist like Model N that can help the industry leverage technology for better pricing and affordability of drugs?

Michael Grosberg (21:58)
I think we at Model N play a really, really important role. All of this complexity that you and I talked about for the last 20 minutes and could talk for another three days, all of that complexity needs to be operationalized. At the end of the day, the pharmaceutical manufacturers run a business. They need to make informed business decisions about

Harsh Thakkar (22:03)
Mm.

Yep.

Hmm.

Michael Grosberg (22:28)
the revenue they will earn from their drug products. Model and technology makes that possible, makes that possible to do it accurately, and make it possible to do it in compliance with the myriad of federal and state regulations here in the United States. So we play a really, really important role in giving the manufacturers the time they need to make those important decisions.

Harsh Thakkar (22:46)
and

Michael Grosberg (22:58)
Should I pay for a PBM rebate? Should I offer a copay card? How much of a copay assistance can I afford to offer? Is the kind of questions the manufacturer asked and they use the data they collect in model and systems to answer those questions. There's a lot of compliance and regulations that we don't see as patients or consumers. All of that compliance is managed

Harsh Thakkar (23:06)
Hmm.

Michael Grosberg (23:28)
by Model N software. That's a really important function to make the mechanics of that system work and work smoothly. I think that there is a need, and I hope that we at Model N and others in the industry can progress that, to further automate.

right, to bring the industry closer together. One of the biggest challenges we have today is that all these different players, pharmacies, the wholesalers, the insurance and the PBMs and other players in the industry, we don't all talk to each other. We have, we have, in many cases, we have unnecessarily adversarial relationships. And my hope is that over the years, if I look

Harsh Thakkar (23:54)
Yeah.

Right.

Hmm.

Michael Grosberg (24:23)
two innovation cycles, 15 years out. I hope that we can all come together in the common goal of serving the patient and actually exchange data and be honest with each other and upfront with each other and then calculate the necessary pricing and whatever else applied in all the business roles that we have to one common data set.

Because today we spend a lot of time verifying each other's data, comparing each other's data, reconciling each other's data. It creates a lot of inefficiency in the system.

Harsh Thakkar (25:01)
Yeah, it, you know, it reminds me again, I feel like this might sound silly, but when you look at, you know, technology in other areas, like, for example, Domino's and how when you order a pizza, you basically see the entire workflow right from when your order is placed to when the ingredients are put on the pizza to when it goes in the oven and you

every that the whole 30 minutes workflow you can see that same with Uber, Uber eats or Uber, right? It's not like some people argue that Uber costs more than a taxi cab. But there are still people paying that price to Uber because Uber shows you clearly that if you paid $30 for this ride, I'm going to take $8 because you're using my tech. And oh, I'm going to pay

$2 to New York City because I have to owe them $2 for taxes and then you're gonna pay this much right so I don't know if I mean this might sound a silly idea, but Does a patient who's taking a drug need that level of transparency or something along those lines? To show here's how this drug came in my hands from the manufacturer and these are all the people that were involved

and the entire life cycle.

Michael Grosberg (26:29)
I think we as patients are owed that level of transparency. And in fact, the federal governments made attempts to do it, right? There was a transparency in healthcare laws passed over last 10 years, and we're supposed to be able to request that information about other medical services. I read it's in the single digit percentages that the hospitals are complying.

Harsh Thakkar (26:32)
Yeah.

Hmm.

Michael Grosberg (26:59)
Part of it is technology, but part of it is disincentive.

Harsh Thakkar (27:01)
Yes.

Hmm Yeah, this is this is a very interesting topic and again for selfish reasons because I don't know much about this I feel like I have like five or ten more every time you say something it it wants me to ask you like five more questions, but I really appreciate you know, the way you explain things and and You know sharing how all these factors come into play

for such an informative conversation. For someone who wants to dive deeper into these topics, maybe read about any of the regulations or how things work. Do you have any resources that you would like to point them to so they can be more familiar with this subject?

Michael Grosberg (27:51)
Sure, well, I will go out on a limb and say, of course, there's a lot of resources on the Model Land website. And of course, folks are welcome to connect with me on LinkedIn. I'm happy to help. I would be remiss if I didn't give a plug to Jesse Mendelson, who was your guest previously, and my colleague. He is certainly an industry leader. And we both very much admire the Drug Channels Institute.

Harsh Thakkar (27:58)
Yeah.

Michael Grosberg (28:21)
and Adam Fine, who's done a lot of research on the inner workings and publishes a lot of work on the inner workings of the space. But I also encourage people to just read the Wall Street Journal and read the New York Times. The reporting that has been done by those news outlets over the last year on the topic of PBM, on the topic of drug pricing,

Harsh Thakkar (28:21)
Alright.

Michael Grosberg (28:49)
has been surprisingly informed and in depth. And it's been great to see a broader level of understanding just in the populace of this very important ecosystem.

Harsh Thakkar (28:53)
Okay.

Yeah, no, those are some really great resources and we'll put all of that in the show notes. And for the audience watching this or listening to this, we'll also add the link to Jesse's episode here. He was back, I think episode 48 or 49, something like that. And he was talking about the Inflation Reduction Act and what's the impact to the industry from that Inflation Reduction Act.

I think it's a 500 page document. if you don't want to read that document, you want to get a gist of it, check out that episode. Michael, it's been a pleasure talking to you. Thank you so much for coming on the show and having this conversation. Any final words before we drop off?

Michael Grosberg (29:49)
It's my pleasure, Harsh. Thanks for having me.

Harsh Thakkar (29:51)
Yeah, thank you. Appreciate it.

Alright, that was really good.