Q&A: Eric Cannon discusses Scripius’ transparency and cost savings for members and insurers

Eric Cannon is the chief pharmacy benefits officer at SelectHealth and the chief pharmacy officer at Scripius, the pharmacy benefit manager provided by SelectHealth.  

In this Q&A, Cannon discusses the transparency and cost savings of Scripius, the role of the PBM, and his thoughts on medication price caps. 


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Patrick Jones: Why did SelectHealth create Scripius and what is some of the history behind it?

Eric Cannon: “As time has gone on, we have added different lines of business. We thought about stepping into the standalone PBM space selling our services. A lot of the people that we would be selling services to had a Medicaid component, a Medicare component, some form of federal employees, and several different lines of business. At the time, we were predominantly commercial. So, we looked at it in the mid 2000s and looked at it again in 2010-11. In 2013 we did jump into Medicaid and Medicare, which basically gave us the full suite of abilities. Even when we were going to go do the Medicare program, our goal was, ‘well let’s find another PBM to do that for us.’ It was interesting because we had the same exact experience that we had back in 1998. So by 2012, we’re looking for a PBM. We can’t find one that’s really going to meet our needs and meet the needs of our members.

We have always kind of lived by the mantra that if we do the right thing for our patients, costs will follow. And so, that continues to be our focus that we will do the right thing clinically, and if we do the appropriate thing clinically, ultimately that’ll save us money. So, we are now out in the market selling PBM services standalone. We have right now four groups that are rolling up and five that are rolling up under the PBM, and we anticipate here in the next six weeks probably another eight to 10 that are gonna fall into place, and continue to talk to people across the country.”

PJ: How does Scripius differentiate itself from the rest of the PBM market?

EC: “A lot of people say they’re committed to controlling costs. But the reality is they’re committed to driving rebates. The consultants and the brokers in the market are hyper focused on how much rebate [they can] get. What we’ve said is, ‘We’re going to make a commitment to control cost.’ We’re going to provide financial clarity for you, as a client, so that you can see and understand the finances behind what we’re trying to do. We’re gonna do that in a clinically focused way.

Then we’re gonna put in, on top of that, our entire suite of transparent business practices. So that our clients can see all of the data. I’ll give you an example. We are bidding on a group—right now it’s about 5000 people. The broker is hyper focused on the rebate. And so we said okay, we’ll give you two options. One, will give you a high rebate yield formulary that will generate a significant amount of rebate for you. Nationally, you see rebates from the Big Three at 30% to 32% of brand ingredient costs. So, for this group, that was about $24.50. If you look at our formulary that’s more clinically focused, not rebate driven, we actually guarantee them, if you use our formulary, ‘You’ll get $16 and change in rebate’. But at the same time, we will also guarantee savings. We guaranteed another $12 in savings. 

It’s getting that message out to people, helping them understand every single client we have brought on, we are saving them at least 20%. We just finished up some benchmarking, with an outside consultant, and if you look at it in terms of PMPM cost, our cost for this benchmarking exercise was $77, per member per month. The next closest plan was $98. There were three or four other groups that just kind of tiered up towards $145. So we know we can deliver the savings. Our goal is to bring that transparency into the market.”

PJ: Can you tell me more about how Scripius can save customers, providers, and insurance companies money?

EC: “We talk about financial clarity and providing transparency. So an employer group can see where they are spending money and what they need to focus on. The second piece is also providing financial clarity for those people that are enrolled on the plan. We’ve got a suite of digital tools that our members can use. They can do a basic formulary search from their phone, and that’ll let them see what’s on formulary. We also have a tool in place right now called Rx savings. [That] analyzes all of your prescriptions for you, and then it gives you savings opportunities. 

The piece that we’re then adding on top of that behind the scenes, is that there are a whole lot of drugs right now on the market that we have tagged as high cost low value category. A lot of the national PBMs will cover those drugs because they’re heavily rebated. Well, ultimately that still just drives the employer’s costs. So we’ve taken that list of high cost low value drugs, and we’ve completely excluded it from our formulary. As we go through that list with employers [and] members, they fully understand those things, and that gives us really strong clinical pathways to build our formulary around.”

PJ: Can you tell me more about Scripius’ commitment to transparency?

EC: “We have always said that we’re transparent. We will provide to our clients claim-level detail so they can see all the details behind that claim. We paid the pharmacy and they can see what we’re billing them, they can see those two numbers match. One of the things that you don’t get in the market today for anybody in terms of rebates, is a claim-line detail of your rebate payments. And so, we will line item for an employer, ‘Here’s the prescriptions, and here’s how much you got and rebate on each one of those prescriptions.’ 

We back that up with full rights of audit. If you look at the big three, there was a Legislative Audit here in the state of Utah. They went to our Express Scripts because that’s what the public employee plan here in Utah uses. As they got into it, Express Scripts wouldn’t even let them see the contracts. So if Express isn’t going to give you access, even though a smaller PBM says, ‘Oh yeah, I’ll give you access to your rebate data,’ they can’t because we know Express Scripts won’t give it out. So I think that the piece is not only are we [transparent], we’re going to give you a full rate of audit. And when we say that we really mean that because we own the paper with the manufacturer, we own the paper with the network pharmacies, and we haven’t contracted with another third party for those things.”

PJ: How do you feel about medication price caps?

EC: “We have always supported just about every piece of legislation I can think of that will do something to control pharmaceutical costs. There’s a lot of things out there as far as legislation. So that transparency piece I think is critical first. It’s kind of hard to say, ‘I’m going to cap the cost of this drug.’ Where are you going to cap? So somebody comes to market and says, ‘My drugs are $5000.’ Do you automatically just say, ‘Okay well, you’re capped at $5,000? And then somebody else comes along and says, ‘I’ve got the same drug and it’s $500.’ So the cap that I think there needs to be some value assessment at some point. 

I do think that the other piece that’s going on, and I’m part of this, is you’ve got so many people in the middle, taking a slice. So you get the hospitals taking their cut through 340B, you’ve got the PBM taking their cut through admin fees, and while they say they pass 100% a rebate through to their clients, I don’t believe that. You’ve got the GPOs [group purchasing organizations) that are taking 3%, and you got the wholesalers taking 3%. So everybody’s got their hand out along the way and it combined for a perfect storm. I think it is on board with us to say, we’re willing to forgo rebates if you give us just low net cost rebates, where it ought to be. 

As soon as you make that argument publicly, you set off all kinds of fireworks. Because if you eliminate the rebate, you just have a low cost product. There is literally nothing in it for any of the people in the middle here. If you know what the price is, why are you going to go through a GPO and give them 3%? The same is with the wholesaler. Let’s eliminate the garbage. Let’s have a low net cost for the product. Let’s forego rebates. If you can do those things, then you don’t need to cap the price and I think. While that might work, I think there’s enough of a general spirit within all of us that as soon as the federal government says we’re going to cap how much you can make on this, it just rubs us the wrong way.”

This interview was edited for clarity and length.