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: “Scripius is the culmination of work that started in 1998.  At several points we thought about stepping into the standalone PBM space and selling  services, but before that could happen, we needed to be able to cover all lines of business. As time has gone on, we have added different lines of business. A lot of the people that we would be selling services to have a Medicaid component, a Medicare component, some form of federal employees, and several different lines of business. In the beginning, we were predominantly commercial. In 2013 we jumped into Medicaid and Medicare, which basically gave us the full suite of abilities. Even when we were going to do the Medicare program, we questioned our ability to do Medicare and looked for an outside PBM. It was interesting because we had the same exact experience that we had back in 1998. So in 2012, we still could not find an outside PBM that could meet the needs of our members and our plan.”

“We have always lived by the mantra that if we do the right thing for our patients, costs will follow. 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. We are now out in the market selling PBM services standalone. We have seen success with multiple groups now rolling up under our PBM.  We continue to see lots of interest 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. And we are going to do that in a clinically focused way.”

“On top of our clinical focus, we put 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 that is about 5,000 people. The broker is hyper focused on the rebate. But instead of giving them a quote that is only focused on rebates, we gave them two options.  One, would provide a high rebate yield formulary that will generate a significant amount of rebate for the client. 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 $16 and change in rebate’. But at the same time, we will also guarantee savings. We guaranteed another $12 in savings. In the end resulting in an offer that would save the client $210,000 annually.”

“It’s getting that message out to people, helping them understand that 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  tiered up towards $145.  We know we can deliver the savings. Our goal is to bring actual cost savings and  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. 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 have 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 RxSavings  [That] analyzes all your prescriptions for you, and then it gives you savings opportunities.”

“The additional piece that we have added , is that there are a significant number of drugs on the market that we have tagged as high cost low value. A lot of the national PBMs will cover these drugs because they’re heavily rebated. Ultimately that still just drives the employer’s costs. We’ve taken that list of high cost low value drugs, and we’ve completely excluded it from our formulary. As we go through the list with employers [and] members, they easily see the lower cost options. This gives us really strong clinical foundation to build our formulary around.”

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

EC: “We have always been  transparent. We provide to our clients claim-level information so they can see all the details behind their claims. Clients can see what we paid the pharmacy and what we billed them for the claim. 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. We line item rebates for an employer, ‘Here’s the prescriptions, and here’s how much you got in rebate on each one of those prescriptions.’”

“We back that up with full rights of audit. Many of the smaller PBM’s contract with the larger PBM’s for rebate aggregation.  We on the other hand own all the paper with the drug manufacturers.  How can a PBM claim to be transparent when they themselves have not seen the rebate contracts?  The same is true for our network contracts.  There have been several legislative audits around the country, that ended without results because they couldn’t get access to the contracts for network or rebates.”

PJ: How do you feel about medication price caps?

EC: “We have always supported legislation that would do something to control pharmaceutical costs. There are a lot of things out there as far as legislation. The transparency piece is a critical first step. It is hard to say, ‘I’m going to cap the cost of this drug.’ Where are you going to place the cap? If a company brings a drug to market for $5,000, do you automatically cap it at $5,000?  Before we set price caps, we need value assessments to determine what a valid price for the drug is in the first place.”

“The other thing that is going on, you have lots of people in the middle taking a cut, which provides manufactures an argument to raise their prices. The new generic drug company Civica has a great model.  There are no people in the middle, they directly contract with hospitals and eliminated the wholesalers, GPO’s and PBM’s.”

“As soon as you make this argument publicly, you set off all kinds of fireworks. 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. If you know you have the same price everyone else does, why are you going to go through a GPO and give them 3%? The same with the wholesaler. If you eliminate the middle men, which you could argue I am, eliminate the rebate and set prices based on the true value of the product, then there is no need to cap the price, you paying for the true value of the product. 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.” I hope I am wrong and believe wholeheartedly that when you add transparency, you change the game.”

This interview was edited for clarity and length, including edits made after initial publication.