What Is A Fiduciary PBM? (with Ken Kemker)

Hey. Hey. Welcome back to the Bullpen Sessions podcast. My name is Andy Neary and this is episode 293. Today I am excited to be joined by Ken Kempker. Ken is a partner and co founder of Disclosed rx. Full transparency Disclosed. Our ex is a complete game consulting client. But I wanted to have Ken on to talk about pharmacy. Now I know this is very much a employee benefits directed conversation today, but I thought it was worth having because let's face it, the PBM space is pretty convoluted and it's usually by design. And I just really like what Disclosed RX is doing in the world of PBMs. From being a fiduciary PBM, a fully disclosed PBM. So by tuning into today's episode, you are going to learn what is happening in the PBM space today and you are going to learn about a unique solution that most transparent PBMs can't do and the traditional PBMs definitely won't do. And we are talking about how you can help your clients reduce their pharmacy cost. It's not rocket science, it's just always putting your clients interests first. Hmm, interesting. It's a great way to do business. So in this episode you are going to learn about Kem Kemker, the fact that he lives just outside of French Lick, Indiana. Yep, that is the hometown of the one Larry Bird. So we actually talk about that a little bit. Plus we dive into the world of healthcare, health and insurance and all things pbm. So it was excited, I was excited to do this episode with Ken. He's got a lot of knowledge and I think you're going to find his information insightful, but also very tactical. You'll have some action steps you can walk away with and talk to your prospects and clients about. So let's dive in. Episode 293, Ken Kemker, disclosed RX. All right. I am here with Ken Kempker, co founder of Disclosed rx. Ken, welcome to Bullpen Sessions.

Thanks Andy. Thanks for having me.

You bet. We're going to get into a very enlightening conversation around Pharmacy, which is a hot topic that has been a hot topic for a long time in the employee benefits space. However, before we get there, if anybody goes to your profile on LinkedIn right now, they'll notice that you live in around French Lick, Indiana. And so for the basketball junkies that might be tuning in, everybody knows French Lick, Larry Bird. What's it like living in a town as small as French Lick that has had has a famous person like Larry Bird?

Well, so I'm about six miles outside of French Lick in the middle of the woods, but every time I get on a phone call and folks ask, where are you at? I have to tell them, you know, I live near French Lick. And the first question is always, isn't that where Larry came from? And the answer is yes. Yes. Greatest player of all time.

What is the influence like in town? Is everything Larry Bird this, Larry Bird that?

So there's a whole lot of it. I mean, there's some food establishments that have his jerseys hanging and memorabilia and all that go along with that. So, yeah, there's quite a bit of his influence in the area.

I'm curious, Ken, speaking of influence and what influenced you to get into the employee benefits space, what was that transition like? You know, most of us did not get in this industry by design, but what was that transition like for you? Talk a little bit about the Ken Kempker. Maybe before Disclosed rx.

Okay, so before disclosed rx, I was chief operating officer of another pbm. I was invited to do that from my experience.

At the executive level of a, of a multinational manufacturer. And I was involved in managing international supply chain and then also at the, the, the higher levels of the executive team helping to guide and lead that company. And that's how I was, was recruited into a chief operating officer role for a pbm. And that's, that's how I, that's how it all started.

It's interesting, you know, having that supply chain background. What was that experience like for you? You were doing it at the manufacturing level in a completely different industry. What was that like for you to come over to this side of the world with that background of supply chain? Did you quickly notice some interesting things about the supply chain on the healthcare side?

Well, sure. So you've got, it's, you've got product and service delivery through the pharmaceutical industry. And what a PBM does is to assist employers in managing that part of their purchase, their supply, their supply chain for their benefit. And so there's a whole lot of.

Business theory and methodologies you can apply into this space that you apply through manufacturing and other businesses. And the easiest example that when I give folks go, okay, that makes sense, is the personal importation, right? I mean, that's supplying therapeutics.

Acquiring therapeutics from many, many different countries. And that's, you know, you're managing supply chain.

Yeah, it's, I'd be curious to know. You know, I can remember I was, you know, selling health insurance for 20 years, but really around 2017.

Being exposed to this new idea that, wait, we can help manage the healthcare supply chain. Up until that point, most of us were brokers, selling rates, every renewal. Right. And so going back to your time as a, you know, working with a supply chain on the manufacturing side, I'd love to hear your thoughts. Okay. When you were in that role, what were your biggest priorities? Helping manage the supply chain for a manufacturer.

Well, so you have, so we had supply chain that went through Asia, China, Vietnam, Mexico. And so you, one of the first things you have to do is make sure your partners are, are trustworthy. You know, that you can rely on them, because even if it's just a piece of what your end product is you're going to take to market, if they're not reliable, you know, it really throws a wrench into your business. So when you, when you partner for, you know, multinational supply chain management, you really have to find partners, people who you trust as, as much as you do your own employees. And that's tough to do. That takes a lot of work. But as you develop that supply chain, you know, you can find tremendous advantages through the services and the products that you then package and deliver your, you.

Know, something I always found interesting, and I'd love your perspective on this from your past. On the manufacturing side, I feel like if you ask any business owner who does look at their supply chain cost of goods sold, most of them know what they're spending with the partners almost down to the penny. When you looked at how you manage the supply chain on the manufacturing side, was that, was that the case where you're like, hey, we, if I, if I asked you with this partner, what are you spending? You know, pretty dang clear what you're spending.

Oh, yes. That's the whole point of it.

That's, you know, and that's what's so interesting on this side. I remember, I remember the one time, one of the few times I actually won an aor. An Agent of Record Ken, on one. In one meeting, I looked at the CEO and I said, tell me who your top three suppliers right now are? And he rattled them off and I said, do you know what you spend with them every year? Of course. I said, do you know who your top three suppliers are in your healthcare supply chain? They kind of looked at me, but you could tell he got it. And I said, that's the problem. You have no idea what you're spending with them every year. And every year the costs go up and you just keep paying them.

So this, this goes to an entire health Service delivery system discussion. This is not just the pharmaceutical industry. This is whether it's hospital, emergency room surgical care, you know, any of the healthcare services that an employer provides to their employees as a benefit. Those costs, those detailed costs are often very opaque. You don't know. And getting competitive pricing, this clinic versus this hospital for the exact same service. And then your quality of care metrics, can I get the same level of quality care over here that I can currently get here, but at a better price? You know, and so you've got the combination of quality, quality of care as well as cost of care that you have to consider because you don't just want cheaper. Right. Especially in health care, if you're, the quality of care is less.

You don't want that service even if the price is half what it was. Right. You want, you want top level health care, but you want to be able to get that same level at the most competitive price. That's, that's the tough part in the healthcare industry today. And it's not just pharmaceutical.

That's a really relevant point. This, this phrase that we've all adopted, cost containment often tends to ignore quality. It's, it's a, how do we lower the cost of healthcare? But to your point, just going and finding cheap healthcare doesn't solve the issue of quality is not addressed.

Yeah, no, that's, yeah. And, and you know, when an employer.

Is.

Providing a benefit for their employees, you know, the operative word there is benefit, you know, they want it to be to the benefit of their employee. And if you're doing cost containment and delivering a lower quality of service or product, the benefit, the perceived benefit drops precipitously. It's no longer considered a benefit. And so it's important when we're talking about cost containment, it's wrapped within the concept of quality of care as well. And the care goes beyond just the product. If for us the product is a therapeutic, right, but the product is going to be manufactured at the same location or by the same manufacturer wherever we acquire it. The challenge there then moves towards what is the member care, how are they being treated as they're going through this healthcare system with RX just being one piece of it. And that whole journey is usually at a time of, you know, high stress already because you had an indication that's, you know, probably concerning and then you've got all of the cost implications and so got someone who's already in a tough spot that that healthcare delivery system needs to, to, to really care for that person and not just push them through as a number. When they call to get help, they're not calling because they want to sit on the phone for an hour waiting. They want someone they can talk to to get help. You know, and that's how we design our member services. When you call, someone answers and very quickly and it's someone who can help you. And you know, if, if more of the health care service vendors had that mindset, the whole, the whole industry would be much better for the people that, that we're here to serve in the first place.

You know, I think that's a great jumping off point where our conversation from here is going to focus is on those three things. Quality, cost and care. And care being the service. Are you, are you providing the support? And if you're an industry partner listening in, I think this is going to be a really insightful conversation for you to tune into. And you know, it's interesting, Ken, we're going to get into the pharmacy. There's not a week that goes by that I don't talk to an employee benefit advisor that says, you know, the low hanging fruit right now is prescription drugs. It's obvious. But before we get there, let's just take a step back for a second and go, okay, you looking down at the industry from a 30,000 foot view, where do you see the biggest challenges as an industry as well as the opportunities for improvement?

So wow, that's a, there's a lot to unpack there. And so I want to ask a clarifying question. Are, are we focusing in on Rx piece of the health system? I want more just the health system.

For employers offering benefits. Yeah. And advisors selling benefits. Where do you see the biggest. Why is the system so difficult to compete against or beat? Why is the system so convoluted? You know, I would argue for some advisors it's a challenging system to try to figure out.

Sure.

Whether that be health insurance or health care, why has this been designed to be such a big challenge for organizations?

So the original intent wasn't for it to be so tough.

And the, the nature of competition took a very emotionally charged.

Topic. Health care. Right. You. Years and years ago, decades ago, you had your doctor. Right. It was, that was your doctor and you knew them at a personal level. Right. And, and so there was a relationship there that now there are some folks. So there's great healthcare service delivery out there and then there's not so great. The doctors. My doctor's fabulous. He is a family friend. He knows me inside and out. He knows my lifestyle. I get to talk to him when I go in. But there is a need for some healthcare delivery systems to move more people through faster in order to maintain their level of profit, if you will, or even to maintain solvency.

Right.

There's a whole lot of health care service systems that are, that are barely making it. And it gets to where the, the idea of the consumer has been lost because my doctor and I have a one on one relationship. Then you put a broker in the mix, you put a TPA in the mix and you put a hospital in the mix and you put, and then all of these are part of the service delivery that I now have to deal with. And you know who's actually buying the service? Well, my insurance company is. Right. I'm just the person who's going to see the doctor, but the doctor's getting paid from the insurance or the insurance is paying the hospital, who's paying the doctor. And the whole idea of who's most important because who's the consumer, I think has been convoluted and lost. The patient is the consumer of the healthcare. But if there's another entity paying that service provider, where's the relationship? Right. And this gets to. So you, you know, if you want to ask me what's broken. What, what's broken? To me it's, this is a very, very simple description and I've told this story a thousand times because my 18 year old son who mows my yard knows what's broken in the healthcare system. And this story goes like this. And I put my hands up. So this is my house, right. When he mows my yard, he knows I want my stripes parallel with the front of the house. Right. And when he mows my neighbors, he knows my neighbors wants his diagonal. So here's this. In a moment this will make sense. But I'm going to ask you, when he's mowing my neighbor's yard, why does he mow my neighbor's yard diagonally and why does he mow mine parallel?

Why?

You're each motivated by different things.

Because my neighbor is paying him to mow that yard. So he does it the way he wants it because that's who's paying him. When he mows my yard, he mows mine parallel. Because I'm paying him for that job. Right.

And so what I'm hearing you say is the payer is in control.

Exactly. The payer's the boss. The person who pays you is the boss. And the problem is that payer relationship has become so convoluted.

The doctor's working for the hospital, but the hospital has other doctors who needs referrals so now they're giving a referral fee. So now that doctor, instead of really paying attention to me is worried about his referral basis because that's what he gets paid for. And so in that analogy, the best health care isn't always delivered. Right. Because that who's the consumer is lost.

Yeah, your point's well made because I think if you talk to some hospital executives, they'd tell you their customers, the insurance companies and, and not the patients that are taking their beds. And it's interesting, I was sitting on a flight a few months ago right in front of two co workers that I don't know who they work for but it was obvious they were working for an organization who teaches hospitals how to optimize revenue. And I was just listening to all the things they were saying about what they're teaching hospitals and I was literally jump. Like I almost had everything I do just to hold myself back from not turning around and going do you see? You are not the problem. And it's interesting, Ken, to your point, we're going to talk about quality, cost and care. And what I'm hearing you say is number one, the system's built on quantity, not quality. Number two, it's all about profit going up, which means costs go up. And number three, the care. We look at patients now like mere numbers because as a doctor I have to see 30 to 40 of them a day just to meet my obligations. So we're doing the opposite of quality, cost and care.

Well, when we talk about quality, the primary care physician.

Has often a level of compensation that's tied to their referrals. Right.

If they didn't have that and they were enabled to be and they were able to be the primary care provider, they would be able to perform 85 plus percent of the healthcare delivery that that patient needs. That's high level care, that's high quality care and then refer when the patient needs it. Not I have someone who came in with a and I'm going to make a bad analogy, a cough. So I'm going to send them to a pulmonologist. You know that's a bad example but it's, we've injected too much of the compensation based on non patient care. What I do for other entities, not the member, not the patient.

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Yes.

What are your thoughts about transparency as it relates to PBMs?

Okay. So transparent. So I'm gonna, I'm gonna make a statement and, and you know, whoever's watching this might take you by Surprise. We are not a transparent PBM. We don't want to be associated with transparent PBMs. Transparent PBMs. Now there are some better than others. So I'm. I don't want to be grouping everyone together. But transparent as it's used in this market space means that I will tell you something, okay? And usually a good transparent is going to codify that in their contract. They're going to say, I'm going to tell you this and we're going to put it in the contract. You can see it right here. I'm going to tell you this. So I'm transparent because I'm telling you this, okay? So there's no definition that really says for you to take the moniker of transparent, here's the criteria and here are all of the things you need to disclose to your client. So what ends up happening is I would, I don't. Another transparent might claim the moniker of transparent, codify it with this line that says I'm going to tell you this, but what it doesn't mean is I'm also going to tell you this and this and this, which are important, but you didn't ask me about and we didn't put in the contract, so I don't have to tell you, okay? That's how transparent is used in this market space. That's why we are not a transparent pbm. We don't tell you this and put it in our contract. There's no definition for transparent. What we do, we're called disclosed rx. We are a fully disclosed pbn. What that means, and there is a definition for full disclosure. The SEC owns it. And the SEC defines full disclosure. And I'll simplify it, but basically full disclosure means both parties to a transaction have access to all the information they need, all material information to fully understand the transaction. So I don't have to tell you anything I'm putting in my contract. I say we operate under full disclosure. And what that means is you have access to everything that is material. If it's important, you have access to as our client. So full disclosure means we're going to tell you everything that's important. Transparent means I'll tell you one or two or three. And so for us, it's full disclosure. And so that's the difference between us and as a fully disclosed PBM and a PBM that claims the monitor, the moniker of being a transparent pbm.

Well, I think it's important you address that the way you did because let's be honest, the PBM space is A very convoluted space. And I know there's a lot of it, veteran advisors, myself included, I admit, when I even, even as a seasoned veteran, five, six years ago, did I know everything I needed to know about PBMs? Probably not. And it's a very convoluted space by design. And I think it's important to be able to break down how they work in terms anybody can understand. And I think what you just said was very, very clear. Now, the other word that you. Go ahead.

So I want to jump on what you described there because.

And this gets to some of the stuff we talked about earlier. One of the most important things when you're doing supply chain management is partnering with someone you can trust. Okay? The reason the term transparent entered this market space is because PBMs got caught making backroom deals that the employer did not know of. And those backroom deals, if you're the client, you're inevitably. Those costs, whatever costs someone's making with regards to this transaction set, are always going to pass through to the final consumer, right? So if I make a deal where I'm going to keep rebates or I'm going to get a formular replacement fee or an international supply channel is going to give me a quarterly market incentive fee, whatever you want to call it, any of those costs that I would keep as a PBM as it relates to me representing this client eventually are going to be passed through to that client. Right? There's no magic to it. They're not paying me because I'm a nice guy. They're paying me because I'm doing something I wouldn't ordinarily do, which means it's not in the best interest of our client. So that gets to, I think, where you were headed with the next fundamental building block of our business is that of fiduciary.

It's a word that's not as loosely thrown around. But talk to us about why that word is so important. What does it mean to be a fiduciary pbm?

Okay, so first, so to answer that, the house analogy, right. The person who pays you is your boss, right?

So when we built this. This business, we kept that concept in mind as we were building our business structure. So in order for us to fully represent.

An employer, okay. As they're trying to provide a benefit to their employees, and we're sort of an intermediary in their acquisition of therapeutics, in order to fully represent our client, the only person that can pay us.

Is that client.

Right. If I have a Revenue stream. Any other source. Any other other source other than my clients, then my representation for my client is compromised. There is no magic to it. There's no compensation that exchanges hands where something isn't expected in return. Right? So if I am making money, if I own a pharmacy, I've got a profit motive to run business through that pharmacy. That might not be in the best interest of my client. If I'm retaining rebates, I have an incentive to change my formulary. That's why the rebates are provided, so that you change the formulary to favor some meds over others. I'm now not working in the best interest of my client. Right. So the only entity that can pay us is our client. And that means we're acting as a fiduciary. Right? So a fiduciary means we have to operate free of financial conflict of interest. Nobody but our clients can pay us, period. Full stop. Means every decision we make has to be in the best interest of our clients. That's why our clients would hire us. They're not hiring me as a PBM so that I can get a quarterly kickback from an international supply channel. They're hiring me so that I can represent them in the acquisition of therapeutics. For their benefit, for their employees benefit. That's why they pay us. And so we built this business with a fiduciary contract. Our contract assumes liability. If we operate with conflicts of interest, financial or otherwise, we're in trouble. So what our contract does is it protects our clients and our employers best interest. So they know that when they work with us, they're working with someone they can trust. And that's what we talked about earlier. When it comes to supply chain management, find someone you know you can trust and then you don't have to know everything there is to know about pbm. If you are a broker out there and you are preparing a benefits package, why in the world would you think you need to know everything that there is to know about PBMs and how they operate? Why? And the reason is because you don't trust them.

I was just going to go there. If you trust the partner, you shouldn't have to know.

You don't need to. That's our job. That's why you're hiring us?

Yeah.

If you know everything you need to know, then why would you hire. I mean, if I know how to, you know, do an oil change in my truck, I don't need to take it over to the Quick Loop. I can do it myself. You don't need to know everything about this business. You need to know that you can trust us, know why you can trust us and then.

Hand over the reins. We'll take care of that. And you can run your business making widgets, selling whatever and focus on that and allow us to focus on our area of expertise. That's why the fiduciary and the fully disclosed are in place.

Yeah, well, and I like just the, the basic level at which you broke that down, which is fiduciary means we have to act in our clients best interest at all times, number one. Number two, the payer is our boss and we understand who the payer is. It is the employer cutting the bill every single month, period.

With that in mind, Ken, here's what I would love for the brokers listening in the fiduciary side, the fully disclosed. Let's talk about the three things we were going to talk about. Quality, cost care being fully disclosed and a fiduciary responsible PBM can't say that. Right. What impact does that have on the quality of the pharmacy, the drugs inside a plan, as well as the cost of the pharmacy, the prescription drugs and how they're being purchased.

So quality. There are services out there that are offered that right now we're not participating in from an international supply chain. There are countries that are considered tier one, meaning they have supply chain chain of custody documentation that's as good as the FDA requires. But there are some areas of the world that we're not comfortable importing in because that area has very high levels of counterfeit product, therapeutics, currency and otherwise. And so we don't, we don't work with them.

And so there are also products, there's, there's infusions that require being kept at a certain temperature. They're called cold chain meds. And there are, there are folks who will import cold chain meds from different areas. And we don't have a level of comfort across all services that are providing those that they are in proper packaging, that the meds are monitored. We have packaging requirements for our cold chain meds that have electronic monitoring that's required so that when our members are getting this cold chain med, we can show and they can be comfortable that the correct temperature was maintained through the entire delivery service of that product. So those are just a couple of examples of how we protect our members and the quality of their therapeutics.

Through our, you know, our business model.

And I think that's a big important point because especially with the.