EP353: What You Need to Know About Specialty Pharmacy Formularies and Rebating, With Pramod John, PhD

How Specialty Pharmacy Rebates and Formularies Really Work, With Pramod John, PhD. Inside the Rebate Math That Decides Which Specialty Drugs Make Your Formulary. Episode 353.

In part 2 of her conversation with Pramod John, PhD, founder and CEO of VIVIO Health, Stacey Richter breaks down the mechanics of pharmaceutical rebating—how PBMs use rebate walls and exclusive formulary deals to maximize their own revenue, often at the expense of patients and plan sponsors footing the bill.

WHAT YOU'LL LEARN

✅ How PBMs collect rebates from manufacturers in exchange for formulary placement or exclusivity—and why bigger rebates mean fewer competing drugs on formulary

✅ How "rebate walls" make it nearly impossible for cheaper new entrants to compete against an already-exclusive incumbent drug

✅ Why patients with coinsurance pay a percentage of the pre-rebate list price, not the discounted price the PBM actually negotiates

✅ How self-insured employers use rebate dollars to lower premiums, effectively having the sick subsidize the well

✅ Why some plans are saving 30% or more on drug spend by moving away from rebate-driven PBM models

✅ How psychology around drug risk shapes prescribing even when the underlying data is the same

WHY THIS MATTERS

The rebate system that determines which specialty drugs land on a formulary is optimized for PBM revenue, not patient outcomes or total cost of care—and plan sponsors who don't understand the mechanics end up subsidizing that system through their premiums. Moving toward pricing and formulary design based on what actually works for patients, rather than rebate size, is where John sees the real savings.

MENTIONED IN THIS EPISODE

EP315 with Bob Matthews: Apple Podcasts | Spotify | Other Apps

EP289 with Bishal Gyawali, MD, PhD: Apple Podcasts | Spotify | Other Apps

EP345 with Paul Simms: Apple Podcasts | Spotify | Other Apps

=== LINKS ===

🔗 Show Notes with all mentioned links: Episode Page

✉️ Enjoy this podcast? Subscribe to the free weekly newsletter

🫙 Support the podcast with a small donation to the Tip Jar

📺 Subscribe to our YouTube channel

🎤 Listen on Apple Podcasts

🎤 Listen on Spotify

=== CONNECT WITH THE RHV TEAM ===

✭ LinkedIn ✭ Threads ✭ Bluesky ✭ X

00:00 Introduction.

08:31 How does drug efficacy affect pharmacy rebates?

09:39 Do purchasers have the power to change the course of Pharma?

12:11 How do formularies affect the supply of effective drugs?

14:07 "This is about science, and it's about published data and facts."

15:39 How do you fix high drug costs and wasteful spending?

19:06 "Where's the money to be made or saved?"

19:28 Why do we pay for benefits?

23:04 "About 1.5% of the population spends over 60% of all dollars that are spent on drugs."

26:45 "Does anybody want to be a traffic cop in this [situation]?"

27:58 "We all make assumptions about how things work … and if there's one thing that we've learned from this COVID experience … is that we need to be able to separate the beliefs of experts from the facts."

29:47 "We can build a better system. And that's what we do every day."