Pharmacy Benefits Managers, better known as PBMs, are your classic middle-men. First, they buy medications from pharma manufacturers. Then they bundle those medications into formularies and sell that service to employers, plan sponsors and health plans. The problem is, there’s no transparency into how much PBMs pay for the drugs, and there’s a complex rebate system layered on top of that. With dug costs on the rise, it’s no wonder that many characterize PBMs as the bad guy, nor that the feds are taking aim at their business model.

Today’s guest tells us not to count on regulation to fix this. First of all, the pharmaceutical industry has strong ties to Washington and a very powerful lobby. That’s going to hold up any proposed regulation. Secondly, the regulations fail to address the underlying issues driving pharma costs today. But there is something we can do right now. David Henka, President and CEO at ActiveRADAR, tells us how they’re using reference pricing and therapeutic equivalents to enable a new interaction with the PBMs formulary. And he claims it can drive immediate and ongoing savings of more than 20 percent for employers, health plans and other plan sponsors.

David gives us a foundational overview of the issues at hand and offers up several suggestions for how we might move forward. Topics include:

  1. What is a PBM?
  2. Why were PBMs created in the first place?
  3. Are PBMs the bad guy or a necessary component in the system?
  4. What are PBM rebates and why do we keep hearing about them from the feds?
  5. What is the fundamental issue with U.S. pharmaceutical pricing?
  6. Is the U.S. really funding pharma R&D for the entire world?
  7. What is reference pricing and how can it drive down pharma spending?
  8. What are therapeutic equivalents? How do they differ from generics?
  9. How has the market received the idea of reference pricing and therapeutic equivalents?

I’ve been meaning to cover pharma on the show for some time. This was a much needed first dive in, and David Henka delivered the goods to get us started.

About David Henka

David Henka is the President and CEO of ActiveRADAR, a company specializing in pharmacy cost reduction programs for employers, trust funds and health plans. Henka brings decades of experience consulting with health plan sponsors on a wide range of employee benefit issues, including plan design, benefit strategies, funding and plan management to his role at ActiveRADAR. Henka previously served as ActiveRADAR’s COO, responsible for sales and the development of the company’s IT and analytics platform. Henka previously served as the Director of the Reta Trust, a nonprofit Catholic employer healthcare trust. There he was responsible for vendor contracting, benefit design, clinical reporting and strategic market planning. Prior to his tenure at Reta Trust, Henka worked for Kaiser Permanente where he served as Director of Strategic Accounts and was responsible for overseeing CalPERS, which is California’s largest pension and health benefits system. He holds a Bachelor of Arts in History from University of California Los Angeles.

About Active RADAR

Since 2010, ActiveRADAR (formerly RxTE Health) has worked with some of the country’s largest employers across multiple industries, including unions and trusts, to effectively drive down pharmacy costs. ActiveRADAR leverages a reference pricing model which applies a proprietary algorithm scientifically proven to drive immediate and ongoing savings of more than 20 percent, while also empowering members and their doctors to select the most cost-effective drug treatment. To start lowering costs, increase benefit plan adherence and improve the well-being of employees, visit

Twitter: @activeradar


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