A Conversation With Shawn Gremminger, M.P.P., the Newest Member of the MHE Editorial Advisory Board

Shawn Gremminger, M.P.P.

Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, has joined the Managed Healthcare Executive editorial advisory board. The National Alliance represents the interests of self-insured employers. Gremminger has held advocacy and lobbying positions for a number of healthcare organizations. He spoke with Peter Wehrwein, managing editor of MHE. The transcript of their conversation was edited for length (and clarity) for the April print issue of MH. You can read a full-length transcript (also edited for clarity) here.

When did you catch the healthcare policy bug?

I grew up in Seattle. I was always very interested in politics and government. My grandparents lived out in this area, in Alexandria, Virginia, so I knew D.C. pretty well as a kid. I came out a lot in the summers and really enjoyed Congress and policy making and that kind of thing, so when it was time to go to college, I decided on a school on the East Coast an hour from D.C. and spent a lot of my time doing internships and stuff in D.C.

My first job out of school was doing get-out-the-vote work on a political campaign in ’04 in Pittsburgh. And turns out I hated it. Electoral politics were not for me.

I accidentally landed in healthcare. I applied for and got a job at the Children’s Hospital Association, not because I was particularly interested in healthcare or children’s hospitals, but because I needed a job. I took to it. My first 13 years in D.C., so still over half of my career at this point, were lobbying on Capitol Hill for national hospital trade associations, first for the children’s hospitals and then for the public safety net hospitals.

When I went to George Washington University for grad school, I thought about getting a master’s in public health. The GW School of Public Health is a well-known entry point for a lot of people into healthcare policy, but I still wasn’t sure I wanted to do healthcare. That’s why I went to the Trachtenberg School, which is the public policy school, and decided to get a broader education.

I just stuck in healthcare because I was enjoying it, and it didn’t make sense to restart my career in some other field. It was maybe a couple of years after grad school that I realized, look, I’m a health policy guy. That’s what I do. I might as well just embrace it and focus in that area.

You came into the field just as the Affordable Care Act (ACA) was being born. You were representing the Essential Hospitals group.

I moved over to the Essential Hospitals, or what at the time was called the National Association of Public Hospitals and Health Systems, right before the ACA, at the beginning of the Obama administration. At that point it was very clear that they were going to be moving some majorhealth policy legislation. It was part of the reason that I was interested in going over to the public hospitals, because pediatric issues are interesting, but not central to what I knew that kind of fight was going to be.

We were broadly very supportive of the law, along with all the other hospital associations. We represented core urban safety net hospitals that had a very high number of uninsured folks. So anything that we could do that would promote greater healthcare coverage, particularly among low-income people, was the right thing to do, philosophically and also just good for hospitals, right? If you can move somebody from being uninsured and you get paid nothing to being covered by Medicaid, even if you might not be getting paid as much as you might like, that’s still a win from a hospital
financing standpoint.

The big fight at the time in our little space was around Medicaid Disproportionate Share Hospital [DSH, pronounced “dish”] payments patterns, because the notion was, if we’re going to have a substantial increase in the number of people who are insured, many of whom would be covered by Medicaid, you would have lower uninsured volume, lower charity care, so therefore you didn’t need as much Medicaid DSH. At one point, the White House proposed $100 billion in DSH cuts. That number was shrunk over time. In the end, we did see some Medicaid DSH cuts in the ACA. I spent the next several years of my life being the main guy — although there are plenty of others who are working on this — on stopping the DSH cuts.

Hospitals, with some of their bill collecting, have had their share of negative headlines. But it’s not like the payers or big employers like you’re representing now. Was it easier to represent hospitals?

It was. I represented a subset of hospitals that were particularly popular, to be totally frank, among Democrats, because they tended to represent big urban hospitals and urban areas, districts that were heavily Democratic. But we had plenty of Republican support as well.

It’s funny. When I was in the hospital industry, I didn’t realize how powerful the hospital industry was as a lobbying force. It was only after I left it that I was able to look at it from a bit of a distance, and say, oh, you know, that may actually be the most powerful industry in healthcare, from a public support standpoint.

We always thought of pharma as being the most powerful industry. As you know, the pharmaceutical industry didn’t really take a substantial loss in almost any legislative debate for a very long time, arguably, until the Inflation Reduction Act.

As I have worked in different sectors of the healthcare industry, including sectors that have been kind of critical of the hospital industry, or at least some aspects of the hospital industry, I’ve realized how powerful they really are. They don’t have the same dollar figures in terms of numbers of campaign donations, the amount that they spend on lobbying as the pharmaceutical industry. They may not even have the same dollar figures in terms of those aspects as the health plan industry, but they have the kind of broad political support that I think both of those industries would really like and probably will never have.

Let’s talk about your current job, president and CEO of the National Alliance of Healthcare Purchaser Coalitions. You’re representing self-funded employers, ERISA [Employee Retirement Income Security Act] plans. I think we got acquainted talking about pharmacy benefit managers (PBMs) and PBM reforms, and how PBMs weren’t necessarily working on the behalf of employers and employer plans the way they should. It that still your A-1 priority?

It is absolutely still at the top of our list. When we were drafting our 2025 policy agenda, we listed things in three columns: hospitals, PBMs and drug manufacturers. You could break that down and say it’s really two things, hospital care and prescription drugs.

That is not by accident or because I find those things personally interesting, although I do. It’s because we survey and talk to employers and purchasers all the time, and we’re always asking the questions, “What are your biggest pain points? What are the things that you feel like you can’t control?” I’d say 90% of what they’re concerned about is how much they’re paying for hospital care and how much they’re paying for prescription drugs.

Actually, I think purchasers are more focused on prescription drugs than, arguably, they should be. If you look at their overall spend, prescription drugs are a relatively small slice, but they are the slice that their employees complain about the most. Depending on how you count it, between 35% and 50% of all employer spending is on hospitals. So clearly that should be No. 1. Prescription drugs are more like 10% to 15%.

But, if you’re a health benefits manager, one of the core groups for people that we work with, the complaints that you’re getting from people are usually not about hospital care, because most people aren’t going to the hospital every year. But just about everybody takes prescription drugs, and they notice when the price of those drugs goes up.

Our policy agenda, it really is what can we do about a distorted and broken hospital sector market and prescription drug pricing. We focus on things like hospital consolidation, anticompetitive business practices, lack of transparency, those sorts of things that we know are driving up healthcare costs for employers and purchasers around the country.

On the prescription drug side, we tend to focus on the entire drug supply chain. So are there things that manufacturers are doing that are meaningfully driving up the price of drugs? The answer is yes: patent thickets, other games. And, course, [there is] the PBM sector. You and I have spent a lot of time talking about it, but it’s everything from lack of pass-through rebates, lots of fees that are added on, really bad formulary management and formulary placement that is designed to make money for the PBM but not make money for us or to help patients get access to the best drugs at the cheapest price.

I think our agenda will probably stay on those two big buckets for the foreseeable future.

340B, it’s a program that allows certain hospitals to purchase drugs at discounted prices. Now, the program has lots of critics who say it has been abused by hospitals. Early in your career you must have been on the hospital side of 340B. Now I think self-insured employers are among its critics. So as the song says, you have seen 340B from both sides now.

I have. I think it’d be a legitimate critique by somebody looking up from the outside and you’re just a good lobbyist, and you just support whoever you happen to work for, and if that means fundamentally changing your position on something, that’s just the cost to do business. I won’t try to defend against that critique. It’s God’s honest truth that I lobbied for the children’s hospitals and the public hospitals, and now I’m on this side.

That being said, I will say my thoughts on 340B, it’s not 180 degrees from where it used to be. It’s maybe
90 degrees from where it used to be.

So when I was with the public hospital group, I was there when some of the big changes happened, and I lobbied on behalf of those changes, and some of the big changes that happened allowed the program to grow into the space that it’s gone. I don’t think anybody at that time, and I’m talking about, like circa 2010, ACA, really saw 340B growing into the behemoth that it is now.

I represented this core organization; I never represented the broad swath of hospitals and health systems that now participate, so I don’t feel like I’m turning on my former members. In fact, when we talk 340B, we try to talk about the fact that there are core urban safety net hospitals, rural hospitals, community health centers that need the program, [and] they should get the program.

The statutory cutoff to get into the program is you’ve got to be a nonprofit or a public hospital. So for-profit hospitals are statutorily not in, and you have to have a disproportionate share payment adjustment of 11.75%; basically, if you have 12% of your patients [who have] Medicaid or low-income Medicare, you can participate.

Well, in 1992 roughly 12% of the people in the country were covered by Medicaid. Today, roughly 25% of people in the country are covered by Medicaid for a lot of reasons, part of it being ACA. So suddenly, a program that originally would have allowed 100 hospitals — the big urban safety nets, Parkland, Grady, the New York City Health and Hospitals — all of those guys were the original recipients. Now, more than half the hospitals in the country qualify.

[Another reason the program has grown] is just market dynamics, because of hospital consolidation, particularly vertical integration. When 340B was created you might have one or two off-campus clinics, but it wasn’t a thing, right? And you could only fill 340B prescriptions at your hospital or community health center-owned pharmacy. Most big hospital systems now have huge networks of outpatient clinics, all of which qualify for 340B, if the mother hospital qualified.

And an HRSA [Health Resources and Services Administration] decision allowed for unlimited use of contract pharmacies. So now Walgreens, CVS, Walmart — there are 50,000 contract pharmacy arrangements in the country, more than there are pharmacies in the country.

340B is the second-largest drug purchasing program in the country. More drugs flow through 340B than through Medicaid, than Medicare Part B. The only program that’s bigger is Medicare Part D.

I’m not trying to critique the program as it was in 1992 or even the program as it was in 2010. Those programs were fine. I’m critiquing the program that is now taking over. We’ve done a lot of analysis. Employers and purchasers are paying billions of dollars more in drugs than they would be in absence of 340B. So we feel like we have a very significant role to play in saying this program has to change