As the Federal Trade Commission (FTC) and Congress turn their attention opens in a new tab or window to the business practices of pharmacy benefit managers (PBMs), companies are springing up to provide alternative ways for employers to manage their drug benefits.
Under the traditional model that has been used by the "Big Three" PBMs -- CVS/Caremark, ExpressScripts, and OptumRx, which together comprise about 80% of the market -- the PBM made its money in several ways, including through rebates -- discounts -- from drug manufacturers, and "spread pricing," in which the PBM charges employers and insurers more for the drug than it pays to the pharmacy. PBMs have also used other tactics, such as charging fees to pharmacies known as "clawbacks," to increase revenue.
A Different Model
But these alternative PBMs operate in a different way -- they charge a flat per-member-per-month fee to employers and then pass along 100% of rebates to them, which they contend is a better deal for their employer customers. "We are markedly different than the Big Three model," Jordan Feldman, CEO of Rightway, one of the alternative PBMs, said during a phone interview at which a public relations person was present. "We don't retain rebates, don't utilize spread pricing, and don't own mail order or specialty facilities. We simply charge a per-member, per-month administration fee such that we can take care of the member and not be financially misaligned with our underlying client."
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