Tyson Foods, a Fortune 100 company, selected a new pharmacy benefit manager (PBM) to serve its 140,000employees effective 1/1/24. An employer changing PBMs isn’t always breaking news and occurs regularly, especially at the beginning of a plan year. What makes Tyson Foods’ move particularly intriguing is the PBMs involved.
Like many large employers, Tyson Foods contracted with one of the Big 3 PBMs prior to 1/1/24. For clarity, the Big 3 PBMs are CVS Caremark, Express Scripts, and Optum. Oftentimes, when a large employer utilizing one of the Big 3 PBMs changes administrators, they move to another one of the Big 3. Competition for business can be fierce with multiple rounds of negotiation on pricing guarantees, rebates, contractual definitions, and performance guarantees as the employer seeks improvement over the status quo in an effort to reign in the rising cost of prescription drug spending.
Tyson Foods selected Rightway, a relative newcomer to the PBM industry compared to any one of the Big 3. Tyson has become one of the first companies of its size to work with Rightway, a pass-through PBM with a single admin fee model. The pass-through pricing model largely contrasts the Big 3 PBMs, whose contracts with employers may be based on a spread model. A pass-through model can provide employers with greater insight into the actual cost of a medication as the amount the employer pays for any particular prescription is the same amount the dispensing pharmacy is being reimbursed for that prescription. The PBM will also charge the employer a set administrative fee for services to generate revenue.
In a spread model, the PBM charges the employer an amount that is greater than the pharmacy is reimbursed and retains the difference as revenue.
The scrutiny of spread pricing has intensified as prescription costs have continued to rise. Employers have a greater understanding that they are only seeing one side of the cost equation in a spread model. They often lack visibility into the revenue PBMs are generating from their employee’s specific prescriptions and may be unable to easily discern the cost of the medications vs. the cost of management and administrative services.
What’s Next?
Employers seeking additional clarity in this regard maybe well served to confirm the pricing structure of their current PBM contract and consider evaluating a pass-through model for their next renewal if it is not currently in place. Most PBMs, including the Big 3, will provide pass-through pricing proposals. Some, like Rightway, only operate on a pass-through basis.
Dr. Jeff Eichholz is the Director of Pharmacy Solutions for McGohan Brabender. If you have a question or topic you would like addressed, you can email him at jeichholz@mbbenefits.com.