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October 10, 2023

PBM Challenges: How To Improve Transparency and Efficiency in Healthcare

It is no secret—there is a complex value chain in healthcare. It’s also fair to say sometimes a patient’s needs get lost in the shuffle. Pharmacy benefits managers (PBMs) are an integral go-between among pharmacies, hospitals, drug manufacturers, and providers.

PBMs face the daily task of negotiating terms and prices, selecting which drugs are covered by plans, and striving to pass savings on to the patient. Of all the PBM challenges, one common denominator is the need for greater transparency.

Below, we’ll examine the PBM’s role in healthcare as it has evolved and how collaborative transparency and using the best tools can help eliminate many of the industry’s greatest pitfalls.

A Brief History of the Pharmacy Benefits Managers’ Place in Healthcare

The role pharmacy benefits managers (PBMs) have played in healthcare has gone through a series of progressions. By looking at how PBMs have substantially changed the industry, we also see the evolution of various PBM challenges.


PBMs first entered the picture in the 1960s to answer the healthcare industry’s need for streamlined claims administration. Insurance companies sought help with processing high-volume, small-dollar claims in an economically viable way.

PBMs filled this much-needed intermediary role, resolving the administrative bottleneck of processing prescription approvals. This reduced operational costs, passing the savings on to patients.


In the 1970s, PBMs introduced the plastic drug benefit identification card. It’s hard to grasp the revolutionary impact this had, virtually eliminating patients having to file paper claims for themselves.

These successful PBM practices led to innovations, as PBMs introduced pharmacy networks and mail service benefits at a discount, further reducing administrative burdens and lowering costs.


In 1987, PBMs introduced the first real-time electronic online drug claims processing, including two-way communication with pharmacies.


Decades of innovation and healthcare benefits led to continued expansion. PBMs grew in power, now managing most of the prescription market. There were major consolidations and mergers with organizations like Rite-Aid acquiring PCS, Express Scripts purchasing Value RX, and others.

PBMs were now managing 1.8 billion prescriptions per year, the top four PBMs covering more than two-thirds of them.

Critics became concerned whether multiple revenue streams were introducing a conflict of interest: negotiating drug prices, selecting drugs for approval in formularies, and receiving rebates in addition to a fee-for-service.

2000s-Current Day

Regulators and federal agencies have increased efforts to protect patients from the rising cost of prescribed medications.

Because there is a delicate balance between drug developers who create patented medications, drug manufacturers looking to reach the largest potential market, and healthcare providers seeking as many therapeutic options for patients as can be afforded, the PBM is often at the center of legislative crosshairs.

Common Industry Challenges

There are numerous challenges throughout the healthcare industry. Many challenges exist where there are cracks in the system, and have no easy solution or certain culprit. The following are some of the more prevalent trials faced by PBMs:

PBM Transparency

The challenges surrounding transparency have many levels.

Transparency in Negotiations

To pass the greatest savings forward to healthcare plans—thus to patients—PBMs have to leverage confidentiality in their negotiations with drug manufacturers and retail pharmacies. There is a fine line between the necessity for contractual non-disclosures and public perceptions.

Transparency in Pricing

PBMs strike a balance between influencing which drugs are included in formularies and the terms they negotiate with drug manufacturers and retail pharmacies. The resulting prices might include rebates that patients can pass on or a price spread veiled in contractual silence.

Transparency in Fees

PBMs are paid a service-for-fee, but they also earn a percentage of rebates before passing what remains to employers and providers. They often also profit from a price spread between the negotiated price of drugs and the final cost passed to healthcare plans for approval.

Since many of these arrangements are concealed—often at the request of drug manufacturers or retail pharmacies—it adds to public scrutiny and speculation.

Impact on Independent Pharmacies

Since consolidating the largest PBM groups in the 1990s and forward, it has been difficult for community pharmacies and small startups to compete with national chains. Their profit margin is simply too thin for profitability.

Regulatory Pressure

While everyone, including well-meaning PBMs, agrees greater transparency in pricing and operations would lead to improvements industry-wide, regulators and lawmakers are focused squarely on PBMs. Issues include the need for complete transparency on their spread, rebates, and other earnings, which could inadvertently weaken the PBM’s negotiating power with drug manufacturers.

There’s also a push to eliminate the price spread entirely and for 100% of rebates to be passed on to health plans. Many worry that doing so without oversight to ensure patients see lower costs could shift consolidated powers to other hands.

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Building Better Working Relationships

Suppose drug manufacturers, PBMs, and healthcare providers join efforts to improve transparency as a united front. In that case, they can also help reduce the uncertainty that may follow regulatory disruption and reorganization of the industry.

Pricing Transparency

PBMs can work with drug manufacturers, patent owners, pharmacies, and healthcare providers to provide an itemized breakdown of fees, spread pricing, rebate retention, and direct/indirect remuneration (DIR) fees. This will require a new approach to negotiating terms, but transparency ultimately helps organizations coordinate with PBMs to maximize cost savings.

Utilization of Better Tools

Better data comes from having a more sophisticated view of industry-wide metrics. With that data, you can uncover new efficiencies.

The following are three significant benefits of using advanced software to increase efficiency across the pharmaceutical sector:

1. Reduce Operational Costs

With advanced analytics, automation, and machine learning (ML), software platforms can help groups optimize their operations to reduce costs.

2. Improve Patient Adherence to Therapy

Using digital monitoring and managing personalized healthcare data can ensure patients follow prescribed therapies. Better adherence leads to better health outcomes, reducing the industry’s cost burden.

3. Foster Collaboration

When stakeholders share the interest and responsibility in reducing costs, the industry can organize efforts to bring greater patient savings.

Xevant Is Driving Better Decisions through Technology

Xevant’s software platform provides the healthcare industry with the following tools:

  • Real-time data analysis
  • Automated reporting
  • Prescription cost visualization and utilization
  • Data forecasting for reducing costs and enhancing clinical oversight
  • Facilitation of Retrospective Drug Utilization Reviews (RDURs) to identify prescribing issues and optimize rebates
  • Automated pharmacy claim repricing and savings analysis
  • Multi-source data consolidation

Discover how our platform drives innovation to foster collaboration and enhance patient outcomes. Try Xevant’s platform by taking advantage of our free trial today!

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Brandon Newman, CEO of Xevant


Brandon Newman, CEO of Xevant

"Brandon has a dynamic, 25-year leadership career spearheading several businesses with emphasis on growth, revenue, and sales performance. He has run many high-growth environments, including start-ups, turnarounds, and $1B+ dollar businesses. As a serial entrepreneur, he has a proven record of founding new businesses and advancing them through growth and acquisition, merger, or roll-up including ScripPoint, Veridian, and AviaraMD. He is the driving force for vision, new market strategy, revenue growth, technology development, and partner alliances."


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Mitchell is a seasoned marketing leader with over a decade of experience driving direct-response demand. From bootstrap budgets to multi-million dollar per month budgets, Mitchell knows how to ensure positive returns on marketing investments. With extensive experience in both B2C and B2B, he has a knack for delivering show-stopping and world-class campaigns that generate immediate impact as well as long-lasting impressions.

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Dave Sanders

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With almost 20 years of experience as a senior executive and strategic leader in the data industry, Dave transforms companies through innovative technology solutions. He’s built high performing teams at various types of companies, including Ancestry, the New England Patriots, and Vivint. Dave has successfully migrated many companies to the cloud and always enjoys the challenge of improving processes. He’s excited to help lead Xevant data engineering to make an impact in healthcare.

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Serving as Xevant’s VP of Product Management, David is a product and technology executive who has led and scaled successful product teams at organizations ranging from high-growth startups to established multi-billion-dollar B2B brands. With expertise building innovative SaaS solutions that disrupt established markets, he is laser-focused on driving the realization of Xevant’s industry-changing vision with world-class product strategy and execution. David is an avid outdoorsman, musician, and family man; perfectly positioned at the foot of the beautiful Wasatch Mountains in Utah.

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Pete Tantillo

Chief Financial Officer

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Ashwin Patel

SVP, Data

Ashwin (Ash) has more than 20 years leadership experience in data warehousing and business intelligence practices within the healthcare sector. At Xevant, Ash leads the data and business intelligence teams and is responsible for future state expansion of Xevant data technology platforms and processes, partnering with the organization’s product teams to develop best-in-class products and solutions. Prior to Xevant, Ash was VP Business Intelligence for HealthSmart Benefit Solutions based in Irving, TX, a third-party administrator (TPA) of medical, pharmacy, and clinical data. Ash earned a Bachelor of Science degree in computer science and operations research from Leeds Becketts University in Leeds, England.

Sahily Paoline

Chief Clinical Officer

Sahily is a licensed pharmacist and expert business leader with more than 20 years of experience delivering high-quality clinical care, building and leading organizations, and staffing and motivating teams in the pharmaceutical and digital health industries. Sahily specializes in Clinical Program Management, Pharmacy Practice and Operations, and building and growing business. She is passionate about the use of data and technology in patient care and believes in a holistic approach to healthcare.
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Megan Foster

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VP, Services & Corporate Operations

Todd served as an Artillery officer in the U.S. Army before a disability turned his focus to the business world. He’s carried a bag, led multiple sales operations and sales development efforts, and run a sales team in complex selling environments. The son of small business owners, Todd enjoys helping business leaders grow by using proven, repeatable processes. He holds a BS from the United States Military Academy at West Point and an MBA from the Kellogg School of Management at Northwestern University. Todd lives in Nashville with his wife. He spends as much time outside as possible and co-founded a brewery in 2019.  He’d love to tell you the full story over a pint sometime.

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Marvin Roi Elvambuena

Director, Web Development

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Greg Abram

Chief Growth Officer

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Jeff Weber

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Gerrit Lemmen

VP, Rebates

Gerrit is an experienced leader in the PBM, Specialty and Formulary rebate markets. As VP of Rebates at Xevant, Gerrit is responsible for managing drug rebates through Xevant’s revolutionary pharmacy benefits platform. In his previous roles at Magellan Rx Management, Gerrit led highly respected commercial rebate operations teams and focused on increasing efficiency that enabled scalability and growth.

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Laura Phillipson is a client management expert with experience managing client services teams. Her past roles include Sr. Client Services Executive for Navitus and over a decade of experience as a Certified Pharmacy Technician. Laura’s career in client relations spans nearly two decades. An avid sports fan, Laura excels in helping clients create a strong strategy with a competitive edge. Laura’s extensive background in both customer service and the medical field provides an ideal blend to lead client management for Xevant.

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Jace Garfield

Chief Analytics Officer

Jason (Jace) Garfield, MSW has thrived in many industries ranging from data and information technology to foster care and mental health management. In his role with the Utah State Justice Commission, he helped publish medical research on drug effectiveness. Jason’s passion for technology and data automation paved the way towards innovations in identifying new to market drugs, tracking systems to identify clinical interventions, and data automations, resulting in millions in operational cost reductions. At Xevant, Jace leads every aspect of product operations and is responsible for a diverse team of technology experts.

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Jason Hardin

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Lindsay Jones

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