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April 24, 2024

Evolving PBM Pricing Models – What Does it Mean to Be Transparent?

The pharmacy benefit management (PBM) industry is continuously evolving to keep pace with a dynamic pharmaceutical landscape, ongoing regulatory changes, and shifting payer and patient expectations around transparency in PBM business practices.

But what is transparency in pharmacy? And how will increasing it benefit you and your clients? Here’s how different stakeholders are answering the call for greater transparency and how you can determine which options deliver the most value.

The Importance of Transparency in PBM Practices

Historically, PBM operations have been somewhat opaque, with details of drug pricing negotiations, rebate arrangements, and the criteria for formulary inclusion often kept confidential. A report by Maynard Nexsen shows the growing demand for transparency in PBM, noting that 94 percent of plan sponsors expressed dissatisfaction with the level of transparency in traditional contracts.

Greater transparency in PBM practices benefits all stakeholders:

  • Pharmacies better understand reimbursement rates and the criteria to join or remain in a PBM’s network.
  • For payers, transparency leads to more predictable drug spending and ensures they get fair value for expenditures.
  • For patients, the benefits of clear, transparent PBM practices include lower drug costs and improved patient outcomes.

The push for transparency began with demands for clearer contracting practices and more detailed reporting requirements. Now, the focus is on transparent pricing models that link the cost of a drug more directly with what payers are actually spending on those drugs.

Alternative PBM Options and Market Disrupters

Traditional pharmacy benefit management pricing models involve a mix of spread pricing and rebate arrangements with drug manufacturers that are not always passed on to payers or patients. In contrast, new PBM players have introduced pricing models prioritizing transparency and simplicity.

Non- “Big 3” PBMs

While the “big 3” PBMs dominate the conversation and the market – CVS Caremark, Express Scripts, and OptumRx manage 80 percent of all prescription claims – they have a fair amount of competition. Many smaller PBMs tout greater flexibility, more tailored support, and 100 percent transparency – something they claim the vertically integrated PBMs simply cannot deliver.

Mark Cuban Cost Plus Pharmacy

Mark Cuban founded Mark Cuban Cost Plus Drugs to “disrupt the drug industry” and help “end ridiculous drug prices.” Cost Plus Drugs offers a clear-cut cost-based pricing model – they charge a fixed 15 percent markup on the actual cost of a drug plus a $5 dispensing fee and $5 shipping fee. Their drug list includes more than 2,500 generic medications and now includes select specialty medications, including Yusimry, a biosimilar to the blockbuster anti-inflammatory biologic, Humira.

Amazon RxPass

Amazon Pharmacy created RxPass, a subscription service that allows customers to fill prescriptions for a wide range of generic medications at a fixed monthly rate of $5, bypassing traditional insurance and PBMs altogether. The program currently offers more than 50 medications and continues to add to that list.

Major Healthcare Organizations Are Making the Move

Last year, one major health plan and one health system each announced strategic partnerships with an alternative PBM option – specifically, Mark Cuban Cost Plus Drugs:

Blue Shield of CaliforniaCommunity Health Systems (CHS)
Blue Shield of California made headlines when it announced it would be transitioning the management of its non-specialty prescription drug benefit to Mark Cuban Cost Plus Drug Company.
According to their press release, Blue Shield of California expects to save up to $500 million in annual drug costs.
CHS is partnering with Cost Plus Drugs to purchase specific products, including epinephrine and norepinephrine, for its affiliate hospitals in Texas and Pennsylvania. They plan to expand this partnership in the coming years.

It will be interesting to see what kinds of savings Blue Shield of California and CHS achieve and if additional healthcare organizations and larger payers will follow in their footsteps.

Evolving Strategies from the “Big 3” PBMs

CVS Health, Express Scripts, and OptumRx have also introduced new pricing and reimbursement strategies aimed at increasing transparency.

CVS Caremark TrueCostExpress Scripts (ESI) ClearCareRxOptumRx Cost AdvantageOptumRx Cost Clarity
Clients will be charged the actual cost of the drug based on an acquisition cost determined by CVS Caremark plus a flat administrative fee. Clients will be charged the amount ESI pays the pharmacy plus a flat per member per month (PMPM) administrative fee.Clients will be charged the amount OptumRx pays the pharmacy based on the average wholesale price (AWP) plus a variable administrative fee.Clients will be charged the amount OptumRx pays the pharmacy based on the national average drug acquisition cost (NADAC) and wholesale acquisition cost (WAC) plus a variable administrative fee.

As PBM pricing models evolve, plan sponsors and consultants must carefully evaluate new arrangements to ensure they deliver the strategic value you expect. To do that effectively, you need real-time data and the ability to automate your analytics for timely information that will inform your decisions.

Fostering Transparency with Real-Time Data and Analytics

Xevant is at the forefront of fostering transparency within the PBM industry. By offering solutions designed for PBMs, consultants, employers, and health plans, we help ensure effective management, monitoring, and optimization of pharmacy benefits with clarity and insight.

Our platform addresses the complex needs of the PBM ecosystem, providing tools that enable real-time analytics, benchmarking, and automated reporting.

How can Xevant help you navigate plan benefit options and increase transparency? Ask us.

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Shane Garduno, VP of PBM Practice


Shane Garduno, VP of PBM Practice

Shane Garduno has over 20 years of healthcare experience with 19 plus years working in the pharmacy benefits management (PBM) industry. The majority of his career has been in account management and leadership roles providing strategic guidance, industry insight and best in class service to various clients including health plans and health systems across the healthcare industry.


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Mitch Searle

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Dave Sanders

VP, Data

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.

David Ninow

VP, Product Management

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.

Key Insights to Stay Ahead of the Curve

From the 2023 drug trend report

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Pete Tantillo

Chief Financial Officer

Pete is an accomplished technology executive who has led many organizations through high growth and profitability stages and has worked with some of the world’s largest companies. Pete most recently completed an exit for RapidRatings, a highly successful data and information analytics company in the risk management and supply chain analytics space where he was both CFO and COO for the business. Prior to RapidRatings, Pete spent ten years working for private-equity and venture backed technology companies in both SaaS and traditional software solutions. Pete also spent 13 years at powerhouse technology company SAP where he led field services for SAP America. Pete started his career in public accounting with Arthur Andersen & Co and is a licensed CPA. He graduated with a business degree from the College of William & Mary in Virginia. 

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

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Megan Foster

Manager, People Operations

Todd Rode

VP, Services & Corporate Operations

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Marvin Roi Elvambuena

Director, Web Development

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Jaylyn Palmer

Chief of Staff

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Greg Abram

Chief Growth Officer

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Jeff Weber

Chief Operating Officer

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Griff McGee

Corporate Controller

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Daniel Telford

Director, Corporate Treasurer

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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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Mike Simmons

VP, Product Management

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VP, Strategic Accounts

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Chad Davis

Director, Compliance

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Director, Data Warehouse

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Chief Marketing Officer

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Jace Garfield

Chief Analytics Officer

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Jason Hardin

Chief Revenue Officer

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Lindsay Jones

Chief Financial Officer

Lindsay Jones, CPA, is a financial executive with experience in start-up companies & mature enterprises. He has a proven track record of helping, leading, and enhancing executive management teams. He has worked with private equity groups and private investors to identify, analyze, and close acquisitions and divestitures of companies. He has founded two startup companies, owned his own business, and closed over $500 million in private and public equity and debt financing, in his twenty-year career. 

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