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A Different Kind of PBM

In a featured story published by ComputerTalk, “A PBM of a Different Stripe: A New Player, New Rules,” Edward Reynolds discusses his understanding of the components of the commercial prescription benefit and why he is in an unusual position.

Reynolds is the owner of Bainbridge Pharmacy, the mayor of Bainbridge, GA, and the chairman of the board and investor in RxPreferred Benefits. These roles allow the ability to look at PBM from the view of the provider, sponsor, and administrator.

Reynolds decided to analyze pharmacy claims to look at what the PBM paid the pharmacy compared to the rate at which the PBM billed claims back to the sponsor. The city, a self-insured sponsor, asked for a detailed analysis of the claims from its pharmacy benefits manager (PBM). As a result, he found an average of $13 per claim added to the amount adjudicated to the pharmacy. This obviously raised concerns.

Wearing my mayor hat, that didn’t seem right to me. It didn’t seem as if the PBM had done anything to really earn that amount in a self-insured environment.

Reynolds further outlines the issues experienced with typical PBMs, including lack of transparency and conflicts of interest. He explains how PBMs extract revenue from the prescription fulfillment process and take advantage of the sponsors by not showing what it pays. Another issue raised is that PBMs are setting up closed networks, which allowed them to take advantage of their position and the ability to offer contracts with different payment formulas to each side.

The Birth of a Transparent PBM

His concerns led to creating a new type of PBM, one with transparency as its core principle. A PBM where the sponsor would be able to see its claims and track them back to the pharmacy to see what they were paid and, therefore, see the PBM transaction processing fees. That’s when RxPreferred Benefits was born – a wholly-owned by and focused on business to independent pharmacies.

We wanted not only for a sponsor to be able to see its claims, but also to be able to track them back to what the pharmacy was paid and see the PBM transaction fee for processing those claims. We wanted to let the sponsor see exactly what their costs are and then help them better manage these costs.

RxPreferred Benefits transparent business model is different from traditional PBMs as they eliminate the spread, pass through manufacturer rebates, remove conflicts of interest, and work collaboratively to design plans that meet the needs of their clients. Reynolds encourages sponsors to educate their HR staff about making plan decisions to move the industry forward with transparency.

While transparency in PBM operations isn’t a new idea, it becomes revolutionary when it’s put into practice by a new breed of PBM. One is not waiting for the mainstream to come to account. According to Reynolds, mainstream PBM and insurance players continue to push back. Many participants in the PBM process don’t know what they don’t know.


Read the original story, “A PBM of a Different Stripe: A New Player, New Rules,” by Will Lockwood published as a featured story in ComputerTalk’s July/August 2013 edition.

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