Mark Cuban-owned company launches pharmacy-benefit manager

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New pharmacy-benefit managers aim to be more transparent about drug costs

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A pair of new companies are being launched to tackle high drug costs, the latest sign of employers’ frustration with middlemen, known as PBMs, whose job it is to keep expenses down.

Mark Cuban Cost Plus Drug Company PBC and Buyer Business Group on Health, a nonprofit alliance of about 40 large public and private employers, said they are each launching new pharmacy-for-profit management companies.

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PBMs work on behalf of employers, labor unions and governments to decide which drugs are available to patients, negotiate discounts on the prices paid for those drugs, and process payments to pharmacies. PBMs pass along most of the savings to their customers. Yet some employers have criticized PBMs for failing to disclose all exemptions and for having too many savings.

The new pharmacy-benefit managers were intended, their executives said, to be more transparent about drug costs and share the savings of any interactions with their customers.

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“Pharmacy costs have been a major cost driver for both public and private buyers … and traditional PBMs were unresponsive to their concerns,” said Elizabeth Mitchell, chief executive of PBGH.

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Mr. Cuban, billionaire investor and owner Dallas Mavericks, is funding the new company with the aim of selling generic drugs at a transparent fixed rate markup. To do so, it is creating an all-in-one pharmaceutical supplier by combining manufacturing, wholesale distribution and pharmacy services under one roof.

Mr Cuban said in an email that he agreed to fund the company nearly three years ago after receiving a cold email pitch from radiologist Alex Oshmansky, who is now the company’s CEO.

In recent years, employers have become more interested in doing business with PBMs, promising to be more transparent. Some large companies have opted to keep most of their business with a single large PBM, but see this as a pilot program to move a small portion of their workforce to a transparent PBM in a particular area. That’s how it performs, said David Dross, drug pricing and policy leader at Mercer, a consulting unit of Marsh & McLennan Cos.

“There are a lot of employers that really want to see a new model and are moving towards a transparent system,” said Mr. Dross.

Transparency in the PBM industry generally means charging a uniform fee for services and giving employers 100% of the rebates and rebates paid by drug manufacturers to PBMs.

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About 80% of US prescriptions are managed by three PBMs: CVS Caremark of CVS Health Corp., ExpressScripts of Cigna Corp., and OptumRx of UnitedHealth Group Inc.

Winning clients away from existing PBMs won’t be easy, said Scott Martin, founder of Remedy Analytics, a consulting firm owned by Brown & Brown Inc., which uses prescription-claims data to advise employers in negotiations with PBMs. As much as employers say they want more transparency from their PBMs, finding the lowest-cost vendor is usually more important, he said.

“Once you go through the process that we created to uncover all the games we play, you find that the purchasing power of large PBMs is comparable to that of startup PBMs,” said Mr. Martin. “They don’t have the volume and price advantage.”

PBM has said the discounts they negotiate are used by employers to keep overall health insurance premiums low and they have long offered a transparent contract arrangement in which all discounts are passed on to customers.

Several state attorneys general are investigating PBM pricing and discounting practices, and federal officials are reviewing a new rule that requires PBMs to be negotiated to reduce out-of-pocket costs for patients in the federal Medicare health insurance program. exemption will be required.

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Mr. Cuban’s PBM will begin bidding for customers next year and is targeted to be operational in 2023, CEO Dr. Oshmansky said. The company will share the details of its operating cost with the customers and 100% of the discount it gets from the drug makers, he said.

“The supply chain for distributing pharmaceuticals to patients is so cumbersome and broken,” Dr. Oshmansky said. “We decided that the only way to get our medicines to the people who need them is to build a parallel supply chain where we have control of all the intermediary players and ensure the same level of transparency at every level.”

Mr. Cuban’s company plans to soon launch an online pharmacy that will sell 100 of the most commonly prescribed generic drugs. Dr. Oshmansky said the pharmacy is buying drugs directly from generic manufacturers, including Amneal Pharmaceuticals Inc., and will charge customers a 15% markup and a $3 delivery fee.

The company is building a plant in Dallas to manufacture certain drugs, and hopes to open the facility in September 2022, Dr. Oshmansky said.

PBGH’s new PBM, EmsanaRx, will be placed under an independent for-profit company called Emsana Health. Chief executive Greg Baker said PBM will begin operating next year with a smaller number of regional medical centers, with a total staff of 3,000.

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Over the next few years, PBM’s target was Walmart Inc. and to win the hearts of customers such as The Boeing Company who make up a subscription to PBGH.

It aims to negotiate discounts directly with drug manufacturers, and will allow its customers to check invoices showing dollar amounts received in rebates, Mr Baker said.

PBM intends to share the 98.5% to 99% discount with its customers, to cover the remaining administrative expenses, Mr Baker said.


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