How alternative PBMs are shaking up the industry

A pharmacy benefit manager (PBM) without all the usual drama? It’s a lofty goal.

Federal lawsuits and investigations have accused the three largest PBMs—CVS Health’s Caremark, Cigna Evernorth’s Express Scripts, and UnitedHealth Group’s Optum Rx—of overcharging for drugs, pocketing savings, and giving perks to their vertically integrated insurance companies as well as their own specialty and mail order pharmacies.

The Big 3 deny this, saying they pass the vast majority of savings on to customers. They’ve recently introduced some transparent models to prove it. Cigna’s Express Scripts, for instance, announced Oct. 27 it would phase in up-front discounts to replace rebates.

Meanwhile, alternative PBMs that already have transparent models like AffirmedRx, Rightway Healthcare, and Navitus Health Solutions are gaining traction. Experts tell Healthcare Brew that though these alternatives aren’t perfect, their models may save insurers and patients money.

“Everybody in the [traditional] supply chain benefits from higher list prices,” Navitus SVP and Chief Pharmacy Officer Sharon Faust told Healthcare Brew. “It requires innovation and disruption of all the historical models to drive cost savings.”

Just passing through

Unlike traditional PBMs, which profit by taking a small cut of the discounts they negotiate between drug manufacturers and pharmacies, these alternative PBMs instead earn revenue through a fee-for-service model, David Reissner, market access lead for advertising agency VML Health, told Healthcare Brew.

Navitus, for instance, charges an administrative fee per member per month for a set contract that often lasts around three years, the alternative PBM’s President and CEO David Fields told Healthcare Brew.

Though the Big 3 maintained in a 2024 federal hearing that they pass on 95% to 98% of discounts negotiated with drug manufacturers to insurers, some alternatives like Navitus—owned by St. Louis-based nonprofit health system SSM Health and Costco—say they pass on 100% of savings.

Show me the money

Another way traditional PBMs profit is through spread pricing, which is when a billing plan sponsors more for a drug than it pays pharmacies to dispense it, per HHS.

A January 2025 Federal Trade Commission report accused Caremark, Express Scripts, and Optum Rx of making $1.4 billion through spread pricing from 2017 to 2022, Healthcare Brew previously reported.

Navitus, meanwhile, takes no spread, meaning it pays pharmacies the same amount it bills insurers, Fields said. Specialty pharmacy Lumicera Health Services, a wholly owned subsidiary of Navitus, makes money from charging a patient management fee for services provided, he said.

“Spread is very profitable. But we were founded to be in opposition to all these gains that were developed in the traditional PBM world,” he said.

What’s more, Field said Navitus provides clients with data at the individual claim level to prove it not only talks the talk but also walks the walk.

This model has won the company 800 clients comprising almost 18 million lives since it began in 2003, including state plans in Wisconsin, some plans in the Medicaid and Children’s Health Insurance Program in Texas, and the nonprofit Pennsylvania-based Geisinger Health Plan.

AffirmedRx, started in 2021, has nabbed big names like 7-Eleven and Indiana-based Purdue University. And Rightway, founded in 2017, swayed Tyson Foods away from Caremark in early 2024.

A September report from nonprofit trade group the National Alliance of Healthcare Purchaser Coalitions surveyed 324 employers and found 61% have moved away from the Big 3 or are considering moving away from them in the next three years.

Reissner predicts that as more alternatives come to market, bigger PBMs will face more pressure to be transparent.

“It’s going to be a requirement,” he said.

The future of pharma

Reissner thinks it’s unlikely these models will totally take over the industry, though.

“It’s not so much about replacing the Big 3 as it is looking for alternatives that are more niche,” he said. “[They’re] carving out a significant sector among a couple key areas.”

One limiting factor for Navitus and other alternative PBM models is they require a “more complex” customer-vendor relationship—meaning, more paperwork, Reissner said.

These alternative plans largely attract self-funded employers and government entities, as well as other groups that prioritize cost control and want to have access to their data in order to make informed decisions about formulary designs and benefit strategies, Reissner said.

Another thing to keep in mind is transparent PBMs still engage in practices that some—like E. Michael Murphy, senior advisor for state government affairs at advocacy and lobbying group the American Pharmacists Association—want to see reformed.

The group supports legislation aimed at reining in PBMs. At this point, every state has some sort of restriction in place, though their stringency varies. Arkansas took the most extreme stance after it banned PBMs from owning a pharmacy in April in an effort to break up vertical integration.

“[Transparency] doesn’t solve the problem if community pharmacies are going to continue to be under-reimbursed,” Murphy said.

A 2024 FTC report accused Caremark, Express Scripts, and Optum Rx of providing their vertically integrated chain pharmacies with higher reimbursement rates and better contracts than independent community pharmacies, which face high risk of closure nationwide.

Navitus is also vertically integrated with Lumicera and has gone to court to challenge Arkansas’s ban, following CVS’s and Cigna’s lead.

Rather than being a problem, this vertical integration is an opportunity to add efficiency and lower costs, Faust countered.

“We think that vertical integration can be good when done in the right way and in the right manner to deliver savings,” Faust said.