The team at Capital Rx, a startup pharmacy benefit manger (PBM), doesn’t have a particularly positive view of the existing drug supply chain.
A.J. Loiacono, the PBM’s CEO, told FierceHealthcare that the company is founded on that idea.
“If you were a rational human being given a blank piece of paper to design the system, you definitely would not construct the current pharmacy benefits system as it is today,” Loiacono said.
Capital Rx announced Wednesday the formal launch of its “Clearinghouse Model,” the startup's new approach which is aimed at bringing some light to the black box of the pharmacy benefit. The model is designed to avoid “spread pricing,” a controversial PBM strategy in which they charge insurers notably more than the cost at the pharmacy for a drug, and pocket the difference.
The clearinghouse approach also aims to bring more light to both employers and pharmacies on their costs. Capital Rx bases its model on the Centers for Medicare & Medicaid Services’ National Average Drug Acquisition Cost (NADAC) pricing, a list that is updated weekly with cost data and provides an “unbiased” source on pharmacies’ costs.
It also provides actual unit costs upfront to employers in contracts—in comparison to a typical PBM contract, which may not include any drug pricing information at all, according to Capital Rx.
By boosting transparency, Capital Rx believes it can get at one of the key problems in the PBM space: the major players don’t talk to each other, which simply maintains the status quo.
“It’s okay to make a profit,” Loiacono said. “Just be clear about it, and don’t prevent the market from doing its job.”
Capital Rx says it’s the fastest-growing PBM in the market today with early customers including Walmart pharmacies. With the industry under intense scrutiny over its pricing negotiation practices, it’s not hard to see why a few employers could be convinced to jump ship from legacy organizations.
PBMs have taken it on the chin in the drug pricing debate in particular over the role of the rebates they negotiate with manufacturers.
While the Department of Health and Human Services’ plan to eliminate legal protections for rebate negotiations has fallen through, several big names in the PBM space, including UnitedHealth and CVS Caremark, have embraced passthrough discounts over rebates.
Capital Rx’s plans are attracting investors, too. In July, the PBM secured a $12 million funding round from Edison Partners, spurring its decision to launch the clearinghouse model this week. He said they see potential to address other problems in the system beyond launching the transparency model.
“I think the job never ends for us—‘What’s your second act?’” Loiacono said. “Thankfully in this industry, there’s plenty to pick from.”