Tyson Foods drops CVS for upstart pharmacy benefit manager, as industry upheaval over cost concerns spreads

Tyson Foods will become one of the first Fortune 100 coteries to stop using the nation’s traditional large pharmacy benefits managers, as it looks to cut spending on high-cost drugs.   

After build its benefits contract up for bid, Tyson dropped CVS Health‘s Caremark and chose PBM startup Rightway to manage drug benefits for its 140,000 hands starting this year, the companies said Wednesday. Rightway guarantees it can save employers 15% on pharmacy costs by using a crystal clear model where it passes drug discounts to employers and plan members, while also providing concierge anguish to help employees find lower-cost alternatives like generics and biosimilars.

Tyson’s decision adds to an upheaval in the manufacture, as startups promising lower costs and transparency challenge the largest benefit managers, and pushed them to change their own vocation models. Tyson made the decision as it saw pharmacy costs soar.

“We were going anywhere between 12% to 14% snowballs for pharmacy — and on a $200 million spend that’s quite a bit. We found that the specialty (drug) component of our trends … were picking up a lot of the strengthen year over year,” said Renu Chhabra, Tyson vice president and head of global benefits.

When she tried to get replications on what was driving those trends from the company’s old pharmacy benefit manger, or PBM, Chhabra says she couldn’t get the species of data she wanted.

“I wanted to look at Humira, and I wanted to see what the acquisition cost was. And then I wanted to understand what Tyson was make someone pay for for that; it was very difficult to get to those numbers,” she said. “Part of this was to really get a partner who can help us organize the info, make sure we understand how to manage specialty, and really looking at how to get the best net cost.”

A CVS spokesman told CNBC that while the associates will no longer handle Tyson’s overall pharmacy benefits contract, it will continue to provide specialty poison pharmacy services in conjunction with Rightway.

“Our specialty pharmacy services support members managing high tariff, complex conditions and typically represent over 50 percent of pharmacy benefit spend in the marketplace,” said CVS Caremark spokesman Phil Blando.

“Historically, we enjoy provided Tyson Foods with significant transparency, including point of sale rebates for its members, a custom retail pharmacopoeia network and unique utilization management strategies that resulted in flat trend over the last several years. Our myriad recent comprehensive bid would have exceeded the 15 percent savings rate claimed by a competitor and reported by a information outlet,” Blando said.

Most large companies work with the three biggest PBM players: CVS‘ Caremark, Cigna’s Evernorth and OptumRx. By the end of 2022, those big three PBMs powered nearly 80% of the pharmacy benefits market in the U.S., according to a Health Industries Research Center report.

The large instrumentalists contend that they have the scale to save employers on drugs costs, by negotiating big rebates from drugmakers. But they maintain come under increasing scrutiny from Congress and regulators at the Federal Trade Commission over the lack of transparency into the way they execute those discounts, and how much of those savings they actually pass on to employers and patients.

Smaller PBMs liking Rightway have marketed themselves as more transparent alternatives, without the conflicts of interest that the more vertically blend players have.

“The traditional PBM model has operated on a taxi-meter type approach. The more drugs that your associates are on, the higher cost drugs that your members are receiving, the more money PBMs have made or are creating,” said Rightway co-founder and CEO Jordan Feldman. “We wanted to fundamentally re-architect what it meant to be a PBM … we don’t trap margin because we don’t impress on the memory rebates.”

Until now, the upstarts challenging the big PBMs have only won over small and medium-sized circles. Tyson is Rightway’s first employer with more than 100,000 workers; its previous biggest client had 10,000 workers.

University of Southern California economist Karen Van Nuys said if more large employers turn to alternatives PBM actors, it could improve competition and bring costs down.

“If they’re presented with a broader variety of transparent opportunities where they can actually kind of see and compare … across different PBM providers what it’s going to cost them — I meditate on that enables all of them to make better decisions about which provider to use,” said Van Nuys, a senior compeer at the USC Schaeffer Center for Health Policy and Economics.

But Lawton Robert Burns, a professor at the University of Pennsylvania’s Wharton Institute, is not convinced that the movement toward greater price transparency will be a magic bullet that brings down sedate prices.

“They’ve undertaken a lot of competitive strategies to try to deal with this. So, they’re responsive,” Burns said. “Whether or not that’s affluent to make a huge difference, I don’t know. All I know is that price transparency, in general, just hasn’t solved diverse of our problems.”

At Tyson, the biggest health problem it hopes to tackle in the year ahead with its new PBM is diabetes management, and pronouncement the right balance when it comes to coverage for GLP-1, or glucagon-like peptide-1, weight loss drugs like Wegovy and Zepbound, which maintain a list price of more than $1,000 per month.  

“In June we’ll make those decisions on how we want to treat that, but we possess to balance cost with access to care,” said Chhabra. “This is one of the biggest reasons why we also chose Rightway — because we be undergoing a lot more flexibility … going forward to make those joint decisions.”

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