Large Employers Launch PBM

Tired of grappling with the rising costs and poor quality of healthcare, a coalition of major healthcare purchasers is taking things into its own hands, establishing a company that is designing healthcare products to meet its members’ needs. “There’s an incredibly high frustration level among buyers of healthcare,” says Elizabeth Mitchell, president and CEO of the Purchaser Business Group on Health (PBGH) in San Francisco.

The nonprofit PBGH represents almost 40 large private employers and public entities that together spend $100 billion each year on healthcare services for more than 15 million Americans and their families. PBGH members include Microsoft, Walmart and American Airlines.

The decision to create the company, Emsana Health, was made about two years ago, with the initial focus on “really understanding the needs on a deep level,” Mitchell says. The company officially launched in the fall, and its first venture is setting up a pharmacy benefit manager (PBM), EmsanaRx, which went started operating on Jan. 1.

EmsanaRx CEO Greg Baker says the PBM is different from its competitors because it was designed to answer to its group members. One of its objectives is to provide members with sound, actionable data, such as what drugs actually cost, as well as information on discounts and administrative fees, Baker says. Companies that use EmsanaRx will pay a fixed price per prescription and a fixed fee to EmsanaRx.

“We do hear the traditional PBMs talk about doing the right thing for their clients, being that a counterweight to the manufacturer, being that intermediary that America needs,” says Baker. “I guess I just fundamentally disagree with that.” Baker says PBMs may be passing on rebates to their clients, but they also charge a variety of fees: “Now I have got a formulary placement fee and a clinical management fee and price protection fees, and those fees do not benefit the employer. Those fees all go back to the PBM.”

Baker says the traditional PBMs often use long, complex contracts that are difficult for clients to understand. EmsanaRx will use simple-language, eight-page contracts, he says, and data will be shared in a way that clients can understand. The account managers will be clinical pharmacists.

EmsanaRx is operating as a for-profit company with shares owned owned primarily by PBGH and its members. There are also some outside investors. Baker, who wouldn’t disclose their identities, describes them as well-funded individuals looking to bring innovation to healthcare. He says there isn’t pressure on the nascent PBM to generate major profits and describes a three-year plan that involves serving the first clients this year, some PBGH members in 2023, and ramping up to becoming a full-fledged PBM in 2024.

“We’ll try to nudge this PBM industry into a better place. But it is really, ‘let’s start slow, let’s be deliberate, let’s do it right’ because I don’t have investors breathing down my neck saying, ‘We need profit today.’” 

Susan Ladika is an independent journalist in Tampa, Florida, who writes about healthcare and business.