Tyson Foods Leaves CVS, Picks Rightway Pharmacy Benefit Manager

Tyson Foods will become one of the first Fortune 100 companies to stop using the country's large traditional pharmacy benefit managers as it seeks to cut spending on high-cost drugs.

After putting its benefits contract up for bid, Tyson dropped out CVS HealthCaremark and tapped PBM startup Rightway to manage drug benefits for its 140,000 employees starting this year, the companies said Wednesday. Rightway claims it can save employers 15% on pharmacy costs by using a transparent model where it passes drug discounts on to employers and plan members, while also providing concierge care to help employees find lower cost alternatives, such as generics and biosimilars.

Tyson's decision adds to the turmoil in the industry, as startups promising lower costs and transparency challenge larger benefits managers and push them to change their own business models. Tyson made the decision as he saw pharmacy costs skyrocketing.

“We were going to increase 12% to 14% for pharmacy, and with a spend of $200 million that is quite a lot. We found that the specialty (drugs) component of our trends… was capturing much of the year-over-year increase “said Renu Chhabra, Tyson vice president and head of global benefits.

When he tried to get answers about what was driving those trends from the company's former pharmacy benefit manager, or PBM, Chhabra says he couldn't get the kind of data he wanted.

“I wanted to look at Humira and I wanted to see what the acquisition cost was. And then I wanted to understand how much Tyson was paying for it; it was very difficult to come up with those numbers,” he explained. “Part of this was getting a partner who could help us organize the information, make sure we understood how to manage the specialty and really analyze how to get the best net cost.”

Most large employers work with the three main PBM players: CVSthe attention mark, Cigna Evernorth and UnitedHealth Group OptumRx. By the end of 2022, those three big PBMs controlled nearly 80% of the pharmacy benefits market in the US, according to a report from the Healthcare Industries Research Center.

The big players argue they have the scale to save employers on drug costs by negotiating big rebates with drug makers. But they have come under increasing scrutiny from Congress and regulators at the Federal Trade Commission for a lack of transparency in how they negotiate those discounts and how much of those savings they actually pass along to employers and patients.

Smaller PBMs like Rightway have promoted themselves as more transparent alternatives, without the conflicts of interest that more vertically integrated players have.

“The traditional PBM model has operated on a taximeter-type approach. The more medications its members take, the higher the cost of the medications they receive, the more money PBMs have made or are making,” said Rightway co-founder and CEO executive Jordan Feldman. “We wanted to fundamentally redesign what it meant to be a PBM…we don't capture margin because we don't retain rebates.”

So far, the upstarts challenging the big PBMs have only won over small and medium-sized businesses. Tyson is Rightway's first employer with more than 100,000 workers; His previous largest client had 10,000 employees.

University of Southern California economist Karen Van Nuys said if more large employers turn to alternative PBM players, it could improve competition and reduce costs.

“If they're presented with a wider variety of transparent options where they can actually see and compare… across different PBM providers what it's going to cost them, I think that's going to allow everyone to make better decisions about which provider to use,” he said. Van Nuys, senior fellow at the USC Schaeffer Center for Health Policy and Economics.

But Lawton Robert Burns, a professor at the Wharton School of the University of Pennsylvania, is not convinced that the movement toward greater price transparency is a panacea that will lower drug prices.

“They've undertaken a lot of competitive strategies to try to deal with this. So they're receptive,” Burns said. “I don't know if that will make a big difference or not. All I know is that price transparency, in general, just hasn't solved a lot of our problems.”

At Tyson, the biggest health issue they hope to address in the coming year with their new PBM is diabetes management and finding the right balance when it comes to coverage of GLP-1, or glucagon-like peptide-1, weight loss medications like Wegovy and Zepbound, which have a list price of more than $1,000 per month.

“In June we will make decisions about how we want to treat that, but we have to balance cost with access to care,” Chhabra said. “This is one of the main reasons we also chose Rightway, because we have a lot more flexibility … in the future to make those joint decisions.”