After years of frustration with mega companies, a group of four Kansas pharmacists is working to change the pharmacy benefit manager trade from the inside out – by creating their own, different kind of pharmacy benefit manager called Oread Rx.
Nate Rockers, owner of Rockers Pharmacy in Paola, Kansas, said the current pharmacy benefit manager situation is dire.
“The industry has morphed away from what we think is the right practice, in an industry that is rife with opportunities for abuse,” Rockers said.
The Kansas company formed in late 2018 is aimed at disrupting a multi-billion dollar industry where major companies decide how much people pay for drugs in their insurance plans, and critics say the pharmacy benefit managers are making big profits in the process while lacking transparency.
To understand what is different about Oread, it helps to understand the complex business of pharmacy benefit managers, also known as PBMs.
PBMs: the ‘middlemen’ of the pharmaceutical world
Health policy expert Karen Van Nuys is the executive director of the University of California Shaeffer Center’s Value of Life Sciences Innovation, a research program aimed at transforming health care.
Pharmacy benefit managers were created in the 1960s when insurance companies started offering prescription medication as a benefit. According to some research, the first PBMs were created by pharmacists. Van Nuys said PBMs were originally designed to help insurance companies process claims.
“It was a sort of high volume, low margin, back-office kind of business,” she said. “Figuring out who needed to be paid what and then processing those transactions.”
Now, PBMs create what are called formulary lists, which include the medication brands that insurance plans will cover. Also, the companies negotiate prices with drug manufacturers and process claims. Over the years, as the health care landscape evolved, the influence of PBMs has, too. The top three pharmacy benefit managers are commonly referred to as the Big Three. CVS Caremark, Express Scripts and Optum Rx are owned by mega insurance companies. And two of them also own major pharmacies, including CVS Pharmacy and Express Scripts Pharmacy, a mail-order pharmacy.
Van Nuys said when companies integrate like this, it puts them in a position where they can see pharmacy transactions from all angles and gives them a massive amount of power.
“The fact that they have that visibility means that they can capture profits or design contracts in such a way to bring more money to them,” she said.
According to Van Nuys, the three large PBMs control 70%-80% of retail prescriptions. She said they rake in billions of dollars using controversial methods like spread pricing — which is when the PBM charges the payer (a health plan or Medicaid program) more than what they pay the pharmacy and pocket the difference.
Van Nuys said pharmacy benefit managers are not transparent with insurance companies or patients. She said the PBM industry is largely unregulated, so they are allowed to operate this way.
These are all things the pharmacists who formed Oread want to change. They said PBMs and their policies are choking out independently owned pharmacies.
The trade group representing pharmacy benefit managers disagrees.
The Pharmaceutical Care Management Association, also known as PCMA, did not return requests for comment on this story. But in a previous statement, the group said pharmacy benefit managers understand that independent pharmacies play a vital role in prescription accessibility for rural Kansans.
“In support of that critical role, PBMs support rural pharmacies in Kansas, and nationwide, through innovative programs that increase reimbursements and allow rural pharmacists to spend more time with patients,” Katie Payne, senior vice president and spokeswoman for PCMA said in an emailed statement.
“A strong relationship between PBMs and rural pharmacies means a better experience and more affordability for patients, which is our shared priority,” the statement continued.
The pharmacists behind Oread
In addition to Paola pharmacist Nate Rockers, the group of founders includes Dared Price, Tyson Mullen and Matt Morrison. The guys have a lot in common. Not only are they pharmacists, but they all own rural Kansas pharmacies and three of them graduated from the University of Kansas.
Their mutual qualms about the PBM industry put them on an unexpected path. Rockers said when they decided on their career paths, their initial goal was to take care of patients.
“We felt that pharmacy was that pathway,” Rockers said. “Becoming business owners was a byproduct of how we thought we could best serve patients.”
Matt Morrison owns Gibson’s Pharmacy in Dodge City, Kansas. He said he hit a breaking point and realized there had to be a better way after a large local employer approached him with concerns about ever-rising prescription expenses.
“I was like, ‘Well, that's funny, because reimbursement keeps declining,’” Morrison said.
So in late 2018, the group founded Oread, their vision of an equitable PBM. They named the company after Mount Oread, a hill in Lawrence, Kansas, where parts of the University of Kansas campus sit.
How Oread works
Rockers, the Paola pharmacist, said Oread has three main distinctions from a traditional PBM. The company is transparent, it does not engage in spread pricing and passes 100% of manufacturer rebates back to clients.
“Our mission with Oread is to put the patient and the plan in the driver's seat of their health care to ultimately achieve the best outcome at the best price,” Rockers said.
Oread customers
One of Oread’s early, large clients was the Winfield school district. The district started working with Oread in 2021 when Nate Reed was the superintendent. Reed said when he heard about the new company, he did not know employers could change PBMs.
“It was kind of like an onion where you just peel back layers, you're like, ‘Oh my gosh,’” Reed said. “Why don't more people know about this?”
Reed said before switching to Oread, the district’s insurance rates varied and were on the rise, mostly due to prescription costs.
Reed said he requested an explanation and wanted to see the data on the district’s prescription drug spending. But his requests didn’t get him anywhere.
“You don't get to see your data. It's not transparent, even at request,” he said.
But switching the district of about 600 employees was no small feat. The district had to change over to a partially self-funded insurance plan, which Reed said was a bit of a headache.
Ultimately, Reed said Oread saved the Winfield school district more than $270,000 on prescription drugs the first year. The savings allowed them to stabilize insurance costs and give employees ‘premium holidays,’ which are months when workers did not have to pay for health insurance.
Last summer, Reed changed careers. He now works at a heating and cooling company in Wichita called Building Controls and Services, Inc., or BCS. Reed said BCS uses Oread, too, and he’s getting to enjoy Oread from the consumer side now.
“You just feel like you're being well taken care of and you're being heard,” he said.
Oread serves several other school districts in Kansas, as well as various counties and municipalities, including the city of Derby, Kansas. Human Resources Director Jenny Turner said they started using Oread in 2023.
So far, the city has seen significant savings on specialty prescription drugs, and their rebate returns have doubled. Turner said before moving to Oread, they were told the PBM they used was fully transparent.
“So we believed them. And then when we moved to Oread, and now we're seeing savings that are twice the amount,” Turner said.
Like in Winfield, Turner said it was somewhat difficult to change PBMs. But she said Oread was clear and easy to communicate with.
“I think it's great that someone who's dealing with the same kind of issues that we are, who shops local,” Turner said. “They don't feel so far removed the way the big PBMs do.”
Oread is not a nonprofit. It makes money from a fixed admin fee. Rockers said for the company to stay successful, it will have to process a high volume of claims and grow its client base. But he said, unlike other PBMs, they do not steer patients to the pharmacies they own. Rockers said at Oread, they want patients to choose the pharmacy that works best for them.
Morrison, the Dodge City pharmacist, said ultimately, there are parts of the PBM system he sees as problematic that they can’t avoid, like building formulary lists, for example.
“We're playing in a sandbox that we didn't build,” Morrison said. “There are things about this system that, frankly, are not advantageous to anybody but the processor in some cases.”
The founders said they are also actively pushing for legislative reform of the industry. They want stronger regulations on pharmacy benefit managers that force them to be more transparent and operate more like Oread.
