Anthem and Humana have invested nearly $140 million to form a new pharmacy benefit manager platform, as criticism over traditional PBMs' operations kickstarts business at startups that promise transparency.
The insurers will hold a minority stake in the new joint venture, named DomaniRx, which is being championed by SS&C Technologies. The Windsor, Conn.-based fintech company owns approximately 80% of the new business, according to a filing submitted to the U.S. Securities and Exchange Commission on July 15. SS&C's existing claims processing platform—RxNova—will serve as the new PBM's technological backbone. By combining claims administration with data analytics, DomaniRx aims to offer payers more transparency into their drug costs and help them better comply with changing government regulations. Payers use PBMs to manage their benefits and negotiate drug pricing with pharmaceutical companies and drugstores.
Humana will serve as DomaniRx's first customer. The Louisville, Ky.-based insurer, which did not respond to an interview request, currently operates its own PBM.
"DomaniRx will focus on disrupting the industry through open source technology to interface with other systems quickly," Danny Delmastro, general manager of DomaniRx, said in a statement. "The insights we draw from hundreds of millions of claims transactions, powered by DomaniRx's advanced processing platform, will provide participating members flexible tools, advanced analytics and customizable programs. All while increasing transparency, accessibility and service quality for members and pharmacies."
Humana and Anthem hold a non-exclusive license to RxNova. If development of DomaniRx is not completed by deadline, both have the opportunity to exit the joint venture.
Anthem referred questions about the new venture to SS&C, which did not respond by deadline. This isn't the first time the Indianapolis-based insurer has shown interest in investing in its own PBM—in 2019, Anthem launched after in-house PBM IngenioRx, after suing Cigna's Express Scripts for $15 billion over allegations the company withheld savings and overcharged the insurer.
The new venture comes as more payers begin to question the work of the "Big Three" PBMs—CVS, Express Scripts and UnitedHealth Group's OptumRx—which control at least 80% of the market, according to a 2020 report by the University of Southern California. These PBMs typically operate through opaque "spread pricing" models, which means they charge payers more than they reimburse the pharmacy for a specific drug and retain the difference.
In June, Centene Corp agreed to pay a combined $143 million to Ohio and Mississippi to settle allegations that the St. Louis-based insurer overcharged states' Medicaid departments for medications. The company has also reserved another $1.1 billion for future settlements related to its PBM services, which it has discontinued.
CVS also faces a suit from seven insurers that accuse the company of scheming with PBMs to overcharge health plans for generic drugs. The suit represents one of at least six related complaints against CVS. UnitedHealthcare has also been hit with at least one suit over its PBM operations. Georgia, Arkansas, Kansas and New Mexico are also investigating their PBMs, according to the Wall Street Journal.
Some say the wave of scrutiny has propelled interest in startups like DomaniRx, which promise to operate more transparently than their legacy counterparts by offering pass-through payment models, which means they derive revenue from a set administrative fee and return all rebates and discounts received from drugmakers back to their clients.
In April, Costco announced it was expanding its partnership with Madison, Wisc.-based Navitus Health Solutions, a PBM owned by SSM Health that handles drug benefits for the retailer's 300,000 employees and their families.
The same month, Ohio announced it was partnering with Tysons, Va.-based Gainwell Technologies to operate its own PBM, which it expects to save the state $240 million in drug costs each year, compared with its former private operators.
And so far this year, Capital Rx has raised a combined $82 million through two venture rounds. The New York City-based PBM has raised $97 million in total venture funding, according to Crunchbase.