National Beverage Distribution

One of the nation’s largest beverage manufacturing and distribution brands was growing frustrated with their discount-based PBM: its lack of transparency, cost-containment solutions, and overall alignment resulted in higher costs. Switching PBMs would be a risk, but the leadership team was determined to find a truly aligned partner who would advocate for lower costs and better experiences for their members. They knew that the same PBM evaluation method would not solve their problem. So they threw out the old score card in search of a cost-based PBM. 

Their comprehensive evaluation, guided by their trusted broker, to find a PBM focused on lowest net costs, rather than illusionary discounts, led them to SmithRx. Entering their fourth year with SmithRx as their PBM, the group is realizing savings at scale, far outpacing the performance of their previous PBM and the industry averaging by over 30%. Learn how this beverage giant is continuing to defy market trends.

The Challenge: Legacy, Misaligned PBM Pricing That Hindered Benefits Goals 

The beverage distribution company was previously working with one of the major PBMs, which utilized a legacy, discount-focused approach. The problem with this model is that every decision is centered around the biggest discount, not the lowest net costs. 

What’s wrong with a discount-based model? Let’s say you’re shopping for a gallon of milk. If a $12 gallon of milk is discounted 50%, you’ll pay $6. That sounds like a great deal… until you see that there’s a different brand of milk that’s selling for a flat $5 per gallon with no discount. Even though you’re getting the best discount, you’re still paying more than you need to. And when you have thousands and thousands of employees, that difference really adds up. 

“Each year, our broker (Gallagher) audited the PBM rebates accuracy; I recall that for three years in a row, we received about $0.5m-$1m in missed rebates. Although the rebates were well received, we noticed our net spend continued going up.”

- Head of Total Rewards, National Beverage Distribution

It became clear that discount-based strategies were limiting the company’s ability to grow and reach its benefits goals. “I realized the traditional model just didn’t make sense and wasn't sustainable for us anymore — there had to be something else,” said the Total Rewards leader.

The Solution: Partnering with a Client-Aligned, Cost-Based PBM

To help the group address the issues arising from legacy pricing models, local Utah-based broker, Gallagher, advised the company to switch to SmithRx for its cost-based model and transparent approach. 

“Transparency in the pricing model was also very important to us because we wanted to understand how we're being billed and where are these rebates coming from, or can we eliminate them and get to the best net cost possible?”

After conducting a claims analysis, Gallagher and SmithRx identified significant cost savings opportunities within SmithRx’s suite of Drug Pathways that are proactively offered to members. 

Besides securing savings, the team wanted to ensure that the changes made by SmithRx would have minimal impact on member experience. “Our people may need help in certain situations in navigating the complex world of pharmacy. So having a partner that can hold their hand and guide them through that complex world, it was imperative to us,” their total rewards leader said.

With a flat PMPM platform fee and modern cost-containment solutions, the company gained more clarity, transparency, and control over their benefits.

“At the end of the day, we decided on SmithRx, because they were able to answer all of our questions and make us feel comfortable. We had numerous initial calls and meetings with them because I kept thinking that it was too good to be true, but eventually I was able to fill in the blanks and understand how the model worked."

The Results: Improved Savings, Year-Over-Year

Even through a go-live "perfect storm" of logistical hurdles and external factors out of the teams’ control, the partnership was solidified by SmithRx’s rapid response in creating a dedicated support line. The shift ultimately delivered significant savings on specialty drugs and a more collaborative, resilient relationship between the rewards team and SmithRx.

If the group had stayed with their discount-based PBM versus switching to SmithRx, the difference in actual spend would have been massive.

*Above Graph. Per Member Per Month (PMPM) Cost: Previous PBM Historical Data & Projections versus SmithRx Performance

The group sees lower costs today than four years ago with their previous PBM, proving the long-term ROI of moving away from discount-based PBMs. The data and projections account for inflation rates and market changes.

“We are in our fourth year with SmithRx and we are still paying less per member per month than we did in 2022 with our discount-based PBM!”

The group’s sustainable success is enabled by the SmithRx Drug Pathway Engine which identifies the lowest net cost source for every eligible claim. SmithRx identifies members utilizing high cost drugs and finds clinically appropriate, low-cost generics or biosimilars. The true net cost is factored in, including rebates, assistance programs, and network discounts. Then, the optimal source is agnostically recommended, comparing big box, independent, mail, and specialty pharmacy pricing in real time. Members are engaged and supported end-to-end through changes utilizing communication channels they prefer. Throughout the process, benefit teams are kept in the loop so they’re able to support members and encourage cost saving behaviors. 

Take Humira, for example, the popular drug to treat autoimmune disorders and costs a whopping $2,150 per month with a high-tier member copay. But SmithRx finds alternatives, like in this case biosimilars, that work just the same but are at a much lower price. The biosimilar, Yusimry, costs $575 with a $0 member copay. This optimization happens in real time for every eligible claim. 

While the group’s utilization went up by 2.5x, their costs dropped by 65%. Through company growth, increased utilization, and market inflation, the group still realized significantly lower costs. 

With a partner who is as committed to members’ health as they are to the bottom line, the Total Rewards team gains more than just savings, they gain the certainty that their people are truly cared for. Learn more about these strategies that enable groups to scale making medications affordable for members from our team of experts today.