National employer group the Purchaser Business Group on Health is starting a new company to develop healthcare products for large employers, frustrated by unmet needs and rising costs.
The venture, called Emsana Health, launched on Monday with its first business unit, a pharmacy benefit manager called EmsanaRx.
Emsana will develop products designed with and for PBGH member organizations, which include Walmart, Costco, Microsoft, Intel, and Tesla, among others, but products will be available to outside companies as well, a PBGH spokesperson confirmed.
PBGH is forming Emsana, which it views as an “innovation studio” for purchasers, due to concerns from U.S. employers that the healthcare services they buy may not be of good quality, despite the high price tag. Such concerns have resulted in a slew of similar ventures from major companies in recent years looking to lower medical costs without sacrificing the quality of care for their employees.
Emsana is first tackling the pharmacy benefit management industry because drug costs are a key driver of health spending and due to a distinct lack of accountability from PBMs to their employer clients, which mostly don’t have access to information about drug costs, discounts, and administrative fees, PBGH said.
PBMs, middlemen that negotiate discounts with drug suppliers and administer pharmacy networks for health plans, are often criticized for hiding behind opaque and complex contracts with health plans, government agencies, and other parties to inflate drug prices and drive out competitors.
Legislators and regulators are increasingly targeting PBMs in a bid to drive down drug costs as the middlemen face ongoing scrutiny over their practices, especially spread pricing, where a PBM reimburses pharmacies one price for pharmaceutical but charges the plan another, resulting in profits.
Emsana says its business incentives are structured to align with employers, with offerings allowing more control and transparency to its clients.
That includes a fixed price per prescription and a dedicated clinical pharmacist account manager partnering with employers to design their own pharmacy network and modify their formulary.
“Customers will know exactly what they are paying for and can make strategic adjustments in real-time,” EmsanaRx CEO Greg Baker, previously a senior pharmacy consultant with advisory firm Blue & Co. and Vice President of Pharmacy Services at Premise Health, said in a statement.
EmsanaRx will start operating next year with a small number of regional medical centers and will work over the next few years to win over clients like Walmart and Boeing that make up PBGH’s membership.
But the multibillion-dollar PBM industry is quite difficult to break into. It’s highly consolidated, with just three PBMs controlling 80% of the market — CVS Health’s Caremark, UnitedHealth’s OptumRx, and Cigna’s Express Scripts.
And disrupting the healthcare industry is something much easier said than done. Previous independent ventures looking to find innovative solutions to cut costs have very publicly crashed and burned, most notably Haven, a joint venture backed by giants Amazon, Berkshire Hathaway, and J.P. Morgan.
Haven announced earlier this year it was suspending operations with very little concrete to show despite a three-year tenure, leading J.P. Morgan to launch a solo business unit, Morgan Health, in late May.
PBGH represents roughly 40 large employers and healthcare purchasers that collectively spend $100 billion annually buying healthcare services for more than 15 million Americans.
The group is the majority owner of Emsana, along with a small group of strategic partners with knowledge of the pharmaceutical industry, and has taken no money from the financial markets, VCs, or private equity to avoid outside influence on Emsana’s strategic goals, the spokesperson said.