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Rightway CEO talks Tyson Foods choosing his startup over CVS

Tyson Foods (TSN) has announced that it will be dropping CVS' Caremark (CVS) as its pharmacy benefits manager and will be switching to Rightway. This is the second Fortune 100 company to drop CVS in the last year. Could shifts like these open up opportunities for smaller pharmacy benefit management companies? Jordan Feldman, Rightway CEO joins Yahoo Finance Live to discuss what makes the company stand out—and what the benefits landscape could look like soon.

Feldman believes that what differentiates Rightway from traditional pharmacy benefit manager is its model. Feldman calls the traditional model a “taxi meter approach," with companies benefiting from members spending more on drugs, rather than focusing on customer experience. Feldman highlights Rightway's “pharmacist in the family approach,” that, according to Feldman, allows for greater customer assistance that ideally would ultimately allow members to make the right decision for their needs. “The pharmacy benefits space is at an inflection point,” insists Feldman, who sees sustainability only being possible if members are at the center.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Eyek Ntekim

Video Transcript

JULIE HYMAN: Well, Tyson Foods is dropping CVS as its pharmacy benefit manager today sending another signal to pharmacy industry giants that maybe we could see further changes on the horizon. It's the second Fortune 100 company to drop CVS in the last year. And the food producer has switched to a much smaller outfit called Rightway, which guarantees 15% savings on pharmacy costs.

The CEO of Rightway, Jordan Feldman, joins us now, along with our senior healthcare reporter Anjalee Khemlani. Jordan, thanks so much for being here. So what makes your model any different than the PBMs that are already out there? And how do you get that 15% savings?

JORDAN FELDMAN: Thanks for having me. If you look at the traditional PBM model, they're essentially on a taximeter approach. The more money that members spend on drugs and the higher cost drugs that are dispensed, the more money they make. They utilize rebates. They utilize spread pricing. And because they have so much financial misalignment, the member experience is essentially nonexistent. They have no incentive, no infrastructure, no technology to truly engage the member.

And what that's created is double-digit compounding increases in pharmacy costs over the last decade. Now what Rightway saw was an opportunity-- an opportunity to really transform that member experience, to take the pharmacy benefit and financially align the model such that there's no spread pricing and no rebates, but really focus on the utilization piece of pharmacy benefits-- how do we support, how do we guide, how do we advocate, how do we generate technology to help members understand cost of drugs and use all of that support that we really call a pharmacist and the family approach to help impact the trend and cost associated with the pharmacy benefit.

ANJALEE KHEMLANI: Jordan, Anjalee here. I wonder, you know, we're looking at this in a time where there's definitely been discussion about the changes needed in PBM. You see that in Congress. You see that in the general discussion with the payers. I actually had a conversation with the California Blue Shield CEO, who was one of the first to start this last year with their dropping of CVS. But they did keep them for specialty benefits. But there is something to be said about the conversation happening. He had this to say about what the expectation should be.

PAUL MARKOVICH: Our mission, I think, drives us to try to make the system better. What I would love to see from payers, because we set the rules of the system, I would love to see us change the rules of the system. So that they facilitate that kind of innovation and consumer focus. So for example, that would include bringing health care into the digital age, retiring fax machines.

ANJALEE KHEMLANI: Of course, the fax machine being a different issue altogether. But I'm sure you could appreciate the idea that there needs to be movement here. I wonder what your thoughts are on that and what can be done and who really needs to be taking on that burden.

JORDAN FELDMAN: Look, the pharmacy benefits space is at an inflection point. They built a model that essentially traps margin and profits within the supply chain. And it's not working for employees, and it's not working for their planned sponsors. So what we need to introduce to the pharmacy benefit is a financially aligned model.

You can't have a PBM that makes more money when you spend more money and more drugs are dispensed. And I think as Paul alluded to, the entirety of this innovation needs to be with the member at its core. If we're really going to transform and innovate around the pharmacy benefit, it's not just the price of it but we certainly need to work on that, we need to have transparency.

But it's about the utilization. We have expensive brand name drugs. We have specialty drugs that offer biosimilars, that offer preferred brands, that offer generic drugs. And we need to be able to support and educate that member, such that they know about these alternatives, such that they can pull up an app, as Paul alluded to, in a modern consumer-driven way where they could see the universe of options about what drug they're on, why they're on it, how much it costs, what the alternatives are. And if we can introduce that consumerism to the pharmacy benefits landscape, we can start to change that whole cost dynamic that's nonexistent from the traditional PBMs today.