Jim reviews the evolution of pharmacy benefit managers (PBMs) within the drug channel and discusses the challenges that the industry's current dynamics create for plan sponsors, patients, and pharmacies. He then outlines SmithRx’s approach to addressing these issues.
To learn more, visit SmithRx.com.
Read on for Jim’s insights.
Why the Pharmacy Supply Chain Is Broken and How SmithRx Is Fixing It
By Jim Sheninger, Senior Vice President, Supply Chain, SmithRx
Over time, the pharmacy supply chain has evolved into a complex web of intermediaries—PBMs, GPOs, wholesalers, rebate aggregators, mail-order pharmacies, and more. Many of these entities are now owned by the same few parent companies, enabling them to set prices, steer volume, and control access. What started as an effort to manage drug costs has turned into a self-reinforcing ecosystem of misaligned incentives.
For employers and patients, the result is familiar: rising costs, limited visibility, and little confidence that their PBM is working in their best interest. But that is starting to change. The market is recognizing the need to leave the legacy PBMs behind and embrace transparency—now it’s time for employers and supply chain partners to take notice.
At SmithRx, we believe the only way to fix the pharmacy supply chain is to fundamentally change how a PBM operates. We built our model to do exactly what PBMs were originally meant to do: help people get the right medications at the lowest possible cost. No retained rebates. No vertical integration. No games. And it works. Our clients save an average of $25 per member per month, reduce pharmacy benefit costs by 30% and, in many cases, provide medications at low to no cost for patients.
We are not a health plan. We are not a pharmacy. We are not a GPO, a wholesaler, or a manufacturer. We are a PBM, and we stay in that lane.
Here’s what it looks like when a PBM is structurally aligned with the people paying the bill.
Start with structure. No ownership. No conflicts.
We do not own any part of the supply chain. No pharmacies. No mail order. That independence eliminates the internal incentives that drive steering, formulary manipulation, and inflated pricing.
Our only source of revenue is a clearly defined administrative fee. Everything else—rebates, reimbursements, and discounts—is passed through in full. That model aligns with the fiduciary duty of our clients and keeps our focus on lowering the total cost of care.
There are no hidden fees and no spread built into our contracts. Just a pharmacy benefit manager doing what it was supposed to do in the first place.
Manufacturers. No middlemen. No rebate games.
Legacy PBMs have evolved manufacturer contracting through GPOs—entities that often obscure the true net cost and prioritize higher list price drugs with the largest rebates. That structure allows PBMs to profit from volume and rebate guarantees, not value.
Wherever possible, SmithRx contracts directly with manufacturers to secure lowest-net-cost pricing. We do not chase the biggest rebate. We pursue the best price. We pass through all rebates to our members and their employers to ensure they’re not paying more than they should. And we work with manufacturers that offer the therapies and drugs our members need, so they can remain adherent to their treatment.
Pharmacies. Partners, not pawns.
Retail pharmacies have long operated at the mercy of unpredictable reimbursement, opaque clawbacks, and shifting terms. But SmithRx works with our retail pharmacy partners to find the right pricing benchmark suitable to that retailer. This could be an acquisition cost-based benchmark such as NADAC or PAC or a traditional option such as AWP. Ultimately, our goal is to create a mutually aligned model that removes opaqueness and obscurity and focuses on predictable and stable retail margins. And we offer our retail partners visibility into the terms. We let the data speak for itself: no channel conflict, no artificial network design, no spread pricing.
The Pathways Engine. Cost optimization, claim by claim.
Having the right pricing is only part of the equation. Making sure members access it is the real challenge.
Our Drug Pathways Engine analyzes every claim in real time and identifies the lowest-net-cost, clinically appropriate drug available. It looks across brand, generic, biosimilar, and cost-plus options—and activates Connect 360, our suite of in-house savings programs, when relevant.
Once a lower-cost opportunity is identified, our clinical and support teams reach out to members and prescribers to help facilitate transitions. This is not passive savings. It is active, hands-on optimization, claim by claim.
The bottom line
People often ask why the largest PBMs are content to keep the pharmacy supply chain inefficient and self-serving. The answer is simple: Their models depend on keeping dollars in the system. Ours depends on getting them out.
That difference shows up in the numbers. But more importantly, it shows up in the experience: fewer barriers, lower costs, and better outcomes.
We are not perfect. But we are transparent. We are accountable. And if that sounds like the kind of pharmacy benefit manager the industry has needed all along, it’s because it is.
Learn more about us at SmithRx.com.
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