Independent PBM Rx Preferred tells committee transparency can cut drug costs; lawmakers ask how it works

Rx Preferred Benefits representatives briefed the Tennessee House Insurance Committee on Wednesday on how a transparent, independent pharmacy benefit manager (PBM) model works and said it can reduce prescription costs for employers and members.

Philip Dodd, vice president of legal and regulatory for Rx Preferred Benefits, and Zach Hansen, senior director of revenue operations, told the committee their firm operates as a “fully transparent PBM” and charges a flat per‑paid‑claim administrative fee rather than using spread pricing or retaining rebates. They said Rx Preferred does not own pharmacies or operate under insurer ownership, which they described as removing incentives that can raise plan costs.

Why it matters: PBMs administer prescription benefits for employers, state plans and insurers; legislative interest in PBM structure and transparency has grown because of concerns that vertical integration and opaque pricing can increase patient and plan drug costs.

What presenters said

- Rx Preferred said it has been in business since 2011 and that it manages plans nationally; the presenters said the firm currently covers just over 2 million lives across plans and employers.

- Zach Hansen described “spread pricing” as a primary profit source for large PBMs: paying a pharmacy one amount while billing the employer a higher amount and keeping the difference. He said the largest PBMs also retain rebates and may steer dispensing to owned pharmacies.

- Rx Preferred described its model as a pass‑through: the PBM pays pharmacies the claim amount, bills the client the same amount and charges a fixed per‑paid‑claim fee. Hansen said that fee is typically a fixed dollar amount per transaction and does not vary with the drug price.

- The presenters noted partnerships with community pharmacies and with Mark Cuban’s Cost Plus Drug Company as ways to access lower prices for some medications.

Lawmakers’ questions and concerns

Committee members asked how an independent PBM can secure competitive pricing when manufacturers, distributors and large chains exercise market power. Representative Lafferty asked why Rx Preferred could beat integrated competitors; Hansen said large PBMs often retain the delta between pharmacy payments and employer charges, and a pass‑through model eliminates that retained spread. Philip Dodd said independent PBMs may offer an alternative distribution route that does not rely on a single large PBM to control pricing and access.

Representative Sparks and others asked whether the model relies on volume to drive price or instead uses transparency and direct purchasing partnerships. The presenters said transparency and data access are key—giving plans claim‑level detail and allowing employers and members to shop for pharmacies and alternative sourcing for specific drugs.

Representative Hakim asked whether federal consumer‑protection entities (for example, the Consumer Financial Protection Bureau) should play a role; the presenters said litigation and fiduciary‑duty claims have emerged in this area but could not point to a specific CFPB role. Representative Martin asked for the number of covered lives; presenters said “a little over 2,000,000.”

What presenters claimed about savings

Rx Preferred told the committee that plans switching from large PBMs to their model have realized 20%–50% savings on drug spend in the first year, with larger savings in some instances driven by single high‑priced medications. The presenters offered a specific example in which a medication classified as a branded specialty generic cost an employer several thousand dollars under legacy reporting, while alternative sourcing could yield much lower prices.

No committee action

The committee received the presentation and asked questions but took no formal votes or policy decisions on PBM regulation during the session.

Speakers in this presentation included Philip Dodd (vice president, legal and regulatory, Rx Preferred Benefits), Zach Hansen (senior director of revenue operations, Rx Preferred), Don Holtz (business development manager, Rx Preferred) and members of the Insurance Committee who questioned the witnesses.