Rightway eyes IPO as upstart PBM leans into transparency pitch

What Rightway is planning

Rightway is exploring a public debut on a roughly four-year horizon as it builds on profitable operations. "The public markets are where some of the best companies in the world are built," CEO Jordan Feldman said, adding, "That public currency and transparency are certainly something that we strive toward."

Someone with knowledge of the situation, not cleared to speak publicly, said the private company carried a $1.75 billion valuation following its most recent funding round.

Taking on the PBM giants

Pharmacy benefit managers are contracted by health insurers, employers and government programs to negotiate with drugmakers and reimburse pharmacies. The business has drawn sustained scrutiny from lawmakers, regulators and auditors who say PBMs overcharge clients and add to healthcare costs. PBMs reject that view and argue they counterbalance manufacturers that set list prices.

Per Drug Channels Institute, the three PBMs owned by Cigna Group, CVS Health Corp., and UnitedHealth Group Inc. command roughly 80% of the market. Rightway is part of a newer set of smaller players that pitch greater transparency and accountability and has benefited as more employers take a look.

Clients, funding and how the money is made

Rightway says it has raised $281 million so far, including a $155 million Series E completed in the past month and led by Francisco Partners, with Thrive Capital and Khosla Ventures participating.

Feldman said Rightway's roster includes 45 Fortune 500 companies, all of which had previously used one of the three largest PBMs. He also said three clients have market values above $1 trillion. Mayo Clinic is slated to move to Rightway in January.

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Feldman said the company's sole revenue stream is a per-enrollee fee, untethered to drug prices, which he said lowers overall pharmacy spending for clients and slows the growth of those costs.

The model shift employers are pushing

PBM revenue has long been linked to drug list prices, a setup critics say gave drugmakers reason to hike prices and nudged patients toward pricier medicines. Some state and federal rules now target elements of that approach in certain plans, and large PBMs say they are moving toward more transparent models. "Employers, armed with greater visibility, are increasingly challenging historically important PBM profit drivers," Jefferies analysts wrote Wednesday.

Eli Lilly & Co. moved its employee plan from CVS Caremark to Rightway last year after Caremark scaled back coverage of its weight-loss drug Zepbound. Caremark later reversed that decision.

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