The former chief executive at Allina Health System has been named CEO at Prime Therapeutics, the Eagan-based company that serves as pharmaceutical benefits manager to several Blue Cross health insurers.
Kenneth Paulus is scheduled to take the top job at Prime Therapeutics next month, more than four years after leaving Minneapolis-based Allina.
The pharmaceutical benefits management (PBM) business is at the center of controversy over escalating drug prices, with Prime's interim chief executive just this week fielding questions from the U.S. Senate Finance Committee alongside other industry leaders.
"This is a very special opportunity to join a great team doing important work," Paulus said in a statement.
Health insurers, state government agencies and employers hired PBMs to manage the pharmacy portion of health insurance benefits. Derided by some as "middlemen," the companies negotiate prices with drug manufacturers and payments to pharmacies for dispensing medicines.
PBMs then create "formularies" as well as networks of pharmacies where patients often have financial incentives to use certain medications and get prescriptions filled at certain pharmacies.
Critics say PBMs have not been passing along all the savings they realize from these negotiations to clients. PBMs argue that their work helps control the growth in medicine prices, which they say is driven by the pharmaceutical industry.
The Senate Finance Committee this year has put executives from both industries in the hot seat, although it's not clear that sweeping changes will come from the inquiry.
Paulus, the former Allina CEO, currently is an executive adviser with Water Street Healthcare Partners, a private-equity firm focused on health care.
Prime Therapeutics is owned by 18 Blue Cross insurers including Eagan-based Blue Cross and Blue Shield of Minnesota. The PBM estimates that during 2018 it managed $29.1 billion in spending on drugs, up from $23.4 billion the previous year.
With operations in Nebraska and New Mexico, Prime Therapeutics employs more than 3,300 people.
In 2018, Prime Therapeutics had a 5% share of the U.S. market in terms of total managed prescription claims, according to Drug Channels Institute, a subsidiary of Philadelphia-based Pembroke Consulting.
Prime is among the six largest PBMs in the country, according to the consulting firm, which lists the big three in the market as CVS Health (30%), Express Scripts (23%) and OptumRx (23%), which is part of Minnetonka-based UnitedHealth Group.
Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck
