CVS Health will change how it reimburses pharmacies for prescription drugs, which it says will make pricing simpler — and which could change how much consumers pay for some of their medicines.
The company disclosed its shift to a more “transparent” model, dubbed CVS CostVantage, on Tuesday. Retail drug pricing typically is based on a set of factors that can make it hard to tell the true cost of purchasing and dispensing drugs. In other words, it can be tough for people to know if they’re getting the best deal. As it stands, pharmacy benefit managers negotiate rebates from drug-makers to insurers. The reimbursement formulas aren’t based on what a pharmacy spends to buy specific drugs.
CVS CostVantage will use a simpler formula. It will show the cost of the drug, a set markup price, and a fee to determine the drug’s price and reimbursement with pharmacy benefit managers.
“We are leading with an approach that will shift how our retail pharmacy is compensated by implementing a more transparent and sustainable model that fairly aligns pharmacy reimbursement to the quality services we provide,” Prem Shah, PharmD, executive vice president, chief pharmacy officer and president of pharmacy and consumer wellness for CVS Health, said in a statement. “It provides our PBM and payer clients a foundational step towards more pricing clarity for consumers.”
The changes won’t start until 2025, though. That’s when CVS will start getting paid for drugs based on how much it pays for them, along with a markup and set fee. The new model will be part of contracts with pharmacy benefit managers and commercial health plans. Many senior living residents on Medicare Part D receive their medications at retail pharmacies such as CVS and Walgreens.
Some drug costs will be lower, though CVS executives told the Wall Street Journal that some drugs may cost more as a result of the changes.
“We’re doing our part by simplifying drug pricing,” CVS Health CEO Karen Lynch said during a presentation on Tuesday.
The model is similar to Mark Cuban’s Cost Plus Drugs program, which is a direct-to-consumer model that raises up drugs from cost by 15% and adds a $3 pharmacy fee. CVS’ Caremark took a hit this past summer when Blue Shield of California said it was ditching the company as its pharmacy benefit manager and giving business to Cuban’s company as well as Amazon Pharmacy.
