CVS Becomes Latest PBM to Overhaul Drug Pricing Formula

CVS Health has announced plans to overhaul the company’s current drug pricing formula in an effort to improve transparency and lower costs. The new pharmacy reimbursement model, called CVS CostVantage, will define drug cost on the amount CVS pays for a drug, a set markup, and a fee for pharmacy services, which will limit the markup and service fee to customers, according to CVS.¹

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“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, Pharmacy and Consumer Wellness, CVS Health, said in a press release. “It provides our PBM and payer clients a foundational step towards more pricing clarity for consumers.”¹

Consumers using cash pharmacy discount cards at CVS pharmacies should start seeing the impact of the move at some point during the first half of 2024. By 2025, CVS expects to launch the new model with PBMs, with savings primarily realized on the payer or plan sponsor side dependent on how the model is initiated, as well as individual client use and how the plan applies to benefits at the individual level.¹

The new CVS model is expected to mirror the plan recently announced by prominent PBM Express Scripts. Last month, Express Scripts announced plans to offer a new pharmacy network option that is similar to the Mark Cuban Cost Plus Drugs model, which sells generic drugs directly to patients at a cost marked up by 15% with a $3 pharmacy fee.²

ClearNetwork uses predictive acquisition cost, national average drug acquisition cost, or wholesale acquisition cost to project an individual drug’s acquisition cost. The plan will add a flat pharmacy fee and a second fee of 15%, which the PBM said will be transparent to clients and pharmacies. ClearNetwork will be available for a plan sponsor’s list of covered generic, branded, and specialty drugs across 65,000 retail pharmacies in the Express Scripts network.

In a post on X/Twitter, former FDA Commission Scott Gottlieb, MD, applauded the move.

“There was probably some advantage to CVS’ PBM to continue to do it the old way but now as that advantage erodes, especially as congress is set to act on rebates, then the benefits of paying pharmacies based on complex contracts struck by their PBM that baked in rebates and other considerations is starting to diminish, and the disadvantages placed on their pharmacy network start to become more paramount,” Gottlieb wrote. He added that costs at the pharmacy counter, “should become more predictable for patients and pharmacy revenue more stable.”

CVS Caremark also announced the launch of TrueCost, which offers their clients pricing that reflects the true net cost of prescription drugs. The plan will allow clients the flexibility to select the best pharmacy benefit model for the individual needs of their members and plan. CVS said it expects TrueCost to launch in 2025.

“We are successfully executing on our strategy to advance the future of health care while unlocking new value for consumers,” said CVS Health President and CEO Karen S. Lynch, in a press release. “The combination of our businesses, and the key growth areas we have invested in, drive our ability to lower the total cost of care, improve health outcomes, and deliver on our commitments to our customers, consumers, and shareholders.”¹

References

1. CVS Health highlights path to accelerating long-term growth through building a world of health around every consumer. CVS Health. News release. December 5, 2023. Accessed December 6, 2023. https://www.cvshealth.com/news/company-news/our-path-to-accelerating-long-term-growth.html

2. Express Scripts Introduces New Option to Give Clients Maximum Simplicity in Drug Pricing. Evernorth Health Services. News release. November 14, 2023. Accessed December 6, 2023. https://www.evernorth.com/articles/express-scripts-introduces-new-option-give-clients-maximum-simplicity-drug-pricing