An individual walks by a CVS pharmacy store in Manhattan, Recent York, U.S., November 15, 2021.
Andrew Kelly | Reuters
CVS Health on Tuesday said it will revamp how it prices prescription drugs and scrap a posh model that typically sets how much pharmacies get reimbursed and what patients pay for those medications.
The brand new effort makes CVS the newest company to try to upend the standard prescription drug pricing system, which has faced years of political scrutiny for what critics call an absence of transparency and inflated health-care costs for U.S. consumers.
CVS will launch a latest model for reimbursing its pharmacies on Jan. 1, 2025, executives said throughout the company’s 2023 investor day.
CVS’ latest model could change the associated fee of prescription drugs for some patients, but it is not going to necessarily make all medicine cost less, company executives said. Some drugs may cost less, while prices of others might rise, they noted. But more prescription costs should fall than climb for consumers, employers and health insurers, according to the executives.
“This can be a really foundational step towards a transparent model for consumers, and it sets the stage for payers to create more predictable pricing on the pharmacy counter,” said Prem Shah, president of CVS’ pharmacy and consumer wellness segment, throughout the company’s investor day.
CVS said the plan, named CVS CostVantage, will use a “sustainable and transparent” formula to determine a medicine’s price and the corresponding reimbursement pharmacies receive from pharmacy profit managers. Those middlemen negotiate drug discounts with manufacturers on behalf of health insurers, large employers and others that contract them.
Under the brand new model, CVS’ greater than 9,000 retail pharmacies will get reimbursed by PBMs and other payors based on the associated fee of the drug, a “clearly defined” markup, and a fee to cover handling and dishing out the prescriptions, according to Shah.
Currently, pharmacies are typically paid using a sophisticated system in a roundabout way based on what they spent to purchase drugs. That model, which involves a multitiered network of insurers, drug manufacturers, PBMs and pharmacies, leads to ambiguity around fees and markups added to the unique cost of a drug.
Billionaire Mark Cuban last yr launched a web based pharmacy that takes the same approach to CVS’ latest reimbursement model. The corporate, called Cost Plus Drugs, goals to drive down the worth of medicines broadly by selling them at a set 15% markup over their cost, plus pharmacy fees.
Cuban’s enterprise is already shaking up the broader health-care industry: CVS suffered a blow over the summer when a significant California health insurer, Blue Shield of California, announced it will not use the corporate as its PBM and as an alternative will partner with several corporations, including Cuban’s firm and Amazon Pharmacy.
CVS Health’s Caremark is one in every of the most important PBMs within the U.S. Caremark and other PBMs have faced increased scrutiny over their role in surging drug costs, and the Federal Trade Commission can be investigating their practices.
Cuban’s drug company has put pressure on other corporations that manage drug advantages to make their very own changes. For instance, Cigna announced last month that its PBM will offer a pricing model similar to Cost Plus Drugs.
The Biden administration is taking its own steps to rein in prices of medicines.
As a part of the president’s Inflation Reduction Act, the administration in August announced the first 10 prescription drugs that can be subject to drug price negotiations with the federal Medicare program, which goals to make costly medications cheaper for older Americans.
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