About time! From our experience in managing health care costs, CVS is one of the highest priced drug retailers on the planet. Most of our groups have eliminated CVS from their pharmacy network.
MyHealthGuide Source: Anna Wilde Mathews,Wall Street Journal (subscription required), 12/5/2023
CVS Health, the nation’s largest drugstore chain, will move away from the complex formulas used to set the prices of the prescription drugs it sells, shifting to a simpler model that could upend how American pharmacies are paid.
Under the plan called CostVantage, CVS’s roughly 9,500 retail pharmacies will get reimbursed by pharmacy-benefit managers and other payers based on the amount that CVS paid for the drugs, in addition to a limited markup and a flat fee to cover the services involved in handling and dispensing the prescriptions. Today, pharmacies are generally paid using complex measures that aren’t directly based on what they spent to purchase specific drugs.
CVS’s move is to be phased in starting in the first half of 2024. It will take the approach to a far greater scale, embedding it in a company that stands at the core of the American drug-supply chain.
For consumers, employers and health insurers paying for prescriptions, the change will have mixed effects. Some drugs may cost less, while others might rise in price, CVS executives said. More should show declines than increases, they said.
CVS is making the move as it seeks to stabilize its retail pharmacy business, which has long struggled with stagnating margins on its core function of dispensing prescriptions.
The company is also responding to criticism from lawmakers, employers and patients about the complexity and opacity around how drugs are bought and sold. Members of Congress and some employer groups have argued that the current setup is flawed and secretive.
Caremark
CVS will also introduce a new option for clients of its PBM, CVS Caremark, that will work in tandem with the new retail pharmacy-payment scheme. The new PBM product, called TrueCost, will be based on the net cost of drugs with defined fee structures, the company said. Employers and other clients will have the choice to use it or not.
However, employers may be reluctant to take one step that is part of the TrueCost setup, which involves applying rebates the PBM receives from drugmakers to individual prescriptions for those drugs. Currently, patients often pay out of pocket amounts based on the higher, prerebate price. Employers and insurers sometimes use those rebates to offset other healthcare costs.
NOTE: Graphic shown above is from Preston Alexander‘s blog.
