Biotech
Wednesday, December 6th, 2023 3:47 pm EDT
Key Points
- CVS’s Prescription Drug Pricing Overhaul: CVS Health has announced a comprehensive revamp of its prescription drug pricing model, with plans to implement a new reimbursement model named CVS CostVantage on January 1, 2025. This move is aimed at disrupting the traditional prescription drug pricing system, addressing long-standing criticism for lacking transparency and contributing to inflated healthcare costs in the United States.
- CVS CostVantage Model Details: The CVS CostVantage model will introduce a “sustainable and transparent” formula for determining medication prices and corresponding reimbursements for pharmacies. Under this model, CVS’s 9,000 retail pharmacies will be reimbursed by pharmacy benefit managers (PBMs) and other payors based on the actual cost of the drug, a clearly defined markup, and a fee covering the handling and dispensing of prescriptions. The goal is to replace the existing complex reimbursement system with a more straightforward approach, ensuring greater transparency in drug pricing.
- Impact on Prescription Drug Costs and Industry Response: While CVS executives acknowledge that the new model may lead to varying costs for different medications, the overall expectation is that more prescription costs will decrease than increase for consumers, employers, and health insurers. The move reflects CVS’s commitment to lowering drug pricing and aligning the economics of drug pricing with what consumers pay at the pharmacy counter. The announcement follows the industry trend, with billionaire Mark Cuban’s Cost Plus Drugs adopting a similar approach. CVS’s move also comes amid increased scrutiny of pharmacy benefit managers and the broader pharmaceutical industry, prompting companies like Cigna to adopt pricing models similar to Cost Plus Drugs. The Biden administration is also taking steps to address medication prices through the Inflation Reduction Act, which includes drug price negotiations for the federal Medicare program.
CVS Health has announced a significant overhaul of its prescription drug pricing model, aiming to bring greater transparency and alignment with consumer costs. The company intends to launch the new reimbursement model, named CVS CostVantage, on January 1, 2025, for commercial payors. This move reflects CVS’s commitment to reshape the traditional prescription drug pricing system, which has long been criticized for its lack of transparency and contributing to inflated healthcare costs in the United States.
The new model is expected to impact the costs of prescription drugs for patients, with the potential for some medications to become less expensive while others may see price increases. CVS executives clarified that the overall trend is expected to result in more prescription costs falling than rising for consumers, employers, and health insurers.
CEO Karen Lynch emphasized CVS’s dedication to lowering drug pricing and enhancing transparency in the process. The new model, according to Lynch, aligns the economics of drug pricing with what consumers will pay at the pharmacy counter, addressing concerns about the lack of understanding and transparency in drug pricing.
Under the CVS CostVantage model, CVS’s 9,000 retail pharmacies will be reimbursed by pharmacy benefit managers (PBMs) and other payors based on the actual cost of the drug, a clearly defined markup, and a fee covering the handling and dispensing of prescriptions. This “cost plus markup, plus a fee” approach aims to replace the current complex reimbursement system, which involves multiple layers of insurers, drug manufacturers, PBMs, and pharmacies, leading to opacity around fees and markups.
CVS’s move is part of a broader trend in the healthcare industry towards value-based care and transparent reimbursement models. The pharmaceutical industry has faced scrutiny for rising drug prices and the financial pressures on pharmacies, prompting various companies to explore alternative pricing models.
CVS’s announcement follows the path taken by billionaire Mark Cuban, who launched an online pharmacy named Cost Plus Drugs last year. Cuban’s venture follows a similar approach, aiming to drive down medicine prices by selling them at a set 15% markup over their cost, plus pharmacy fees. Cuban’s company has already influenced other players in the healthcare industry, with some companies adopting similar pricing models.
The Biden administration is also actively addressing the issue of medication prices. As part of the Inflation Reduction Act, the administration announced the first 10 prescription drugs subject to price negotiations with the federal Medicare program, aiming to make costly medications more affordable for older Americans. The broader industry shift towards transparent and value-based pricing models is indicative of ongoing efforts to create a fairer and more accessible healthcare system.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/05/cvs-to-change-how-it-prices-prescription-drugs.html
