CVS Unveils New Prescription Drug Reimbursement Model

Key Points

• Introduction of CostVantage: CVS Health announced a new reimbursement model, CVS CostVantage, for all commercial prescriptions at CVS Pharmacy.
• Elimination of Cross-Subsidization: The model aims to remove market reliance on cross-subsidization by eliminating the need for higher rates on certain medicines to cover losses on others.

How the Model Works

• Transparent Formula: Uses a formula based on drug acquisition cost, a set markup, and a dispensing fee.
• Reflecting Pharmacy Services: The reimbursement reflects the quality of pharmacy services provided.

Importance

• Market Reality Alignment: Ensures pricing and contracting reflect current and future market realities.
• Building Block for PBMs: Acts as a foundation for Pharmacy Benefit Managers (PBMs) to create simple, transparent models for plan sponsors and patients.

Future Expansion

• Expansion Plans: CVS plans to expand CostVantage to Medicare and Medicaid managed prescriptions.

Background

• Corporate Layoffs: CVS announced reducing 2,900 corporate positions aiming to cut costs by $2 billion over several years.
• Earnings Outlook: CVS had lowered its earnings outlook due to insurance losses from higher-than-expected medical expenses.

Additional Insights

• Community Trust: CVS cites surveys indicating high trust and accessibility of local pharmacists.
• Commitment to Transformation: CVS emphasizes its commitment to transforming the pharmacy model with this new approach.