CVS Announces More Transparent Model for Pharmacy Reimbursement, Drug Costs

CVS Health has introduced a new approach to pharmacy reimbursement and drug costs. CostVantage is being touted as a more transparent model of drug pricing that sets costs using a formula based on the drug cost, a set markup, and a fee for pharmacy services.

The CostVantage model will be launched with CVS’ contracted pharmacy benefit managers (PBMs) for commercial payers in 2025.

“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 of pharmacy and consumer wellness at CVS Health, said in a statement. “It provides our PBM and payor clients a foundational step towards more pricing clarity for consumers.”

CVS also announced TrueCost, which offers client pricing that reflects the true net cost of prescription drugs and provides a transparent look at administrative fees. According to CVS, this simplified pricing will provide confidence that consumers are getting the best possible price.

CVS’ announcement comes shortly on the heels of Express Scripts, a subsidiary of Cigna, announcing its own simpler pharmacy pricing. The “cost-plus” pricing model is called ClearNetwork, and it will charge clients a “straight-forward estimated acquisition cost” and a small markup for pharmacy dispending and service costs.

"The Express Scripts ClearNetwork leverages our scale, relationships, and deep understanding of the pharmaceutical supply chain to create an easy-to-follow option for clients looking to simplify what they pay for prescription drugs, while supporting a seamless, convenient member experience,” Adam Kautzner, PharmD, president of Express Scripts, said in a statement.

ClearNetwork uses established third-party industry benchmarks and takes the lowest one to estimate the acquisition cost for a drug. A flat fee goes to the pharmacy and a second fee of ≤ 15% of the drug cost is added to be shared with participating pharmacies. ClearNetwork will be available in early 2024 and apply to all prescription drugs on a plan sponsor’s list of covered medications.

"This new model differs from other pricing options where Express Scripts negotiates discounts with pharmacies to meet guaranteed rates for clients," Kautzner said."Express Scripts ClearNetwork is a simple pricing option that reinforces the value of our work to help consumers easily access the medications they need, while also shining a light on the root cause of high drug costs – drug manufacturers who set and raise prices."

This year there has been a particularly bright spotlight on PBM practices and reform efforts. There are several bills at the federal level seeking to better regulate PBMs, which would further efforts at the state level. Federal bills take various angles to regulate PBMs, including prohibiting clawbacks; requiring transparency around prices, reimbursement, fees, and markups; implementing reporting requirements; and banning “spread pricing,” which is the act of charging an insurance plan more for a drug than what the pharmacy is paid.

In an interview with Pharmacy Times®, Cheryl Larson, president and CEO of the Midwest Business Group on Health, commented that the PBMs have forced employers to deal with opaque business practices and increasing costs. She noted her group has seen PBMs retaining rebates and keeping drug distribution in house to control what drugs are on formulary, which are often higher cost drugs.