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CVS is changing the way it reimburses drugs at its pharmacies.
CNN
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CVS Pharmacy is committed to making drug pricing systems simpler and more transparent. However, it may not lead to lower costs or greater transparency for consumers.
The company announced on Tuesday: New CVS CostVantage model plans to overhaul the way it pays for prescription drugs at pharmacies. A formula is used that includes “the price of the drug, the established markup, and a fee that reflects the consideration and value of the pharmacy service.”
High drug prices are one of Americans' top health care complaints, and players across the drug supply chain are under pressure from public officials and competitors to cut costs.
However, CVS CostVantage does not directly impact patients who purchase their medications over the pharmacy counter. This arrangement is between CVS Pharmacy and pharmacy benefit managers and payers, including insurance companies and employers, that provide insurance to our U.S. customers. CVS says it works with each pharmacy benefit manager, known as a PBM, and payer to determine markups and fees, which will not be made public. The company operates Japan's largest PBM, “CVS Caremark.”
Currently, the prices customers pay for drugs and the payments pharmacies receive are heavily influenced by PBMs, which act as intermediaries and negotiate rebates from drug manufacturers to insurance companies. Complex reimbursement formulas are not directly based on the amount spent by a pharmacy to purchase a particular drug.
CVS Pharmacy spokeswoman Amy Thibault said the new CVS Pharmacy model, which covers both generic and brand-name drugs, will reduce the cost of most drugs, but will slightly increase the cost of some drugs. He said there is a possibility.
The money saved will be passed on to PBMs and payers, but it will be up to them to decide how much to pass on to their members, she continued. In Tuesday's announcement, she did not mention cost savings for consumers or CVS Pharmacy customers, instead she emphasized transparency and sustainability for the company's large retail pharmacy chain. .
Consumer out-of-pocket costs will continue to be determined by patients' drug coverage benefits, Thibault said. For example, people with job-based insurance or Affordable Care Act insurance typically pay a certain copay or a portion of the drug price known as coinsurance after meeting their deductible. . Prices often vary depending on the type of drug, with generic drugs being the cheapest.
The initiative will launch in 2025 for commercial payers such as PBMs, insurance companies, and employers. Other payers, including Medicare and Medicaid, will be introduced later.
Competition and pressure from Congress
CVS CostVantage has some similarities, but Mark Cuban's Cost Plus Pharmaceutical Company, there are some main differences. Cuban's efforts are focused on generic drugs, where consumers pay the company the price it takes to buy the drug from the manufacturer plus his 15% markup and $5 pharmacy fee. It can be purchased directly from his website. Pricing is public and the model excludes PBMs. PBMs have come under attack from Congress and others for contributing to soaring drug prices and operating opaquely.
It remains to be seen whether patients will benefit from CVS CostVantage, but some experts are skeptical.
“More transparency is good, but does it reduce costs?” said Nick Fabrizio, a senior lecturer in health policy at Cornell University. “Ultimately, if the price doesn't come down, people will think it's just lip service.”
Increased pressure on PBMs, including CVS Caremark, to be more transparent may be a contributing factor to the company announcing new reimbursement models. But shifting payments from CVS Caremark to retail pharmacy chains “may just be throwing money around the company,” said Karen Van Nuys, a senior fellow at the University of Southern California's Schaefer Center for Health Policy and Economics.
“This feels to me like a window-dressing effort to make it seem like they're responding to both Congressional and market pressure from agencies like Mark Cuban's company,” she said.
