The country’s largest pharmacy chain said it plans to scrap a complex and opaque formula system and move to a much simpler model.
The company said its more than 9,000 pharmacies will be reimbursed by contracted pharmacy benefit managers (PBMs) and payors using a formula built on the cost of the drug, a set markup and a flat fee to cover pharmacy services.
A similar payment model, sometimes known as “cost plus,” has been promoted by entrepreneur Mark Cuban and his Cost Plus Drugs company. Cuban’s company sells prescription medications at a 15 percent markup, plus pharmacy fees.
PBMs are the intermediaries in the prescription drug supply chain who negotiate discounts with drug companies on behalf of insurance plans.
CVS said the new model, called CostVantage, aims to bring “greater transparency and simplicity to the system.” It is expected to launch for commercial payors in 2025, CVS said.
The shift comes as the traditional pharmacy reimbursement model falls under serious scrutiny.
The current system is based largely on complicated rebates PBMs negotiate, rather than what pharmacies pay for the drugs. It’s faced years of political skepticism for what critics say is a lack of transparency, as well as inflated costs for consumers.
There are bipartisan bills in both chambers to regulate the PBM industry, and the Federal Trade Commission in June expanded its inquiry into PBM’s business practices as they relate to high drug costs.
CVS also owns the nation’s largest pharmacy benefit manager, CVS Caremark. Caremark is one of three PBMs that control nearly 89 percent of the market.