CVS overhauls pharmacy reimbursement with CostVantage model

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CVS Health is altering how it reimburses pharmacies for prescription medications through a new model called CostVantage, which the company promised would evolve the traditional reimbursement model and provide more simplicity and transparency.

CVS CostVantage will define the drug cost and related reimbursement with contracted pharmacy benefit managers (PBMs) and payers, using a transparent formula built on the cost of the drug, a set markup and a fee that reflects the care and value of pharmacy services.

The company plans to launch CVS CostVantage with PBMs for their commercial payers in 2025, working together to ensure a smooth transition.

WHAT'S THE IMPACT?

In another new initiative targeting prescription drugs, and following on the launch of its Choice Formulary program, CVS is also introducing TrueCost, which offers client pricing reflecting the true net cost of prescription drugs, with visibility into administrative fees.

The company expects that simplified pricing will translate into greater consumer confidence, and will allow members to have stable access to CVS' national pharmacy network. CVS Caremark plans to launch CVS Caremark TrueCost in 2025.

Lastly, at the company's Investor Day this week, the company announced that CVS Healthspire will be the new branded name for the company's Health Services segment, including Caremark, Cordavis, Oak Street Health, Signify Health and MinuteClinic. 

THE LARGER TREND

Several companies have recently introduced cost-plus drug plans.

Mark Cuban Cost Plus Drug Company said it would team with pricing technology company Expion Health on pharmacy costs.

Express Scripts also announced a new pharmacy network option that offers cost-plus drug pricing for employers and health plans starting in 2024.

CVS Health logged strong earnings and revenue performance during the third quarter, hitting $2.3 billion in profit.

Total revenues increased to $89.8 billion, for the quarter and $264 billion for the year, up 10.6% compared to the prior year. Generated cash flow from operations reached $16.1 billion over that time.

CVS Health president and CEO Karen Lynch said during an earnings call that it's been a "challenging business environment," but the company adapted to consumers' changing needs by broadening care access and lowering costs.

In October CVS Health announced several leadership updates as executive vice president, CFO and president of health services Shawn Guertin is taking a leave of absence from his role due to what the company said were unforeseen family health reasons. 

Senior vice president of corporate finance Tom Cowhey has been appointed interim CFO. CEO of Oak Street Health, Mike Pykosz, has been named interim president of health services.
 

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com