CVS unveils new prescription drug reimbursement model

Photo: Courtesy CVS Health

CVS Health has announced that all commercial prescriptions dispensed through its pharmacies will be now contracted through the company's CostVantage reimbursement model.

The model removes market reliance on cross-subsidization caused by market basket approaches to reimbursement, CVS said. This means a reduction in the need for higher rates on some medicines to help subsidize losses on others. 

The approach uses a transparent formula built on the drug acquisition cost, a set markup and a dispensing fee to reflect the quality of pharmacy services provided, CVS said.

The way community pharmacies have historically been reimbursed for services has not fully reflected the value delivered or the underlying costs of doing business, according to CVS. A survey shows 81% of Americans trust their local pharmacist and 88% believe their pharmacists are the most accessible and frequently visited health care providers, CVS said.

WHY THIS MATTERS

The model ensures that CVS Pharmacy has a way of pricing and contracting that reflects the reality of today's marketplace and also anticipates the future, the company said.

CVS also contends that CostVantage serves as a building block for PBMs to create simpler, more transparent models for plan sponsors and patients.

"Delivering on our commitment to transform the pharmacy model, we successfully led the way forward, contracting with pharmacy benefit managers and other payers to advance a more transparent approach to reimbursement for the prescriptions we dispense and the services we provide," said Prem Shah, group president, CVS Health. 

CVS will also eventually expand CVS CostVantage to Medicare and Medicaid managed prescriptions, Shah said.

THE LARGER TREND

In October, CVS announced it would reduce 2,900 corporate positions in a goal to cut costs by $2 billion over several years.

CVS repeatedly lowered its earnings outlook last year after suffering insurance losses due on higher-than-expected medical expenses. This led to speculation over a breakup of its integrated model that includes Aetna, pharmacies and CVS Caremark.

Email the writer: SMorse@himss.org