CVS announces plan to revamp how much drugs cost
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CVS Health will overhaul how it pays for drugs, saying it will use a more "transparent" model that could reduce secrecy around drug prices.
Why it matters: Retail drug pricing has typically been based on a set of factors, obscuring the true cost of acquiring and dispensing drugs and making it difficult for consumers to figure out if they're getting the best deal.
- CVS' move could shift the retail pharmacy market given its outsized influence, with more than 9,000 pharmacy locations and the nation's largest pharmacy benefit manager, CVS Caremark.
How it works: Starting in 2025, CVS will begin getting paid for drugs based on how much it pays for them, plus a markup and set fee.
What they're saying: "We're doing our part by simplifying drug pricing," CVS Health CEO Karen Lynch said during an investor day presentation on Tuesday morning.
- The reimbursement model will be incorporated into contracts with pharmacy benefit managers and commercial health plans.
- For consumers, the impact of the change will likely be mixed. Some drug costs will be lower, though CVS executives told the Wall Street Journal some drugs may be more expensive under the new structure.
Between the lines: The so-called "cost plus" model is similar to that being used by Mark Cuban's Cost Plus Drugs, a direct-to-consumer model that marks up drugs from cost by 15%, plus a $3 pharmacy fee.
- CVS also announced the rebranding of its health services business — including recently acquired Oak Street, which provides primary care for seniors, and Signify Health, a home health company — as "CVS Healthspire."
- It also emphasized the expanding market for copycat versions of expensive biologics, which they said represents a growth opportunity with its own biosimilar marker, Cordavis.
