Cost-Plus Drug Pricing Models Gain Momentum, but Will They Last?

Cost-Plus Drug Pricing Models Gain Momentum, but Will They Last? An assortment of different drugs.

Pharmacy benefits managers (PBMs) have come under increasing pressure from regulatory bodies, states and the federal government, provider organizations as well as startup PBMs to deliver more transparent pricing and lower costs. Now, it appears that these efforts may be having an impact — at least if recent actions by major drug retailers CVS Health and Walgreens are any indication.

Both CVS and Walgreens recently announced new programs designed to reduce prescription drug prices for many patients and bring greater price transparency to consumers and, in CVS’ case, a new pharmacy reimbursement model.

CVS Health plans to launch its CVS CostVantage and CVS Caremark TrueCost programs in 2025. CostVantage will define the drug cost and related reimbursement with contracted PBMs and payers, CVS noted in a statement.

The Caremark TrueCost program is designed to offer clients more visibility into prescription drug pricing and administrative fees. TrueCost prices will be based on the net cost of drugs with defined fee structures. Employers and other clients will have the choice of whether to use the service, the company states.

CVS’ New PBM Reimbursement Model

Sometime next year, CostVantage will offer new prices to consumers who pay cash for their prescriptions using a variety of drug discount cards. The program will be incorporated into CVS’ pharmacy contracts in 2025 with PBMs being paid for under employer plans. CVS states that the change isn’t expected to adjust its pharmacy margins, but would ensure more stable and predictable earnings.

The retailer plans to use 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. If that sounds familiar to billionaire Mark Cuban’s Cost Plus Drug model, it’s because it is. Cost Plus Drugs charges a flat 15% markup over its cost, plus pharmacy fees. CVS, however, has not disclosed its drug markups or its flat fees.

Nevertheless, with CVS and its 10,000 retail locations, the cost-plus model for pharmaceutical pricing could have a significant impact on the drug market, according to Adam Fein, CEO of Drug Channels Institute. “It’s a fundamental change in how pharmacy services are priced [and] a legitimate step toward price transparency,” Fein recently told the Wall Street Journal.

Walgreens, meanwhile, is partnering with the medication access and transparency tech company RxSense to create a digital marketplace called Rx Savings Finder. Consumers who use the free service can save money on thousands of medications by comparing prices of free third-party discount prescription cards.

Customers can visit via desktop or mobile devices, type in their prescriptions and perform searches. This will generate a list of prices from a variety of prescription savings services. Users can then click on the lowest-cost coupon and either text, print it or show the card via their phone to a Walgreens pharmacist for immediate savings of up to 80% off the retail price of prescriptions. The savings cannot be combined with or applied to prescription drug insurance.

RxSense also offers SaaS solutions for pharmacy benefits administration.

An 11-month pilot program between Walgreens and RxSense found that the new program saved customers nearly $70 million on their prescriptions compared with the cash price, according to one report.

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