CVS drug price changes may do little to help consumers | CNN Business



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CVS Pharmacy is committed to making its drug pricing system simpler and more transparent. But that may not translate into lower costs or greater clarity for consumers.

The company announced Tuesday that its new CVS CostVantage model will improve the way it pays for prescription drugs at its pharmacies. It will use a formula that includes the cost of the drug, a fixed markup and a fee that reflects the care and value of pharmacy services.

High drug prices are one of Americans’ top health care complaints, and players throughout the drug supply chain are facing pressure from government officials and competitors to lower costs.

However, CVS CostVantage will not directly affect patients’ purchases of drugs over the counter at pharmacies. The arrangement is between CVS Pharmacy and pharmacy benefit managers and payers, which include insurance companies and employers that provide coverage to its customers, Americans. CVS said it will work with each pharmacy benefit manager, known as a PBM, and payer to determine markups and fees, but those will not be made public. The company operates CVS Caremark, the nation’s largest PBM.

Currently, the prices customers pay for drugs and the payments pharmacies receive are largely influenced by PBMs, which act as middlemen and negotiate rebates from drug manufacturers to insurance companies. The complex reimbursement formula is not directly based on how much it costs a pharmacy to purchase a specific drug.

CVS Pharmacy spokesperson Amy Thibault said the new CVS Pharmacy model, which covers both generic and brand-name drugs, will reduce the cost of most drugs, although the cost of some drugs may increase slightly.

The savings will be passed on to PBMs and payers, who determine the amount passed on to members, she continued. Tuesday’s announcement made no mention of cost savings for consumers or CVS Pharmacy customers, instead emphasizing transparency and sustainability at the company’s large retail pharmacy chain.

Thibault said consumers’ out-of-pocket costs will continue to be determined by patients’ drug coverage benefits. For example, those with job-based or Affordable Care Act policies typically pay a fixed out-of-pocket cost or a percentage of the drug price (called coinsurance) after the deductible is met. Costs typically vary based on the type of drug, with generics being the cheapest.

The program will begin working with commercial payers, including PBMs, insurance companies and employers, in 2025. Other payers, including Medicare and Medicaid, will be added later.

pressure from competition and Congress

Although there are some similarities between CVS CostVantage and Mark Cubans Cost Plus Drug Company, there are also some major differences. Cuba’s efforts are focused on generic drugs, which consumers can purchase directly from its website at the price the company pays for the drug from the manufacturer, plus a 15 percent markup and a $5 pharmacy cost. Prices are public, and the model eliminates PBMs, which have come under attack from Congress and others for contributing to high drug prices and opaque operations.

Whether patients will benefit from CVS CostVantage remains to be seen, but some experts are skeptical.

Being more transparent is great, but can we reduce costs by doing so? said Nick Fabrizio, senior lecturer in health policy at Cornell University. The end result is that if it’s not cheap, people assume it’s just lip service.

PBMs including CVS Caremark are facing growing pressure for greater transparency, which could prompt the company to announce a new reimbursement model. But Karen Van Nuys, a senior fellow at the University of Southern California’s Schaeffer Center for Health Policy and Economics, said shifting payments from CVS Caremark to retail pharmacy chains may just waste money within the company.

“To me, it feels like window dressing to make it look like they’re responding to pressure from Congress and the marketplace from agents like Mark Cubans & Co.,” she said.

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