CVS announces new plan to price prescription drugs, pay pharmacies

CVS is changing the way it reimburses its pharmacies for prescription medications, the company announced on Tuesday, saying the new plan should make the cost of medicine more transparent.

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The plan will have stores pay an amount that more closely reflects how much they spend on a medicine and to provide more information about those payments to health plans and employers, The Wall Street Journal reported.

The cost customers pay for drugs and what payments pharmacies receive from drug manufacturers and insurance companies is largely determined by a pharmacy benefit manager who negotiates payments.

The new method of payment – called CVS CostVantage – will use a formula that includes the cost of the drug, a set markup and a fee to determine the drug’s price and reimbursement which pharmacy benefit managers will continue to do.

CVS executives said the cost of some drugs could change, either making them less expensive or more expensive, however, they said more medications should cost less.

“We are leading with an approach that will shift how our retail pharmacy is compensated by implementing a more transparent and sustainable model that fairly aligns pharmacy reimbursement to the quality services we provide,” said Prem Shah, president of CVS Pharmacy and chief pharmacy officer at CVS Health, in a statement.

“It provides our [pharmacy benefit managers] and payor clients a foundational step towards more pricing clarity for consumers.”

Americans spend an average of $1,200 on prescription drugs each year.

The new plan is set to go into effect in 2025.