CVS Pharmacy is set to implement a significant change in how its pharmacies are reimbursed for drugs with the introduction of the CostVantage program. Under this new program, CVS pharmacies will receive payment based on the cost of the drug, a fixed markup, and a service fee. The move is seen as a response to market pressures, including the demand for transparent drug pricing and the rise of alternative models like Mark Cuban’s online pharmacy.
CostVantage represents a departure from the traditional reimbursement model for CVS pharmacies and is designed to simplify the process. CVS is aiming to adapt to changing market dynamics and consumer preferences, particularly in the face of growing competition from alternative drug pricing models. Mark Cuban’s Cost Plus Drugs, which launched in early 2022, operates on a similar principle, buying drugs directly from manufacturers and selling them to consumers at a 15% markup plus pharmacy fees.
CVS’s new program is seen as a foundational step toward providing more pricing clarity for consumers, according to Prem Shah, Executive Vice President, Chief Pharmacy Officer, and President of Pharmacy and Consumer Wellness at CVS Health. The move comes as CVS faces increased scrutiny and pressure to address transparency issues in drug pricing, a trend that has gained momentum over the past two years.
The CostVantage program is expected to launch fully through contracts with commercial payers in 2025. While it remains to be seen if the new approach will consistently lead to lower costs for consumers, CVS aims to offer a more straightforward and transparent model for pharmacy reimbursement, responding to market demands and competition from innovative alternatives.