pharmacy reimbursement mode

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One of the nation’s largest pharmacy chains is planning to overhaul the way it reimburses its pharmacies for prescriptions as the industry works to provide greater clarity on drug pricing.

CVS Pharmacy announced on Tuesday that it is launching a new reimbursement model, CVS CostVantage, that will reset how reimbursement happens in an industry and ensure drug prices reflect how much pharmacies pay for the drugs themselves. 

It will not only bring “greater transparency” but “simplicity to the system,” CVS said.

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Moving forward, the Rhode Island-based company will define the drug cost and related reimbursement with contracted pharmacy benefit managers and payors. 

To do this, they will 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, according to CVS. 

The company touted this as a foundational step in trying to make the entire system more consumer-friendly.

A CVS pharmacy in San Francisco on Tuesday, July 18, 2023. (David Paul Morris/Bloomberg via Getty Images / Getty Images)

The new model “fairly aligns pharmacy reimbursement to the quality services we provide,” and is a “foundational step towards more pricing clarity for consumers,” Chief Pharmacy Officer Prem Shah said in a statement.

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However, consumers will not see an impact soon. The impact will not happen broadly right away either and will depend on which drugs they are getting. The earliest consumer impact would be in the first half of the new year with patients using cash pharmacy discount cards. 

Still, CVS said it will make savings happen a lot faster than they otherwise would have. 

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CVS CVS HEALTH CORP. 71.00 +2.52 +3.67%

CostVantage will be incorporated into contracts with pharmacy-benefit managers starting in 2025. 

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The move is not unfamiliar. For instance, Mark Cuban’s Cost Plus Drug has also promoted itself as offering “complete transparency on the cost of drugs so that patients know they are getting a fair price.”