CVS Takes on Cryptic Drug Pricing, Unveiling New Reimbursement System

CVS said it will pioneer a new drug reimbursement structure to make prescription prices more transparent and affordable.

The plan, announced Tuesday, changes a system built around pharmacy benefit managers — the controversial drug supply chain middlemen who have been blamed in part for skyrocketing drug prices. These managers negotiate drug prices between manufacturers, pharmacies and health plan sponsors, navigating a complicated maze of rebates and discounts.

CVS pharmacies will be reimbursed for the drugs using a simpler, more transparent formula built on the cost of drugs plus a “set markup” and a fee that reflects the value of the pharmacy service, CVS said in a news release. The pharmacy chain will institute the changes on Jan. 1, 2025, according to a CVS spokesperson.

The new approach “evolves the traditional pharmacy reimbursement model” to ensure customers are getting “the best possible price,” CVS said in the release. The spokesperson couldn’t quantify the savings.

The new payment structure is “a legitimate step toward transparency,” according to Adam Fein, chief executive of the Drug Channels Institute, which provides research on the drug-supply chain.

“It’s a fundamental change in how pharmacy services are priced,” he told the Wall Street Journal.