CVS Health, a prominent pharmacy chain, has announced a significant change to its drug pricing model. The new model, dubbed CVS CostVantage, aims to increase transparency and create more predictable pricing at the pharmacy counter. The company will base drug costs on the amount it pays for a drug, limiting the markup and service fee to customers. This move aligns with the industry's decision to be more straightforward with drug prices. The change is expected to benefit both pharmacies and consumers by providing a more predictable reimbursement rate.
The pricing model is similar to the cost-based pricing for prescription drugs at Express Scripts. It also mirrors the reimbursement model of Cost Plus Drugs, an online pharmacy launched by billionaire Mark Cuban. CVS Health plans to introduce the new reimbursement model next year for some third-party cash discount card administrators, with broader implementation planned for 2025.
While some drug prices may decrease under the new model, others may rise. However, CVS expects that overall, more prescription costs will fall than climb for consumers, employers, and health insurers. This move comes amid growing concerns about the high cost of medications and the complex network of insurers, drugmakers, pharmacies, and pharmacy benefit managers that currently determine drug prices.
In addition to the pricing model overhaul, CVS Health also announced a 10% increase in its quarterly dividend and provided its forecast for next year. Analysts expect adjusted earnings of $8.51 per share on $344.5 billion in revenue. The company's shares rose after it forecasted revenue above market estimates for 2024 and predicted growth in adjusted earnings per share for 2025.