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Our Take: CVS’ new PBM model focuses on net cost pricing for greater predictability

Dec 10, 2018

CVS announced that it is launching a new pharmacy benefits plan that returns 100 percent of drug rebates to its clients.

In a statement, CVS said its new Guaranteed Net Cost pricing model “more closely aligns PBM incentives with plan sponsors’ objectives” by offering more predictability and transparency, and that it “focuses on helping plan sponsors deliver savings through PBM cost management strategies such as formulary, utilization management and performance pharmacy networks.”

“We see a real opportunity to offer clients a simpler economic model that leverages proven PBM cost management strategies to provide predictable drug costs,” said Derica Rice, president of CVS Caremark. More here.

Our TakeLooks like CVS is taking preventive action to address what might be coming from the Trump administration.

Recall that back in May, President Trump announced his Blueprint to Lower Drug Prices. Since then, there has been a flurry of activity from HHS, CMS and the FDA, which is approving generics at a faster rate than we’ve seen in some time.

CMS, for instance, announced a new policy on step therapy, which would allow Medicare Advantage plans to negotiate drug prices for Part B drugs. HHS Secretary Alex Azar has requested that the FDA create a working group on drug importation. And several pharmaceutical companies, in the wake of the Blueprint’s release, agreed not to raise drug prices in 2018.

That lasted less than five months. Pfizer announced last month that it would raise prices on 41 drugs in January.

In any event, Trump appeared to call out PBMs when he announced the Blueprint. “We’re very much eliminating the middlemen,” he said. “Whoever those middlemen were—and a lot of people never even figured it out—they’re rich. They won’t be so rich anymore.”

And in August, Azar said it was within his agency’s power to eliminate rebates on prescription drug purchases. “The question of rebates may very well be fundamental to the issue of how you reverse these constant incentives to higher list prices (for drugs),” he said.

Drugmakers have argued that the rebate system is flawed—that they are pressured by PBMs to provide rebates, and that PBMs don’t pass those savings on to consumers. They say the rebate system creates a perverse incentive to raise list prices.

CVS has acknowledged that, historically, it retains about 2 percent of the rebates negotiated with drugmakers—about $300 million annually.

CVS’ manager of corporate communications, Christina Beckerman, told Fierce Healthcare that the company does not expect CVS Health’s profitability to increase or decrease as a result of the shift to 100 percent pass-through rebates.

“With this model, the client evaluation process will no longer reward largest discounts and largest rebates, but rather the true goal of low net cost per claim,” she said.

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