What to expect after CVS changes drug pricing formula

(NEW YORK) — CVS is the latest pharmacy to change its drug pricing formula, a move it said would increase transparency and simplify costs.

The company will now base drug costs on the amount that it pays for a drug — limiting the markup and service fee to customers.

“What CVS is doing — at the pharmacy and at the PBM [pharmacy benefit managers] — is rewiring or resetting how reimbursement happens in an industry that has become very complex and largely follows a model based on how things used to be a decade ago,” a CVS Pharmacy spokesperson told ABC News. “Only we can take this kind of step forward, given our leadership on the PBM and pharmacy. It is a necessary foundational step to make this entire system more consumer-friendly, preserve choice for payers, and maintain a viable retail pharmacy industry.”

Dr. John Brownstein, chief innovation officer at Boston Children’s Hospital and an ABC News contributor, said the announcement by CVS aligns with the industry’s decision to be more straightforward with drug prices.

“By basing drug costs on their actual acquisition price, CVS is taking a crucial foundational step to make healthcare more consumer-friendly and ensure the viability of retail pharmacies,” he said.

Many consumers may not be impacted immediately by this change. The earliest consumer impact would be the first half of 2024 for those using cash pharmacy discount cards at a CVS Pharmacy.

In 2025, CVS Pharmacy said it will launch this model with pharmacy benefit managers. Savings will mostly be seen on the payer or plan sponsor side but will depend on exactly how the model is adopted, individual client use and how the plan is applied to an individual’s benefits.

Dr. Lucas Berenbrok, an associate professor of pharmacy and therapeutics at the University of Pittsburgh, said pharmacies and consumers alike will benefit from these new pricing models. Pharmacies will have a more predictable reimbursement rate and consumers may be less likely to overpay for generic drugs, he noted.

“I think it could give patients in the public even more trust that someone’s looking out for them and that they’re able to get medications at a fair price,” Berenbrok told ABC News.

The CVS pricing model is similar to the cost-based pricing for prescription drugs at Express Scripts announced last month.

“It’s encouraging to see major players like CVS and Express Scripts taking steps to eliminate the complexity in drug pricing, ultimately benefiting consumers and payors alike,” Brownstein said.

Dr. Jade A. Cobern, MD, MPH, is a board-certified pediatrician specialized in preventive medicine and a member of the ABC News Medical Unit.