CVS Introduces More Transparent and Sustainable Model for Retail Pharmacy
During its 2023 Investor Day, held Dec. 5, CVS Health introduced a new pharmacy reimbursement model.
CVS CostVantage evolves the traditional pharmacy reimbursement model and brings greater transparency and simplicity to the system. CVS CostVantage will define the drug cost and related reimbursement with contracted pharmacy benefit managers (PBMs) and payors, using 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. These changes will also help ensure that CVS Pharmacy locations will continue to be a critical touchpoint for consumers to access affordable health care in their communities.
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“We are leading with an approach that will shift how our retail pharmacy is compensated by implementing a more transparent and sustainable model that fairly aligns pharmacy reimbursement to the quality services we provide,” said Prem Shah, PharmD, EVP, chief pharmacy officer and president, Pharmacy and Consumer Wellness, CVS Health. “It provides our PBM and payor clients a foundational step towards more pricing clarity for consumers.”
CVS Pharmacy plans to launch CVS CostVantage with PBMs for their commercial payors in 2025.
Meanwhile, CVS Caremark has introduced TrueCost, which offers client pricing reflecting the true net cost of prescription drugs, with visibility into administrative fees. Simplified pricing will help consumers be confident that their pharmacy benefit is providing the best possible price and will allow members to have stable access to a national pharmacy network. CVS Caremark also plans to launch CVS Caremark TrueCost in 2025.
The 2023 Investor Day also went into detail on how the company’s unique combination of assets provides CVS Health with clear opportunities for long-term outperformance.
“By broadening our portfolio of integrated products and services, we expect to create a path to sustainable, profitable growth,” said CVS Health interim CFO Tom Cowhey. “Our powerful cash generation capabilities will support our strategic goals, prudent capital deployment and attractive return profile – while also providing opportunities for meaningful long-term outperformance.”
CVS reiterated its 2023 guidance as shared on its Nov. 1 earnings call and provided its 2024 full-year projections, which include:
- Total revenues: At least $366.0 billion
- Operating income: At least $15.0 billion
- Adjusted operating income: At least $17.2 billion
- GAAP diluted EPS: At least $7.26
- Adjusted EPS: At least $8.50
- Cash flow from operations: At least $12.5 billion
With its CVS Pharmacy subsidiary operating almost 10,000 locations nationwide, Woonsocket, R.I.-based CVS Health is No. 7 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America.
