CVS' new PBM strategy: Offering clients 100% of drug rebates

CVS Health, the drugstore chain that operates one of the largest pharmacy benefit managers in the nation, will launch a new "guaranteed net cost" pricing model that will pass its health plan clients 100 percent of any rebates, discounts or other administration fees paid by drugmakers.

The new pricing model, available to clients Jan. 1, aims to simplify the financial arrangements underlying PBM contracts, enhance predictability and improve drug cost transparency, the company said.

Under the new model, CVS Caremark, the pharmacy benefit arm of CVS, will offer guaranteed net pricing for average prescription claims for mail, retail and specialty pharmacies and will pass along all rebates. In addition, the PBM will assume all responsibility for manufacturer price hikes and shifts in brand and generic drugs.

"As a PBM, our job has always been to help our clients manage costs in the face of escalating drug prices without compromising clinical care, so they can continue to provide an affordable benefit to their members," said Derica Rice, president of CVS Caremark. "By simplifying the PBM economic model, we can focus on maximizing the impact of PBM strategies that help reduce costs for clients and consumers and continue to develop additional innovative tools and approaches."

The move comes as industry middlemen deny claims that they are responsible for  rising drug costs.

Rebates, which are the discounts drugmakers pay to PBMs, have long been criticized for their role in raising out of-pocket costs for patients because they are confidential. The secrecy around rebates turned into a nationwide controversy, even   catching the attention of the Trump administration and Congress.

In August, CVS Health CEO Larry Merlo said the CVS pharmacy benefit arm keeps just 2 percent of the rebates it processes, about $300 million of revenue.

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