CVS Changing Its Medication Prices Signals a Larger Industry Change

( — CVS unveiled a new plan to make its drug prices more predictable and transparent for clients in an effort to change its business policies following pressure from lawmakers and new competitors in the pharmaceutical market. CVS shared the plan in a recent announcement and confirmed it is using a new form of pricing known as “cost-plus.” CVS based its original pricing model on unknown formulas and is now shifting it to a more transparent and widely adapted method adopted by other pharmaceutical businesses.

Another business using the new pricing model is Express Scripts, which announced weeks ago that it’ll offer employers and health plans, including clients working for the government, a similar pricing model. The model gained widespread popularity after Cost Plus Drugs, a pharmaceutical company owned by famous billionaire Mark Cuban, began using a 15% markup with an added three-dollar fee. The pricing model gained Cost Plus Drugs widespread media attention and comes as pharmaceutical businesses face intense scrutiny for the high costs of prescription medications.

According to CVS, the shift in price model is the first step towards making the pharmaceutical industry better for patients and consumers. The adjusted price model is also meant to provide consumers with transparency so they know their medications’ costs and how the price is determined. CVS also claims the new pricing model will make things simpler for the company, as it won’t rely on complex formulas that vary between medications. CVS’ Chief Pharmacy Officer, Prem Shah, addressed the new pricing model and claimed that it equalizes pharmacy profit with services provided to consumers.

However, CVS won’t implement the overhauled pricing model immediately, as it announced that the earliest implementation won’t occur until the first half of 2024. CVS also claims that the first customers to benefit from the overhauled model will be those who use discount cards. Despite the wait for the pricing model’s use, CVS claims the new method will save consumers money faster than initially planned. CVS will also use the new model in other pharmacy-related contracts during 2025.

CVS’ decision to shift its pricing model comes as the company faces multiple challenges. California’s Blue Shield recently dropped CVS as its pharmacy benefit manager in favor of Cost Plus Drugs, likely due to the different pricing method used by Mark Cuban’s company. CVS is also the center of multiple proposed bills in Congress, which would compel pharmaceutical companies to provide more transparency in pricing and medication information to their consumers.

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