CVS launches new pharmacy reimbursement model, brand for health services segment

CVS is introducing CostVantage and Caremark TrueCost to drive aligned incentives and deliver a more transparent and sustainable reimbursement model.

CVS Health introduced a new pharmacy reimbursement model, and brand for its health services segment that showcases continued growth opportunities for its businesses.

CVS Pharmacy also announced CostVantage, a new approach that 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 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 also help ensure that CVS Pharmacy locations will continue to be a critical touchpoint for consumers to access affordable health care in their communities, the company said.

“We are successfully executing on our strategy to advance the future of health care while unlocking new value for consumers,” said Karen Lynch, president and CEO of CVS Health. “The combination of our businesses, and the key growth areas we have invested in, drive our ability to lower the total cost of care, improve health outcomes, and deliver on our commitments to our customers, consumers, and shareholders.”

“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, executive vice president, chief pharmacy officer and president, pharmacy and consumer wellness at CVS Health. “It provides our PBM and payor clients a foundational step towards more pricing clarity for consumers.”

[Read more: CVS Health reports strong Q3]

CVS Pharmacy plans to launch CostVantage with PBMs for their commercial payors in 2025, working together to ensure a smooth transition.

The company said that following on from the launch of its Choice Formulary program earlier this year, CVS Caremark today introduces TrueCost, a model innovation that 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 its national pharmacy network. Through this approach, clients will have the flexibility to choose a pharmacy benefit model that works best for the unique needs of their members and plan, and CVS Caremark TrueCost provides another valuable option for them. CVS Caremark plans to launch CVS Caremark TrueCost in 2025.

To help demonstrate the connection and convenience CVS Health uniquely delivers, CVS Healthspire will be the new branded name for the company’s Health Services segment, including Caremark, Cordavis, Oak Street Health, Signify Health and MinuteClinic. The groups within CVS Healthspire will continue to focus on integration across the company’s assets to deliver connected patient care, pharmacy benefits and innovative provider support solutions in communities across the country, making expert care simple, more accessible, and more affordable. 

The CVS Healthspire brand will begin to roll out publicly this month and advance throughout 2024. Consumers will initially see “Part of CVS Healthspire” appear on select CVS Health care delivery offerings across digital and physical assets as the company continues to create an integrated ecosystem for patients.

“Delivering care in a more integrated way - especially for complex patients with chronic health conditions - improves health outcomes and the patient experience,” said Mike Pykosz, CEO of Oak Street Health and interim president of Health Care Delivery. “We are already seeing the benefits of our value-based model to lower the total cost of care for customers, clients, and patients, and we believe we will build on these results as we more fully integrate with our core businesses.”

While CVS Health’s business segments continue to be successful and profitable on their own, there is a sizable opportunity to continue strengthening these connections and create incremental value for the overall company, CVS Health said.

[Read more: CVS Health report highlights need for expanded role of retail pharmacists]

CVS Health provided the example of the recent improvement of Aetna’s Medicare Advantage Star Ratings. In just a year, by leveraging the power of the company’s cross-enterprise assets and executional excellence, Aetna was able to achieve 87% of their members in four star plans or better for the 2025 plan year, a recovery from 21% in the previous year, the company said.

“This achievement was due to the work across our Aetna, CVS Pharmacy, and CVS Caremark colleagues. Even more important than our ratings, these teams worked together to help members improve medication adherence and overcome barriers such as costs and transportation,” said Lynch. “Our strong performance in this area shows how we can quickly unite our businesses to achieve important common goals.”

CVS Health interim chief financial officer Tom Cowhey today will detail the company’s 2024 financial outlook, capital deployment strategy and long-term outlook and growth targets. The company’s unique combination of assets provides CVS Health with clear opportunities for long-term outperformance, including through Medicare Advantage margin recovery, incorporating Star Ratings, starting in 2025; CVS CostVantage, the company’s new retail pharmacy pricing model; increased patient enrollment in Oak Street Health; expanded product offerings through Signify Health; and enhanced growth in core businesses from new offerings in healthcare delivery.

“By broadening our portfolio of integrated products and services, we expect to create a path to sustainable, profitable growth,” Cowhey said. “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.”

Today, CVS Health said it is reiterating its 2023 guidance as shared on its Nov. 1, 2023 earnings call:

  • Total revenues: $351.5 to $357.3 billion
  • Operating income: $13.6 to $14 billion
  • Adjusted operating income: $17.2 to $17.6 billion
  • GAAP diluted earnings per share: $6.37 to $6.61
  • Adjusted EPS: $8.50 to $8.70
  • Cash flow from operations: Upper-end of $12.5 to $13.5 billion
  • The company is initiating its 2024 full-year projections:
  • Total revenues: At least $366 billion
  • Operating income: At least $15 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
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