On Wednesday CVS announced a major change to its pharmacy benefit management services that it says will promote transparency and lower prices for the employer-sponsored health plans that it serves.

The pharmacy giant's PBM business will begin to offer clients a new pricing model where it will disclose any rebates that it receives from drug-makers and pass those savings on to the plan sponsor. Whether or not patients get a taste of the savings is up to their employers.

Pharmacy benefit managers have come under fire from political leaders, including President Trump, for contributing to the ever-rising cost of prescription medication.

In October Congress voted to ban PBMs from including “gag orders” in pharmacy contracts that bar pharmacists from informing patients that they could save money by paying out-of-pocket, rather than through their prescription drug plan.

Critics have also expressed doubts that consumers benefit from the lower prices that PBMs negotiate with drug-makers. While the drug-maker will often provide a steep discount on its drugs to be able to gain access to a large network, such as that managed by CVS, it's not clear how much of that discount is passed on to the patients.

Earlier this year, CVS defended itself, saying that it only kept 2 percent of the discounts that it received from pharmaceutical companies.

However, CVS's pledge to pass along 100 percent of discounts to its clients is not merely an act of benevolence. Whatever money it will lose by giving up the current system will likely have to be made up by charging clients more in flat fees. It is quite possible that some plan sponsors will choose to stick with the current pricing model.

The change may have also been made in anticipation of laws barring the rebate pricing model.

“If rebates go away, this model accommodates that,” Derica Rice, president of CVS Caremark, tells Reuters. “But as long as we get to the lowest net cost we are indifferent.”

Instant Insights /

CVS's 'net new pricing' model brings transparency to drug rebates

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