Major PBMs Announce “Cost Plus” Pharmacy Networks

In the fourth quarter of 2023, two of the “Big 3” PBMs announced that they will introduce new reimbursement methods for network pharmacies in the coming year(s) based on Cost Plus formulas in place of the typical AWP Minus terms.

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In November, Express Scripts announced their ClearNetwork where they claim to base reimbursement on the “lesser of” a few different acquisition cost benchmarks plus a flat dispensing fee to network pharmacies plus a 15% markup or spread that will be shared between the dispensing pharmacy and Express Scripts. Express Scripts states the ClearNetwork will be offered to Plan Sponsors in early 2024.

Most PBM contracts have a lesser of reimbursement methodology. For example, Pharmacy Provider will receive reimbursement equal to the lesser of:

  1. Pharmacy’s Usual and Customary Retail Price;
  2. Pharmacy’s submitted ingredient cost; or
  3. The total of the Acquisition cost, plus a margin fee, plus applicable dispense fee

So how is the Acquisition cost determined? Well, that’s a lesser of scenario as well. The lesser of:

  1. NADAC
  2. PAC (Predictive Acquisition Cost)
  3. WAC

Most pharmacies are familiar with NADAC and WAC, but Predictive Acquisition Cost (or PAC) is new. It’s maintained by GlassBox Analytics and published through Elsevier. PAC uses a predictive analytics model to “predict” a range for pharmacy acquisition cost based on numerous inputs that includes published priced lists (AWP, WAC), voluntary National Average Drug Acquisition Cost (NADAC) data, various state actual acquisition cost surveys, and more. GlassBox Analytics has stated that PAC is, on average, about 1% lower than NADAC.

In December, CVS Health (Caremark) announced their version of a cost plus play called TrueCost which will launch in 2025. This announcement also included a revised retail pharmacy pricing strategy for its CVS pharmacies called CostVantage.

Beyond these announcements, there are little details available to understand the implications of these revised reimbursement models. PBMs have been under much scrutiny from lawmakers at the federal and state level for opaque business practices and hiding revenue via rebates and spread pricing, the FTC has an ongoing study of PBMs, and independent pharmacies have spoken out about the numerous abuses they face from PBMs on a daily basis.

Perhaps they’ve started to feel the heat and coming regulation that would force their hand and they devised a new trojan horse as a peace offering which sounds great on paper but does little to reduce costs for payors, repair broken relationships with independent pharmacy partners or improve patient choice, access and outcomes.

Only time will tell whether network pharmacies and PSAOs choose to enroll in these networks, whether plan sponsors elect such network designs, and whether costs go up or down.

Eric Hartkopf, PharmD