Drugstore Chain CVS Health's Move to Simplify Drug Pricing Gives Peek Into FY24 Outlook

CVS Health Corp CVS announced a new approach called CVS 'CostVantage' 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 (PBMs) 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.

Entrepreneur Mark Cuban's pharmacy company and others advocating for a similar "cost plus" payment model have asserted its ability to increase transparency and accountability in drug pricing, the WSJ noted. 

CVS's forthcoming move is expected to commence in 1H of 2024.

Also Read: CVS Health's Health Services And Pharmacy Benefit Management Business Show Strength In Q3.

The new payment model, CostVantage, will roll out gradually, initially benefiting consumers paying cash using various drug discount cards. CVS plans to incorporate this model into contracts with pharmacy-benefit managers for employer plans in 2025, with future intentions to extend it to government-backed coverage, such as Medicare plans.

The company also launched CVS Healthspire, a new branded name for its Health Services segment, including Caremark, Cordavis, Oak Street Health, Signify Health, and MinuteClinic.

The CVS Healthspire brand will begin to roll out publicly this month and advance throughout 2024.

CVS Health reaffirms FY23 guidance, with adjusted EPS of $8.50-$8.70 versus analysts consensus of $8.58.

For FY24, CVS Health sees FY24 revenues of at least $366 billion versus a consensus of $345.40 billion and an adjusted EPS of at least $8.50 versus a consensus of $8.52.

The company sees FY24 adjusted operating income of at least $17.2 billion and cash flow from operations of at least $12.5 billion.

Price Action: CVS shares are up 1.34% at $69.40 during the premarket session on the last check Tuesday.