How Mark Cuban Is Forcing CVS To Change the Way It Prices Prescriptions

It seems that Cuban has finally given big pharma the push it needed.
Updated May 8, 2024
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In a groundbreaking shift, CVS has announced a significant change to its drug pricing formula, aimed at enhancing transparency and simplifying costs for consumers. This strategic adjustment is anticipated to have a ripple effect on the pharmaceutical market overall, impacting how customers perceive what constitutes fair pricing.

Experts believe an increasingly competitive drug pricing market, including the innovative approach of Mark Cuban's Cost Plus Drug Company, has influenced this initiative. Some believe CVS has made such a pronounced move in response to Cuban’s drug company, which he founded to revolutionize the industry and offer more transparency in the pricing of prescription drugs.

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Understanding CVS's new pricing formula

CVS is making waves by recalibrating its drug pricing based on the actual amount it pays for a drug. This departure from the traditional markup and service fee approach is a pivotal move in an industry that has grappled with complexity and opacity in pricing structures. 

Consumers and philanthropists alike have long been at odds with what they believed were pharmaceutical giants taking advantage of Americans struggling to afford necessary medications. CVS sees this as a necessary foundational step to make the entire system more consumer-friendly, preserve choice for payers, and maintain a robust retail pharmacy industry.

A CVS Pharmacy spokesperson highlighted the significance of this move, stating, "What CVS is doing — at the pharmacy and at the PBM [pharmacy benefit managers] — is rewiring or resetting how reimbursement happens in an industry that has become very complex." The leadership position of CVS in the pharmacy benefit management sector also uniquely positions them to pioneer such changes and, in hope, influence other pharmaceutical companies to do the same as well.

Impact on consumers

While the immediate impact on consumers may not be pronounced, the shift in CVS's drug pricing model will gradually unfold. For Consumers using cash pharmacy discount cards at a CVS Pharmacy, the earliest consumer impact is expected in the first half of 2024. However, consumers will feel a more substantial impact in 2025 when CVS Pharmacy plans to implement this model with pharmacy benefit managers.

The potential savings resulting from this new pricing model will primarily be seen on the payer or plan sponsor side. The extent of these savings will depend on the specific adoption of the model, individual client usage, and how the plan is applied to an individual's benefits. Nevertheless, this move represents a positive step toward a more transparent and consumer-centric drug pricing environment.

Benefits for pharmacies and consumers

Pharmacies and consumers stand to gain several benefits from these new pricing models. With a more predictable reimbursement rate, pharmacies can streamline their financial operations and plan more effectively for the future. 

Dr. Lucas Berenbrok, an associate professor of pharmacy and therapeutics at the University of Pittsburgh, emphasizes the potential advantages for consumers. He notes that a cost-based pricing model could instill greater trust in patients, assuring them that someone is advocating for fair pricing and preventing overpayment, particularly for generic drugs.

The move by CVS aligns with recent developments in the industry, notably the cost-based pricing for prescription drugs at Express Scripts, which was announced last month. This collective effort by major players, including CVS and Express Scripts, reflects a positive trend toward simplifying drug pricing structures and fostering transparency.

Competition and consumer benefits

The evolution of drug pricing models, spurred by competition and innovative approaches, is fundamentally beneficial for consumers. CVS's strategic shift is a response to the changing dynamics of the pharmaceutical landscape, with the potential influence of the introduction of innovative models like Mark Cuban's cost-plus drug company.

As major players like CVS and Express Scripts take steps to eliminate complexity in drug pricing, consumers and payors alike stand to benefit and save money. The increased transparency and predictability in pricing structures empower consumers to make informed decisions about their healthcare, fostering a sense of trust in the industry — which is new for a market that has historically been at odds with consumers.

Bottom line

In the wake of CVS's announcement to overhaul its drug pricing formula, a new era of transparency and consumer-centric pricing is dawning. This move, influenced by the evolving landscape of drug pricing, aligns with a broader trend in the industry. As CVS and other major players lead the charge in simplifying drug pricing structures, consumers can look forward to a more transparent, predictable, and consumer-friendly experience. 

The competitive push to lower drug prices reflects a positive shift that aims to prioritize the needs and trust of consumers in the complex world of healthcare. Maybe Mark Cuban finally gave Big Pharma just the push it needed.

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Author Details

Georgina Tzanetos Georgina Tzanetos is a former financial advisor who has been active in financial media for the past six years. She holds a master's in political economy from NYU, where she studied distressed labor markets.

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