CVS launches program targeting expensive new drugs

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CVS Caremark will allow its clients to exclude coverage of drugs with extremely high launch prices under a new program the company said is aimed at pressuring manufacturers to lower drug costs.

According to CVS, launch prices have been steadily rising for years, and are completely up to the discretion of the manufacturer. The high prices put an unsustainable burden on the country’s health system, CVS said.  

The new program will use specific methods of comparing the cost and effectiveness of certain medications. CVS said such analyses for the effectiveness of drugs are common in Europe, but don’t exist in America.

“No one but manufacturers have, until now, had any control over the launch price of newly patented drugs. This new approach, harnessing the power of the market, could change manufacturer behavior,” CVS said in an announcement.

CVS said the program will focus on expensive drugs that aren’t cost-effective, so medications that are deemed “breakthrough” therapies by the Food and Drug Administration will be excluded from this program.

Caremark is the pharmacy benefit manager (PBM) arm of CVS Health. Its clients—  employers and insurers — use rebates to lower the costs of providing insurance for their employees and members.

PBMs administer prescription drug programs for commercial health plans, and are tasked with negotiating discounts on drugs with pharmaceutical firms and insurers.

As the middlemen, PBMs are being demonized by both the drug industry and President Trump as the main instigator of high drug prices.

Essentially, drug companies pay the PBMs to include their drugs in an insurance benefit in order to make a profit. The PBMs negotiate a discount for those drugs, usually in the form of lower co-pays, and they make a profit by keeping a portion of that rebate for themselves.

CVS said it will continue using other techniques to help lower costs for insurers and employers, “but lower launch prices could help bring about real deflation in drug prices.”

In a statement to The Hill, the drug lobbying group Pharmaceutical Research and Manufacturers of America said it opposes “the misuse of subjective, one-size-fits-all cost effectiveness thresholds to deny patient access to life saving medicines.”

Without addressing the CVS plan directly, the group said that “blunt cost-effectiveness thresholds ignore what individual patient and providers value and conflict with the movement toward personalized, 21st century health care.”

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