An earlier version of this article had a typo in the 2024 revenue guidance. It has been corrected.
CVS Health Corp.’s stock
CVS,
jumped more than 4% Tuesday after the healthcare giant set 2024 revenue guidance comfortably above consensus and announced a revamp of its prescription-drug pricing model.
The Woonsocket, R.I.-based company said that under the new model, its retail pharmacies would be reimbursed by pharmacy-benefit managers and other payers using a more transparent formula that adds a set markup and fee to the amount that CVS paid for the drugs.
The move comes as major pharmacy benefit managers, including CVS Caremark, Cigna Group’s
CI,
Express Scripts and UnitedHealth Group Inc.’s
UNH,
Optum Rx face scrutiny from lawmakers and regulators who say the companies’ pricing practices and contracts lack transparency. PBMs manage prescription-drug benefits on behalf of insurers, large employers and other payers, and they can use complex formulas to reimburse pharmacies that aren’t necessarily tied directly to a drug’s cost.
The new model replaces more complex, “outdated” reimbursement approaches and “sets the stage for payers to create more predictable pricing at the pharmacy counter,” Prem Shah, CVS chief pharmacy officer, said during the company’s investor presentation Tuesday. The model will be launched with commercial payers in 2025, CVS said.
CVS also said Tuesday that its CVS Caremark PBM unit would offer clients pricing that reflects the true net cost of prescription drugs, disclosing administrative fees.
Other PBMs have also recently attempted to clarify pricing practices. Express Scripts last month announced a new pharmacy network option for health plans, employers and other customers seeking cost-based pricing.
Shares of GoodRx Holdings Inc.
GDRX,
which provides prescription-drug price comparisons and coupons, dropped more than 7% Tuesday after CVS announced its plan. GoodRx in July announced a new program to lower out-of-pocket prescription drug costs for CVS Caremark clients’ members.
CVS said it expects 2024 adjusted EPS of at least $8.50 on revenue of at least $366.0 billion. The FactSet consensus is for EPS of $8.51 and revenue of $344.5 billion. The company still expects 2023 adjusted EPS of $8.50 to $8.70 on revenue of $351.5 billion to $357.3 billion.
CVS Health is also raising its quarterly dividend by 10% to 66.5 cents per share versus 60.5 cents previously. The new dividend is payable Feb. 1 to holders of record as of Jan. 22.
The stock is down more than 23% in the year to date, while the S&P 500
SPX,
has gained 19%.
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