CVS Caremark helps a variety of pharmacy benefit management (PBM) clients, which include employers, unions, health plans and government payors, control rising drug prices. Our PBM clients have options to choose from to compensate us for the services we provide, and we work with our clients to best meet their needs and the needs of their members in negotiating pricing options. In one model, clients agree to pay the price negotiated with the pharmacies, which can vary in accordance with the fluctuation of costs in the market, along with a separate administrative fee for the services we provide. More often, we find that our clients choose a different model whereby they contract for predictable drug costs for the year and allow the PBM to keep the difference between this fixed amount and the amount paid to the pharmacy that dispenses the drugs. This second option, which is commonly called “spread pricing,” is regularly misrepresented.
“Spread pricing” is simply the term used to describe the difference in pricing from what we are paid to what we reimburse our network pharmacies – no different than how any business makes a profit on the difference between what it pays to acquire goods versus what it charges the end user.
This model is often requested by our clients, including many of the managed Medicaid plans we support, because it provides them with stability and certainty around their drug costs. Under this model, we make money on some drugs, but lose money on others.