David Joyner: CVS Health is on a Pharmacy Transformation Journey

CVS Health’s health services business, which includes the pharmacy benefit manager CVS Caremark, saw revenue decline again in the fourth quarter of 2024 and for the full year. For the full year of 2024, the segment saw a decrease in revenue of 7.1% to $173.6 billion compared with $186.8 billion in 2023. Pharmacy claims also decreased 18% in 2024 compared with 2023.

Company officials have previously said this has been the result of losing the PBM business of Tyson Foods, although Caremark continued to provide specialty pharmacy support services. This change was announced and was effective beginning January 2024.

CVS Health’s total revenue for the company for the full year 2024 increased 4.2% to $372.8 billion, which company officials said was driven by growth in both the healthcare segment and the pharmacy and consumer wellness segments. The healthcare benefits segment saw its medical benefit ratio increase from 86.2% in 2022 to 92.5% to full year 2024.

Related: Updated: CVS Health’s Medical Benefit Ratio Increases But Company Sees Better Path for 2025

David Joyner

The health services business, and especially Caremark, factors into the company’s positive outlook for 2025. The company is continuing on a “transformation journey” with its efforts to drive change in pharmacy benefits, CVS Health’s CEO David Joyner said during an investor call.

And Just as Andrew Witty, CEO of UnitedHealth Group, did in a call with investors last month, Joyner defended the role of PBMs in healthcare. Joyner said PBMs help to mitigate pharmaceutical company price increases. PBMs, Joyner said, have erroneously been subject to deceptive rhetoric and misinformation.

“Where PBM tools are limited, we’ve seen egregious price hikes,” Joyner said during the investor call. “For more than three decades, PBMs have been a proven unequivocal mechanism to negotiate down the price of drugs for payers and consumers, while promoting better adherence and better health in drugs that have no rebates.”

During the CVS investor call, both Joyner and Prem Shah, who was recently promoted to oversee CVS Caremark and healthcare delivery, said the company has made moves to ensure stable pharmacy margins and provide for more transparency.

Prem Shah

“We are shifting our pharmacy reimbursement model to be more closely aligned to our underlying cost of our business and the value that we’ve created at a local community pharmacy level for the tens of millions of patients that we serve,” Shah said during the call. “About pharmacy reimbursement, there was a lot of cross subsidization across brands and generics, and this allows us to ensure more stable pharmacy margins and a more durable kind of process.”

But not mentioned in this morning’s call was the loss of a second customer. Beginning this year, Blue Shield of California has dropped CVS Caremark as its PBM for Prime Therapeutics to negotiate drug prices. As with Tyson Foods, CVS Caremark will continue to provide specialty pharmacy services for Blue Shield of California.

In terms of transparency of drug pricing, this year, CVS Health has launched two programs. The CVS CostVantage is a pharmacy reimbursement model that will define the drug cost and related reimbursement using a formula built on the cost of the drug, a set markup and a fee that reflects the care and value of pharmacy services. Effective Jan. 1, 2025, all commercial prescriptions are dispensed through CostVantage are contracted with a transparent CVS cost plus model, Joyner said.

“Under this new framework, we have tied reimbursement to our acquisition costs and will deliver savings to our payer partners as we continue to relentlessly drive down prices,” Joyner said. He said the company is now working to develop a cost-based solution for Medicare and Medicaid markets.

“These models remove the market basket approach and the unintended consequences that existed in the pharmacy reimbursement, ensuring that patients continue to have access to the most durable and frequent interaction in their healthcare journey,” Joyner said.

The second program is TrueCost, a model that offers client pricing reflecting the true net cost of prescription drugs, with visibility into administrative fee. Joyner said this program has resonated with customers. Already, 75% of commercial customers have two or more elements the model in their pharmacy benefit.

“Today, we pass through 99% rebates to our clients when fully implemented,” Joyner said. “TrueCost enables patients to see the lower cost of encounters, including the full pass through of the rebates we generated from our negotiations with the manufacturers.

Joyner also cited during the call CVS’s work to address the costs of biologics through biosimilars and specifically mentioned the Cordavis unit and its unbranded biosimilar of Humira (adalimumab). CVS Caremark has an agreement with AbbVie, the manufacturer of Humira, to supply Cordavis with a committed volume of co-branded Humira biosimilar.

He said in the earning call that its biosimilar is more than 80% below the cost of Humira, and they are able to provide this to members for $0 out-of-pocket. This has generated almost $1 billion in savings to clients, Joyner said. “We are the only company that meaningfully drove biosimilar adoption amongst our clients, and will continue to do so with a growing pipeline of additional biosimilars in our pharmacy businesses, we delivered exceptional experiences,” he said.