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How CVS Health’s Performance-Based Pharmacy is Positioned to Improve Cost and Quality across the Healthcare Continuum

Posted April 6, 2018| Jacob Golbitz

CVS Health issued a press release in October 2017 announcing the launch of the nation’s first “performance-based pharmacy network” in March 2018. The network will comprise approximately 30,000 retail pharmacies that currently work with Caremark, CVS Health’s Pharmacy Benefits Manager (PBM). Most of these stores will be CVS or Walgreens locations, but the network will also include up to 10,000 independently owned pharmacies.

CVS Health states the performance-based pharmacy network is “designed not only to deliver unit cost savings, but also to improve clinical outcomes that will lead to lower overall health care costs for CVS Caremark PBM clients and their members.”

How this Performance-based Pharmacy Network Will Work

Within this network pharmacies will have performance goals measured by consumer’s prescription adherence. When people with chronic conditions fail to take medications as directed – a common occurrence – they run the risk of becoming acutely ill and ending up in the hospital, the most expensive venue of health care provision.

CVS Health is not explicit about how the pharmacies will be incentivized to reach these performance goals, but the reference to “unit cost savings” implies that pharmacies meeting measurable goals will receive discounts on some medications purchased from CVS Caremark.

Incentivizing Pharmacies Can Have a Significant Impact on Cost and Quality

The strategy of incentivizing pharmacies to more proactively help customers with chronic conditions take medication as directed is an extension of the value-based care model in which providers are financially incented by payer organizations to drive better health outcomes for their patients. In this case, care is shifting from the high-cost clinical setting to a low-cost retail setting and there are two significant implications for cost control and quality improvement—improved access and convenience, and dispersion of costs.

1. Increased access and medication adherence.

For most  elderly patients– a segment making up a disproportionately large percentage of people with chronic conditions – getting to the local drugstore is significantly easier and less expensive than seeing a physician. Greater convenience means higher probability of engagement, which means it is likely a pharmacist or pharmacy technician in a retail location will have more opportunity to counsel a customer on their medication regimen than a primary care physician would.

2. Addressing cost concentration in chronic conditions.

In 2006 the Agency for Healthcare Research and Quality, the research arm of the U.S. Department of Health and Human Services, published a report claiming that people with one or more of five major chronic diseases – diabetes, heart disease, mood disorders, hypertension, and asthma – drive 49% of health care spending. By focusing on customers with chronic conditions CVS Health’s pharmacy network is directly addressing the issue of cost concentration in health care and will likely generate an appreciable return in cost savings through a relatively simple program. A program enabled by the innovative use of existing health care and retail infrastructure can complement CVS Health’s broader strategy.

Influence Plan Member Behavior

To be successful, insurers must control costs in an environment where the cost of care continues to rise. The most effective way to do that is through influencing member behavior to minimize illness and medical loss. The performance pharmacy network targets patients with chronic conditions and leverages the vertically integrated CVS Health’s many points of consumer contact and engagement – something standalone insurers don’t have and many only have direct contact with members when there’s a problem.


Looking for more?

Read our blog on How this Pharmacy Network Demonstrates CVS Health’s Broader Strategic Vision and Competitive Strategy

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