Brent Eberle: “Not all Cost-Plus is Created Equal"

This year, employers and benefit managers should expect to hear much more about cost-plus drug pricing from a pharmacy perspective. Mark Cuban’s launch two years ago of CostPlus Drug Company ushered in a new way to think about how prescription drugs are priced. The larger pharmacy benefit managers have been playing catch up, with Express Scripts and CVS Caremark launching late in 2023 their own versions of a cost-plus model.

But there is likely to be confusion in the marketplace because there is not a standard definition of what “cost plus” means, according to Brent Eberle, senior vice president and chief pharmacy officer at Navitus, a PBM that has 11 million members.

Eberle said there is some caution among clients about how the cost is determined, how rebates factor in and the benchmarks used. He said that transparency around cost will be important during these discussions.

“This is a topic people will be spending some time on, but it will create challenges,” he said in an interview. “Not all cost-plus is created equal. It really depends on what you mean by cost.”

Employers, plans and smaller PBMs such as Navitus have been critical of the larger PBMs — CVS Caremark, Express Scripts and Optum Rx — that control 80% of market for their lack of transparency around drug pricing, rebates and payments to pharmacies.

Satisfaction with the larger PBMs has declined over the last few years among employers, plans and unions, according to a September 2023 survey by Pharmaceutical Strategies Group. Just a quarter of respondents were satisfied with their PBMs’ disclosure and accessibility. Many indicated they also wanted more transparency about formulary decisions.

Within this environment, Mark Cuban Cost Plus Drug Company entered the market in January 2022 as an online pharmacy. It passes along the cost it pays for generic drugs plus a flat 15% margin and pharmacist fee. Many of the smaller PBMs such as Navitus use a model where they charge an administration fee and pass through any discounts and rebates back to the client.

In November 2023, Express Scripts announced a program that will begin this year called the Express Scripts ClearNetwork. It will use the lowest benchmark – predictive acquisition cost, national average drug acquisition cost, or wholesale acquisition cost – to estimate the acquisition cost for an individual drug. A flat pharmacy fee and a second fee of 15% is added. A spokesperson said the fees will be transparent to clients and pharmacies.

In December 2023, CVS Caremark announced similar programs that will begin in 2025. CVS Caremark TrueCost aims to provide pricing based on net cost of prescription drugs, with visibility into administrative fees. Another program is CVS Caremark CostAdvantage, which will provide better transparency of pharmacy reimbursement. CVS Caremark has not yet provided any details about these programs.

Eberle said Transparency-Rx is taking the lead to help define what “cost” actually means. Navitus is part of Transparency-Rx, a not-for-profit coalition of PBMs that launched in September 2023 to bring clarity to drug pricing issues. The organization supports the use of a 100% pass through model, a ban on spread pricing (the difference between what it charges a payer for a prescription and what it pays out to the pharmacy), national reporting requirements for PBMs, and rebate reform. Other PBM members of Transparency-Rx include: Affirmed-Rx, Liviniti (formerly Southern Scripts), RxPreferred Benefits, and SmithRx.

Eberle said federal legislation regulating PBMs is possible this year but whether it will address drug costs is uncertain. “The PBM legislation that is being talked about addresses minimum reimbursements to pharmacies and other things that move costs things around versus actually addressing and lowering drug costs in totality. I'm a little skeptical that the legislation is going to have the exact intent to lower costs."