Optum Rx is reforming how it pays pharmacies

Dive Brief:

Optum Rx is shifting to a new pharmacy reimbursement model that should result in pharmacies being paid more for brand-name drugs and less for generics. It’s the latest move from a major drug middleman to reform how pharmacies are paid amid widespread criticism of the status quo.
Optum Rx said Thursday that it would pay pharmacies in a cost-based model, which should give them more reliable revenue and allow them to stock more drugs, also helping consumers access their medications.
The massive pharmacy benefit manager, which is owned by healthcare conglomerate UnitedHealth, has already begun transitioning employer and health plan clients over to the new arrangement and expects full implementation by the start of 2028.

Dive Insight:

Pharmacy operators say the existing reimbursement model is fundamentally broken. Pharmacies are generally paid for drugs based on a variety of complex factors beyond cost, which results in them relying on higher rates for some medications to offset losses on others — a delicate balancing act that has become more difficult as pricier branded drugs enter the market.

As a result, pharmacies are often reimbursed less than it costs to acquire and dispense drugs, contributing to losses for many operators. Many pharmacies blame PBMs like Optum Rx, because they reimburse pharmacies for dispensing drugs to their members.

PBMs, on the other hand, pass the blame along to drug manufacturers for setting high list prices, arguing that price hikes result in pharmacies having to pay more to acquire drugs in the first place.

Still, major PBMs are taking actions they say will make pharmacy operations more tenable as they face rising public pressure to lower drug prices.

With its announcement Thursday, Optum Rx is following in the footsteps of pharmacy juggernaut CVS Health, which in 2023 said its pharmacies would move to a cost-based model. Cigna-owned Express Scripts also offers a cost-based pricing option.

Under such models, pharmacies are generally paid the drug’s acquisition cost, plus a defined markup and occasionally an additional dispensing fee.

However, it’s not clear how Optum Rx plans to structure its model, including how it will calculate any additional markup for the pharmacy.

When asked for more details, a spokesperson said Optum Rx’s approach “incorporates multiple market indices and data to inform how drugs will be reimbursed.”

Changes to Optum Rx’s reimbursement structure have major implications for U.S. pharmacies. Last year, the PBM managed $178 billion in pharmaceutical spending for more than 61 million people, according to a securities filing and information on the company’s website.

Pharmacy groups said they welcome the change, but it’s difficult to say how helpful it will be without more details.

“We have seen announcements like this in the past by PBMs that claim they want to work with independent pharmacies. Based on the results to date, some were obviously intended as political cover or public relations,” the National Community Pharmacists Association said in a statement.

“If this is a good-faith effort, it would be a good first step in reimbursing all independent pharmacies for the actual cost of acquiring drugs, plus the cost of counseling patients, serving patients, inventory, supplies, and other overhead. Otherwise, this will be another cost-shifting gambit that will leave independent pharmacies in the same position,” the NCPA continued.

The Optum Rx spokesperson did not respond directly to questions on how the reimbursement model will affect the PBM’s finances, or whether it expected pharmacies would be paid more overall as a result.

“We expect these changes will rebalance reimbursement to promote long-term financial stability for pharmacies in our network,” they said. “When implementing cost-based reimbursement, a pharmacy may receive more for certain drugs and less for other drugs.”

Reimbursement pressures have contributed to notable upheaval for the pharmacy industry. In recent years, CVS has closed hundreds of underperforming locations, Rite Aid underwent a bankruptcy and Walgreens announced plans to go private in a deal with a private equity company. Meanwhile, some regional chains and independent operators have gone out of business entirely.

All told, the closures are contributing to pharmacy deserts. Nationally, 15.8 million people, or 5% of all people in the U.S., live in areas without convenient access to a pharmacy, according to a study from last year.

Along with PBM’s impact on pharmacies, lawmakers and antitrust regulators have also taken issue with how the middlemen negotiate savings with drugmakers, contributing to rising momentum in Washington to crack down on PBMs.

However, despite a plethora of bills on the Hill and litigation from the Federal Trade Commission, PBMs have yet to face concrete reform. Instead, major PBMs say they’re responding to calls for change internally.

Optum Rx, for example, announced the pharmacy reimbursement change one day after it released plans to lower prior authorization requirements on dozens of drugs.

The PBM also recently committed to pass through 100% of rebates it receives from drugmakers to its customers.