In a significant shift to pharmacy reimbursement practices,
UnitedHealth’s pharmacy benefit manager Optum Rx announced Thursday it will transition to a cost-based payment model for pharmacies. The change is expected to result in higher reimbursements for brand-name medications and reduced payments for generic drugs.
The new model, which Optum Rx plans to fully implement by early 2028, represents the latest effort by a major drug middleman to address widespread criticism of current pharmacy payment systems. The company has already begun moving its employer and health plan clients to the updated arrangement.
The transition follows similar moves by industry competitors. CVS Health introduced a cost-based model in 2023, while Cigna’s Express Scripts now offers comparable pricing options. Under these frameworks, pharmacies typically receive the drug’s acquisition cost plus a defined markup and potentially additional dispensing fees.
When asked for specifics about the new payment structure, an Optum Rx representative indicated that their approach would incorporate various market indices and data points to determine drug reimbursement rates, though exact details remain unclear.
The impact could be substantial, given Optum Rx’s market presence. The company managed $178 billion in pharmaceutical spending for more than 61 million people last year, according to company data and securities filings.
Pharmacy industry groups have expressed cautious optimism about the announcement while emphasizing the need for more details. The National Community Pharmacists Association noted that previous PBM promises of reform haven’t always delivered meaningful change, stating that while this could be “a good first step” if genuine, it might otherwise amount to “another cost-shifting gambit.”
The existing reimbursement system has faced criticism for its complexity and unpredictability. Pharmacies often rely on higher payments for certain medications to offset losses on others – a balance that’s become increasingly difficult to maintain as expensive branded drugs enter the market. Many pharmacies report being reimbursed below their costs for acquiring and dispensing medications.
This industry pressure has contributed to significant market disruption. CVS has shuttered hundreds of locations, Rite Aid filed for bankruptcy, and Walgreens is pursuing privatization. Smaller independent pharmacies have also closed, contributing to pharmacy deserts that affect approximately 15.8 million Americans who lack convenient access to pharmacy services.
The announcement comes amid increasing scrutiny of PBMs’ role in drug pricing. While lawmakers and regulators, including the Federal Trade Commission, have pushed for industry reform, concrete legislative changes haven’t materialized. In response, major PBMs are implementing voluntary changes.
Optum Rx’s reimbursement reform announcement coincided with other initiatives, including a reduction in prior authorization requirements for numerous medications and a commitment to pass through all manufacturer rebates to customers.
The company representative declined to specify how the new model would affect Optum Rx’s financial performance or whether it would result in overall higher payments to pharmacies. They stated that the changes aim to “promote long-term financial stability for pharmacies in our network” while noting that individual pharmacies might receive higher payments for some drugs and lower payments for others.
This development occurs against a backdrop of mounting pressure on PBMs to address drug pricing concerns. While PBMs point to drug manufacturers’ high list prices as a key factor in pharmacy struggles, they face ongoing criticism about their role in the pharmaceutical supply chain and their impact on healthcare costs.