A major pharmacy benefits manager is overhauling its payment system for pharmacies, marking the latest effort by drug industry middlemen to address criticism of current reimbursement practices.
Optum Rx announced Thursday it will transition to a cost-based model for pharmacy reimbursement, which is expected to increase payments for brand-name medications while reducing compensation for generic drugs. The company, a subsidiary of UnitedHealth Group, aims to complete the transition for all employer and health plan clients by early 2028.
The move comes as pharmacies struggle with what they describe as an unsustainable reimbursement system. Under existing practices, pharmacy compensation relies on complex calculations beyond drug costs, forcing operators to depend on higher margins from certain medications to offset losses on others. This delicate balance has become increasingly difficult to maintain as more expensive branded drugs enter the market.
Many pharmacies report being reimbursed at rates below their costs for acquiring and dispensing medications. While pharmacy benefit managers (PBMs) like Optum Rx point to manufacturers’ high list prices as the root cause, they are taking steps to reform payment practices amid mounting pressure to reduce drug costs.
The initiative follows similar moves by competitors, including CVS Health’s 2023 announcement of a cost-based model transition and Express Scripts’ offering of a cost-plus pricing option. Under these arrangements, pharmacies typically receive the drug’s acquisition cost plus a defined markup and possibly additional dispensing fees.
Specific details about Optum Rx’s implementation remain unclear. When questioned, a company spokesperson indicated the approach would incorporate “multiple market indices and data” to determine drug reimbursement rates.
The change carries significant implications given Optum Rx’s market presence – the company managed $178 billion in pharmaceutical spending for over 61 million people last year. While pharmacy groups cautiously welcomed the announcement, they emphasized that its impact would depend on specific implementation details.
The National Community Pharmacists Association noted that previous PBM announcements promising to work with independent pharmacies have sometimes served more as public relations moves than meaningful reforms. The organization indicated that while this could be “a good first step” if implemented in good faith, it could alternatively amount to “another cost-shifting gambit.”
The reimbursement pressures have contributed to significant industry upheaval, including hundreds of CVS store closures, Rite Aid’s bankruptcy filing, and Walgreens’ plans to go private. Some regional and independent pharmacies have shut down entirely, contributing to pharmacy deserts affecting approximately 15.8 million Americans who lack convenient access to pharmacy services.
The announcement comes amid increasing scrutiny of PBMs’ role in drug pricing. Despite numerous legislative proposals and Federal Trade Commission litigation, concrete reforms have yet to materialize. PBMs have responded with voluntary changes, with Optum Rx recently announcing reduced prior authorization requirements and committing to pass through all manufacturer rebates to customers.
When asked about financial implications, Optum Rx’s spokesperson avoided direct answers regarding the model’s impact on company finances or overall pharmacy payments. They stated the changes would “rebalance reimbursement to promote long-term financial stability for pharmacies” while noting that individual pharmacies might receive higher payments for some drugs and lower payments for others.
The transition represents part of a broader industry response to calls for reform, though its ultimate impact on pharmacy operations and drug pricing remains to be seen as implementation details emerge.