Why 2025 Could Be a Great Payback Year for CVS and Walgreens

On By Littum

Legislation slowly moving through states and in Washington could mean increased payments to pharmacy chains like CVS Health, Walgreens, Walmart and independent pharmacies across the country.

Although pharmacies didn’t get what they wanted last week from Congress in a year-end spending package, the door has been opened wider for legislation to benefit pharmacies while regulating pharmacy benefit managers, or PBMs, even with Republicans in control of both houses. Congress and the White House in 2025.

“PBM reform is supported by majorities in both parties, by the outgoing President Biden and by the incoming President Trump,” said B. Douglas Hoey, executive director of the National Community Pharmacists Association, after Congress late last week passed a new short- term spending package that did not include PBM reform. “It may be the only issue in Washington on which they agree. Every day they delay reform, another small pharmacy will close or be pushed closer to the brink because of the business practices of the big health insurance companies and their PBM henchmen.”

Pharmacies have been closing across the country in recent years, which their owners blame in part on a reimbursement squeeze from the PBMs that pay them. PBMs, which are considered middlemen between drug companies and consumers when it comes to purchasing drugs, administer drug benefits for employers and public health insurers, including Medicaid coverage for poor Americans and Medicare benefits for seniors. In these roles, PBMs determine what pharmacists and pharmacies must pay to dispense prescription drugs.

But PBMs have come under fire in recent years as the public, taxpayers and Congress question whether they are passing on as many savings as they should to health plan enrollees. And this increased scrutiny has already led to an increasing number of state legislators and increasing payments to pharmacies.

Leaders at PBMs recognize that change is coming.

“We’re seeing the regulatory environment change intensely,” Jason Borschow, CEO of Abarca, an independent pharmacy benefits manager, told healthcare executives at the Forbes Healthcare Summit in New York earlier this month. “It’s already happening in Medicaid, Medicare is coming and obviously in a free market, kind of commercial area. The individual market area is probably the last to be regulated, but our expectation is that regulations will happen and PBM business practices will be regulated by the federal in addition to state governments.”

Among the areas where Democrats and Republicans in Congress have reached common ground include provisions that would require PBMs to reimburse pharmacies at (national average drug acquisition cost) “plus the state fee-for-service fee for all Medicaid managed care programs in all 50 states, ” National Community Pharmacists Association, which represents more than 18,900 pharmacies, have said. “It would eliminate spread pricing and pay PBMs a flat administrative fee in all Medicaid managed care programs. The provision will save taxpayers approximately $1 billion over the next 10 years.”

Because CVS also owns a PBM, Caremark, it’s unclear how much potential reforms would hurt that company financially.

But other regulations advancing in states would certainly benefit the thousands of pharmacists and retail pharmacies under CVS ownership, as well as other pharmacies.

As an example, dozens of states are passing legislation that expands the role of pharmacists in prescribing certain drugs. This so-called “test to treat” legislation gives pharmacists prescribing status.

At the Forbes Healthcare Summit, Walgreens senior pharmacy manager Rick Gates, said pharmacists have already tested for a number of illnesses, including Covid-19, and then prescribed medication.

“You test positive for covid and we can actually prescribe right then and get you on your medication when you’re in the store,” Gates said. “The same goes for the flu. It could be a UTI. It could be a lot of other things. But that’s just the chasm I’m thinking of where pharmacy can really play a bigger impact.