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Offering payors choice in an evolving market

Formulary strategies give payors options while driving to lower net cost and optimizing member experience


Joshua Fredell, Vice President & Head of PBM & Specialty Product Innovation


Recent changes in public policy have significantly impacted market dynamics, prompting pharmaceutical manufacturers to respond. In response to a provision in the American Rescue Plan Act (ARPA), some drug manufacturers have opted to significantly lower list prices on certain drugs like insulin to retain more revenue and limit their exposure. This presents an opportunity for both our clients and their members.

CVS Caremark provides flexible, durable solutions that address these evolving market dynamics.


Helping plan sponsors control spend

As a leader in formulary management, our rich history of innovations ranges from drug removals to new-to-market reviews to indication-based strategies. These innovations are now the standard for pharmacy benefit managers (PBMs).

CVS Caremark uses formulary management and preferred placement to negotiate better pricing and greater discounts that reduce costs for payors when clinically equivalent alternatives are available. In 2022, we helped deliver single-digit trend for the sixth year in a row, and single-digit specialty trend for the second year. Nearly 31 percent of clients had negative trend overall while about 34 percent of clients had negative specialty trend.


Joshua Fredell, PharmD, dives deep into our formulary strategy.


Trend in 2022 was 5.3% overall and 6.5% for specialty


While rebates remain an important element in delivering lower costs, the role of rebates may shift in the evolving market.

As a response to these market dynamics, our innovative formulary strategy allows clients to choose how they reach lower net cost and ensure their formulary design continues to deliver savings while optimizing member experience.

We have always provided our clients with a choice of different formulary designs that clients may want to leverage to best match their pharmacy cost management and member experience needs. We will continue to evolve our formulary strategies to keep clients ahead of a rapidly changing market.


Introducing formulary optionality

In certain drug classes, it is possible to achieve a comparable lower net cost through either lower list price product strategies or higher rebated product strategies.

  • Clients who prefer to achieve lower net cost with higher rebated product strategies can choose “Choice Formularies,” a new formulary strategy aimed at optimizing rebate value in certain classes.
  • Alternatively, by remaining aligned to one of our existing core template formularies, clients can achieve lower net cost through lower list price product strategies. These strategies have lower available manufacturer rebates and will lead to adjustments to rebate guarantees.


What this means for payors

Our clients want optionality to drive toward lower net cost. We’re delivering a solution that enables just that.

While these market dynamics impact insulin, there may be other manufacturers who follow the same path regarding their list prices, potentially even for biosimilars. In that case, clients will be better prepared for evolving market dynamics and maintain lower net cost regardless of the formulary choice they make.


This document contains references to brand-name prescription drugs that are trademarks or registered trademarks of pharmaceutical manufacturers not affiliated with CVS Health.

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