Was in @CNBCTheExchange today discussing CVS announcement of cost plus pricing at its pharmacies. Some initial and admittedly rough thoughts that I shared: There was probably some advantage to CVS’ PBM to continue to do it the old way but now as that advantage erodes, especially as congress is set to act on rebates, then the benefits of paying pharmacies based on complex contracts struck by their PBM that baked in rebates and other considerations is starting to diminish, and the disadvantages placed on their pharmacy network start to become more paramount. They are willing to give up *some* of the declining advantage/margin on the PBM side to provide some competitive edge to their pharmacies and perhaps significantly improve the consumer experience. Pricing at the pharmacy county should become more predictable for patients and pharmacy revenue more stable. The policy should apply to all pharmacies CVS works with not just its own pharmacies. That’s because, as part of Medicare regulations, there is a concept called "related parties" built into the bidding process for Part D drug plans, which CVS also operates. CMS basically makes sure that healthcare entities operated by Part D plan sponsors — like pharmacies and clinical providers — can’t get paid differently than the going market rate for a service, otherwise the worry by CMS was a plan sponsor may overpay its own network to game its medical loss ratio. Of course CVS is not doing that here, but that rule does mean that CVS has to offer stable terms across all pharmacies, its own as well as those its drug and health plans contract with. I do think this move today will make the patient experience at the pharmacy counter more predictable — there will be fewer out of pocket surprises, so consumers may prefer to come to CVS over time. If CVS is no longer paying pharmacies based on some economic derivative that’s calculated off of the terms of its PBM contracts with drug makers, it probably makes those terms — on the margin — less valuable. My sense is what this move signals is that CVS is saying “OK that whole rebating structure is eroding, so we need to stop clinging to it in a circumstance where it could also be hurting the retail experience for our customers.” Kudos to CVS for leading here, and making this move.