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Government drug price negotiations, lower list prices with lower rebate strategies, and biosimilars are examples of market developments changing rebate dynamics between plan sponsors and pharmacy benefit managers (PBMs).
Combined with calls for greater transparency in pharmacy benefits, these developments are contributing to a shift among PBMs toward alternative rebate models.
In September 2025, CVS Caremark presented National CooperativeRx with the opportunity to shift to drug-level rebate guarantees. Following an extensive evaluation and negotiation process, National CooperativeRx has reached an agreement with CVS Caremark to incorporate drug-level rebate guarantees into our master PBM contract. What this means—and when it applies—depends on the member group and timing.
Traditional Channel-Level Guarantees vs. Drug-Level Rebate Guarantees
Traditionally, rebate guarantees have been structured around broader groups of drugs, and where those drugs are filled, rather than individual drug products. Because rebate performance is evaluated across broader groups, changes in the drugs being utilized can affect the overall rebate collections.
For example, if utilization shifts or pricing shifts away from highly rebateable drugs, the overall rebate performance for the broader group can change. Today, these changes may result in a rebate credit to allow the PBM to take credit if the patient switches to a lower cost, lower rebate medication.
Drug-level rebate guarantees take a more specific approach by evaluating rebate performance at the individual drug level. This provides greater visibility into the rebate value associated with the drugs being utilized and reduces the extent to which changes in one area of the drug mix affect the broader rebate guarantee.
Feature | Traditional Channel-Level Model | Drug-Level Model |
|---|---|---|
Drug Identification | Aggregated broad groups (less than GPI-14*) | Highly specific drug products (GPI-14*) |
Utilization Shifts | Changes in the mix of drugs utilized can affect overall rebate performance and may require reconciliation against the applicable guarantee. | Rebate performance is evaluated at the specific drug level, providing greater visibility into how changes in utilization affect rebate value. |
Reconciliation & True-ups | May rely on complex true-up reconciliation processes to collect overperformance. | Greater collection in guaranteed rebate payments and less risk of excessive value in true-up reconciliation. |
Adaptability to Marketplace Changes | May be slower to adapt to shifts in the broader marketplace. | Quicker adaptation to changes in drug pricing, utilization, formulary strategies, and other marketplace factors. |
*Generic Product Identifier – Wolters Kluwer’s MediSpan
Neither approach eliminates the need to manage changes in the pharmacy marketplace. The traditional model provides a broader framework for managing rebate performance, while the drug-level model places greater emphasis on the performance of individual drugs.
National CooperativeRx’s Evaluation of Drug-Level Rebates
When drug-level rebate guarantees were proposed to National CooperativeRx, our team conducted an extensive evaluation that included detailed analyses and discussions to understand the model and assess its potential impact.
As part of this evaluation, National CooperativeRx reviewed quotes for several prospective member groups to assess how the drug-level approach could perform across different plan designs and utilization. Our analysis demonstrated the value this model change would bring to member groups. Following this thorough evaluation, National CooperativeRx began contract negotiations with CVS Caremark, including negotiations for the 2027 market check.
We are pleased to announce an agreement that establishes a clear definition of rebates and ensures that the dollars passed through under National CooperativeRx’s current rebate model will continue to be passed through under the drug-level rebate model.
National CooperativeRx will also continue to verify rebate payments through independent, full rebate audits, providing an additional layer of accountability and verification.
What Does This Mean for National CooperativeRx Member Groups?
The timing of the transition will depend on whether a group is a current or prospective National CooperativeRx member.
Current member groups: The current rebate model will remain in place through December 31, 2027, to ensure contract value for 2027 is delivered to all members per the terms of our master contract. Current member groups may consider a transition to the drug-level rebate model as part of the 2028 RFP process.
Prospective member groups: All future quotes for prospective member groups will use the drug-level rebate model.
Adapting to a Changing Marketplace
Industry data and market trends reinforce the need for change in the traditional rebate model. As the marketplace continues to shift, the drug-level rebate model offers a more detailed framework for understanding rebate value at the individual drug level. This approach provides greater visibility into the rebates drugs earn, a clearer view of how utilization and formulary decisions affect rebate performance, and greater flexibility to respond to marketplace changes.
The shift to drug-level rebate guarantees is a prime example of how National CooperativeRx monitors and navigates the pharmacy benefits marketplace on behalf of its member groups. The Cooperative evaluates industry developments and their potential impact to determine whether changes to our approach or master contract terms are appropriate for our member groups. Much of this work happens behind the scenes, so member groups do not have to navigate these changes independently and benefit from the Cooperative’s expertise.
As the pharmacy benefits industry continues to change, particularly in response to federal reforms, National CooperativeRx will continue to assess new developments and strategies, weighing their potential implications for our member groups and adapting our approach when appropriate.
Additional information about the transition will be shared as it becomes available. If you have questions, please reach out to your CVS Caremark or National CooperativeRx representative.
