Could value-based pharmacy payment models help control drug spend?

The amount of money the US spends on pharmaceuticals is growing rapidly.

Between 2023 and 2024, total pharmaceutical expenditures increased by 10.2% to $805.9 billion, largely driven by demand for GLP-1s, according to a 2025 study. Higher drug spend contributes to growth in overall US healthcare spending, which often raises insurance premium costs.

Value-based payment models have become increasingly popular tools to control healthcare spending. Such payment models tie insurance reimbursements to quality metrics, such as improving patient health outcomes, rather than basing reimbursement solely on the quantity of services provided. The theory is that doing so both increases the quality of patient care and lowers overall costs, according to Mark Ey, SVP and COO of the National Community Pharmacists Association, a trade group.

In 2025, more than half of primary care physicians received reimbursements from a value-based payment model, according to the Commonwealth Fund.

But while they’ve taken off in the medical setting, they’re still rare in the pharmacy setting. Just 5% of employers and 26% of health plans had value-based pharmacy contracts as of 2023, according to a report from consulting firm Pharmaceutical Strategies Group.

One size does not fit all

There are many ways a value-based pharmacy contract can be structured, according to Mitzi Wasik, SVP of practice strategy and innovation at the Academy of Managed Care Pharmacy, a professional association that works to manage medication costs and make medicines more accessible. The parties involved in these agreements are often insurers, pharmacy benefit managers (PBMs), pharmaceutical manufacturers, or pharmacies themselves, though not all are involved in every contract.

“If you’ve seen one contract, you’ve seen one contract,” Wasik said.

William Doucette, the Deborah K. Veale professor in healthcare policy at the University of Iowa, conducted a study with Wellmark that examined how effective the insurer’s value-based pharmacy program with 73 community pharmacies worked at reducing costs in 2017 and 2018. The study was published in 2021 in the Journal of Managed Care and Specialty Pharmacy.

It looked at a list of 18 metrics Wellmark had in place over these two years, such as improving medication adherence and chronic condition management. The insurer then scored the pharmacies on their ability to meet the metrics and reimbursed them based on those scores. Scoring higher led to higher reimbursement, Doucette said.

The study found that the value-based agreement significantly reduced the amount Wellmark paid to cover beneficiaries with one or more chronic conditions. Total costs of care per member per month for beneficiaries going to pharmacies participating in the program were $30.48 lower than costs for those going to non-participating pharmacies. Under similar circumstances, other payers with 100,000 beneficiaries who have at least one chronic condition could save $26.5 million annually, the study concluded.

However, value-based agreements between community pharmacies and insurers aren’t very common outside of smaller local health plans like Wellmark, according to Ey. Wellmark provides plans for more than 2 million members in Iowa and South Dakota. Many value-based payment agreements are made between a pharmaceutical manufacturer and an insurer or a PBM.

Manufacturers may be incentivized to make such agreements with health plans because they could help their drugs gain preferable placement on formularies and differentiate them from competitors, according to a 2019 study from Rutgers University.

Healthcare Brew reached out to the American Pharmacists Association (APhA) for comment on its stance on value-based pharmacy, and the organization pointed us to its policy manual, which states that “APhA supports value-based payment models that include pharmacists as essential healthcare team members and that promote coordinated care, improved health outcomes, and lower total costs of healthcare.”

Chris Bond, spokesperson for AHIP, the insurance industry’s largest trade group, told Healthcare Brew that “health plans support innovative payment models to lower the cost of prescription drugs for consumers.”

Not a magic bullet

Value-based pharmacy contracts also come with some downsides and challenges for pharmacies and pharmacists.

For one, the cost-saving benefits from some types of value-based contracts don’t always reach pharmacies themselves, according to Ey. The reimbursement pharmacies get when they ensure patients adhere to their treatment plans, for example, often isn’t enough to cover the amount the pharmacy is losing due to low dispensing reimbursement rates, he said.

Having to counsel patients on medication adherence or A1C level management also adds work to pharmacists’ already full plates. While many community pharmacists would like to do such tasks, according to Ey, they’re often not reimbursed enough to justify the extra work.

“There’s an ethical and professional dilemma of trying to do the right thing while also trying to keep your business viable,” he said. “You can’t bring in extra staff and take up extra staff time to do a lot of this work if we’re not being reimbursed for it. And all we’re asking for is fair reimbursement. We’re not asking for it to be a large profit center.”

Collecting adequate data is another challenge. If patients decide to pay in cash for their prescriptions at the pharmacy instead of going through their insurer, for instance, the payer doesn’t get data on whether they’re still picking up their prescriptions, Wasik said. That means they can’t track that patient’s medication adherence, which is often a key factor in value-based contracts.

“Pharmacies might be doing the right thing every day and every month and working to get these patients adherent, but because the data is fragmented, the pharmacy won’t get credit for it,” she said.