Blue Shield of California, a non-profit insurer catering to approximately 4.8 million members, intends to reduce its reliance on CVS Health’s pharmacy benefit management (PBM) services. Instead, it plans to engage various partners, including Amazon.com and Mark Cuban’s drug firm, to curtail drug costs for its insurance plan beneficiaries.
The regional health insurance provider recently announced its strategy to enlist five different partners to handle services typically overseen by PBMs, entities responsible for negotiating drug prices with manufacturers. This transition, set to be fully implemented in January 2025, is projected to save the insurer around $500 million annually in drug expenses.
While CVS Caremark will continue to manage specialty drugs – expensive medications used to treat intricate conditions like cancer and rheumatoid arthritis – Blue Shield of California’s CEO, Paul Markovich, clarified that the insurer’s decision was driven by CVS’s hesitation to cover a significantly more cost-effective version of Johnson & Johnson’s cancer drug, Zytiga, earlier this year.
Markovich emphasized the importance of lawmakers, the Federal Trade Commission, and employers scrutinizing PBMs’ role in surging healthcare costs. He expressed the need for a fairer pharmacy system for patients.
The transition’s announcement led to a more than 9% drop in CVS shares, with concerns spreading to rivals like Cigna Group and UnitedHealth Group, which also have PBMs.
Blue Shield’s partnership strategy includes Amazon Pharmacy for at-home prescription drug delivery and upfront pricing, while Mark Cuban’s Cost Plus Drug Company will offer access to generic drugs. Privately held Abarca will handle prescription drug-related claims processing, and smaller PBM Prime Therapeutics will engage in negotiations with drugmakers to achieve cost savings.
Analysts have noted potential challenges in managing multiple partnerships but suggested that if successful, this approach could inspire other regional insurers to adopt a similar model.
In response, CVS expressed its anticipation to continue providing specialized care for Blue Shield of California’s members requiring complex medications. However, this shift marks another setback for CVS Caremark, which is slated to lose the contract for managing Centene’s annual pharmacy requirements from the following year.
