Blue Shield of California drops CVS, taps Amazon: What’s behind the PBM shakeup
As lawmakers scrutinize the nation’s pharmacy benefit managers, the California insurer expects to save $500 million in annual drug costs by replacing most of CVS Health’s PBM services by January 2025.
Blue Shield of California expects to save $500 million in annual drug costs by replacing most of CVS Health’s pharmacy benefit manager services with five different partners by January 2025. The insurer serves about 4.8 million members.
Amazon Pharmacy will offer at-home drug delivery, and Mark Cuban’s Cost Plus Drug Company will provide access to low-cost medications through retail pharmacies. Another company, Abarca Health, will process drug claims. Blue Shield will retain CVS Caremark for its specialty pharmacy services, which provide specialized therapies and counseling to patients suffering from complex disorders.
“We look forward to providing care for Blue Shield of California’s members who require complex, specialty medications, as we have for nearly two decades,” said Michael DeAngelis, a spokesman for CVS Health.
Paul Markovich, Blue Shield of California’s CEO, said the move had been in the works for some time but was spurred by CVS’s reluctance to cover a much less expensive version of Johnson & Johnson’s cancer drug Zytiga this year.
“We managed to get to the same drug for about $160 a month (instead of around $3,000) and went to CVS and said we’d like them to sell it, but they told us ‘no’ for about five months until they would,” he said.
Related: PBMs, the brokers who control drug prices, finally get Washington’s attention
Lawmakers and the Federal Trade Commission have been investigating the role of PBMs in rising health-care costs this year, which Markovich said is needed along with further scrutiny from employers to mold a fairer pharmacy system for patients.
The announcement has hurt the stock prices of several PBMs. CVS shares dropped by 9%, Cigna Group fell by 6% and UnitedHealth Group declined nearly 2% because of investor concerns that other insurers may adopt a similar model.
“Many in the industry will likely be watching this situation closely, as managing the five partnerships could prove tricky, but if it (Blue Shield) is successful, we could see additional regionals move more in a similar direction,” said analyst Elizabeth Anderson of Evercore ISI.