Blue Shield of California is making a bold move to lower prescription drug prices by changing its partnership with CVS Health’s pharmacy benefit management service. This decision is expected to have ripple effects across the industry.
Blue Shield will be dropping most services from CVS Caremark, one of the major pharmacy benefit managers (PBMs) that help insurance companies negotiate drug prices. Instead, the nonprofit health plan will be partnering with Mark Cuban’s Cost Plus Drugs, Amazon Pharmacy, and other companies to purchase and deliver drugs. The new business model is set to begin ramping up next year and fully launch in 2025.
This shift comes at a time when PBMs are facing scrutiny from federal regulators and Congress over concerns that they are driving up drug prices. While PBM defenders argue that they actually lower prescription drug costs and increase access, Blue Shield’s decision to break ties with CVS Caremark shows a willingness to challenge the current drug pricing and reimbursement model.
If Blue Shield’s new model is successful in saving the insurer up to $500 million in annual drug costs, it could encourage other insurers or employers to follow suit or put pressure on PBMs to modify their business practices. Stacie Dusetzina, a professor of health policy at Vanderbilt University School of Medicine, sees this announcement as a major step in reshaping the industry.
Blue Shield aims to lower prescription costs and provide its nearly 5 million members with convenient and transparent access to medications. Under the new business model, the insurer will be working with five companies: Amazon Pharmacy for prescription delivery, Mark Cuban’s Cost Plus Drugs for a more affordable pricing model, Abarca for prescription drug claims, Prime Therapeutics to help negotiate prices with drug manufacturers, and CVS Caremark to continue providing specialty pharmacy services for members with complex conditions.
While some experts express concerns about Blue Shield’s ability to match the discounts negotiated by PBMs, CVS Health maintains that this decision will have no impact on its 2023 guidance. The stock price of various PBM companies dipped following the announcement.
Blue Shield’s CEO, Paul Markovich, explains that the current pharmacy system is expensive, complex, opaque, and designed to maximize profits. The insurer is working with like-minded partners to create a new, more transparent system that aims to lower costs and ensure the right drugs are delivered to the right people at the right time.
The success of Blue Shield’s new model will be closely watched by the industry, as managing the five partnerships could prove challenging. However, if this move proves successful, it could inspire other regional insurers to follow a similar path.
CVS Health emphasizes that fragmentation in the healthcare industry is one of the primary reasons for its complexity and high costs. The company remains confident in the value it provides to customers and believes its integrated solutions will continue to resonate in the marketplace.
Overall, Blue Shield of California’s decision to change its partnership with CVS Health’s pharmacy benefit management service has the potential to disrupt the industry and lead to significant changes in how prescription drug prices are negotiated and managed.
How will Blue Shield’s partnership with alternative drug purchasing and delivery companies give members greater transparency and control over their medication expenses?
Members with greater transparency and control when it comes to their medication expenses. By partnering with alternative drug purchasing and delivery companies, Blue Shield hopes to bypass the traditional PBM model and negotiate lower prices directly with drug manufacturers.
In recent years, PBMs like CVS Caremark have faced criticism for their role in the rising cost of prescription drugs. Some argue that they use their negotiating power to secure higher prices for medications, while others argue that they help control costs by negotiating discounts and rebates on behalf of insurers.
Blue Shield’s decision to shift away from CVS Caremark sends a clear message that they are committed to finding new solutions to address the issue of high drug prices. The partnership with Cost Plus Drugs and Amazon Pharmacy, both known for their innovative approaches to healthcare, is a strategic move that could disrupt the traditional PBM market and force other PBMs to reevaluate their practices.
By directly purchasing and delivering drugs through these new partners, Blue Shield aims to eliminate unnecessary middlemen and administrative costs, potentially resulting in significant savings. If successful, this could lead to savings of up to $500 million in annual drug costs for Blue Shield, setting a precedent for other insurers and employers to explore alternative models.
The decision also aligns with the broader push for transparency in healthcare. With a direct partnership with drug suppliers and delivery companies, Blue Shield can provide its members with clearer pricing information and more control over their healthcare decisions. This shift may also address concerns about lack of competition in the PBM market, as multiple partners are involved in the purchasing and delivery process.
As Blue Shield moves forward with its new business model, it will be closely watched by industry experts, regulators, and other healthcare stakeholders. Its success could signal a turning point in the industry’s approach to prescription drug pricing and reimbursement, potentially leading to more widespread changes and a more consumer-centric healthcare system.
