Blue Shield Of CA Removes CVS As Pharmacy Benefit Manager In Favor Of Amazon & Others

Non-profit health insurance company Blue Shield of California, which covers 4.8 million people in the state, announced on Thursday that they will be switching pharmacy benefit managers from CVS Health Caremark to several other companies, including Amazon Pharmacy and Cost Plus Drugs, to save money and reduce reliance on companies that negotiate rebates with drug manufacturers.

For the past year, pharmacy benefit managers (PBMs), which are third party companies that act as intermediaries between insurance providers and pharmaceutical manufacturers, have faced increased criticism. Concern over their role in the supply chain of pharmaceuticals, how companies are compensated, and if their practices drive up costs rather than reduce them have brought states to challenge them on all sorts of issues. In California, this has included suing PBMs CVS Health Caremark, Express Scripts and OptumRx over violations of the state’s Unfair Competition Law and driving up the cost insulin earlier this year.

While PBMs have also been defended by supporters saying that they reduce healthcare costs, promote patient safety, and prevent millions of medication errors, climbing healthcare costs and continued issues with PBMs have increased public scorn against them. The push against PBMs led to Blue Shield of California to switch from traditional PBM CVS Health Caremark to a group of 5 more transparent and cost effective companies like Amazon Pharmacy and Cost Plus Drugs.

In a statement on Thursday, Blue Shield said that the new pharmacy care model will save the company $500 million each year and would “fix problems in today’s broken prescription drug system.”

California Blue Shield CEO Paul Markovich said, “The current pharmacy system is extremely expensive, enormously complex, completely opaque, and designed to maximize the profit of participants instead of the quality, convenience and cost-effectiveness for consumers. That is why we are working with like-minded partners to create a completely new, more transparent system that gets the right drugs to the right people at the right time at a substantially lower cost.”

The new Blue Shield plan

Under Blue Shield’s new plan, Amazon Pharmacy is to provide free delivery of medications to Blue Shield members. The Cost Plus Drug Company will create a pricing model to reduce drug prices, with Abarca handling prescription drug claims and Prime Therapeutics being the main negotiator with drug companies. CVS Health Caremark is to be a part of the new plan as well, but in a greatly diminished capacity as the provider for specialty pharmaceutical needs for those with “complex conditions.” Overall, the new system will no longer have one company in charge of every step of the process, with each company being transparent on everything from costs to how they conduct business.

“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,” CVS Health Caremark said in a statement Thursday. “The company did not elaborate further, ignoring the lost PBM agreement as well as their stock falling by 9% as a result of the announcement.”

Healthcare experts told the Globe that the action by Blue Shield would not be the last against traditional PBMs.

“PBMs have been under fire for awhile now, and it isn’t going to end with Blue Shield,” said Alexandra Robinson, a former drug manufacturer executive. “Amazon and Mark Cuban’s company (Cost Plus) have been inching more and more into the market and have expanding where the PBMs have been challenged. Other insurance companies will likely follow soon, or at the very least talk with their PBMs with what they want changed. PBMs are good at many things, but now there are serious alternatives to them.”

As of Thursday afternoon, other major insurers have yet to comment on Blue Shield’s changeover.