Blue Shield of California ditches CVS Caremark as PBM, unveils new pharmacy care model

Blue Shield of California today unveiled a new model for pharmacy care that it hopes will overhaul the “broken prescription drug system.”

Under the Pharmacy Care Reimagined program, the health plan will sever most of its ties with CVS Health’s Caremark, its current pharmacy benefit manager. But not all of them, Sandra Clarke, Blue Shield of California’s chief operating officer, told Fierce Healthcare.

Caremark will instead become one of five companies the insurer partners with in the initiative. The PBM giant will still handle specialty drugs, which account for more than half of drug spending in the U.S.

“A number of those drugs are infusions, or they’re things that we might be delivering through a provider’s office,” Clarke said. “So, they may or may not be included, under that categorization of specialty for us. CVS offers a great experience for our members, and we wanted to continue that.”

Aside from Caremark, the other partners are Amazon Pharmacy, Abarca, Mark Cuban Cost Plus Drug Company and Prime Therapeutics.

Each will handle a different piece of the puzzle; Amazon, for instance, will provide upfront pricing as well as free, fast home prescription delivery, while Prime Therapeutics, a PBM collectively owned by a slew of Blues plans, will take on the work of negotiating directly with pharmaceutical companies.

Abarca will take the lead on paying claims while Cost Plus Drugs will be responsible for creating a simple and transparent pricing model, reducing surprise costs for patients at the pharmacy counter.

Ultimately, the goal for the program is to move beyond the existing paradigms of pharmacy care.

“The whole point of this is that we don’t have one pharmacy benefit manager anymore,” Clarke said. “We have partners that are best in breed at particular pieces, and we are working in the middle, if you will, making sure that our members are getting the best prices and the best experience.”

The health plan hopes to cut prescription drugs costs between 10% and 15%, or about $500 million a year. In 2021, the healthcare system spent more than $600 billion on prescription drugs, or about $1,500 per person, per year.

A study by RAND in 2021 said that prescription drug prices in the U.S. average 2.56 times more than those seen in 32 other countries.

The move means that Blue Shield of California, which has 4.8 million members, becomes the second large health insurance plan to rein in ties with Caremark in recent months. Last year, Centene decided to ditch its contract with Caremark in favor of one with Express Scripts.

Stock in CVS Health, Caremark’s parent company, fell when the news broke, and shares were still down by 9% at about 2:30 p.m. on Thursday. 

Ethan Slavin, a spokesperson for CVS Caremark, in an email to Fierce Healthcare underscored CVS’s role in the Blue Shield of California effort.  

“Specialty pharmacy spend now represents over 50% of pharmacy benefit spend in the marketplace,” Slavin said. “Fragmentation in the healthcare industry is one of the primary reasons healthcare remains too complex and expensive. We remain confident in the value we provide our customers and that our integrated solutions will continue to resonate in the marketplace.”

Slavin also noted that Blue Shield of California has a history of trying to unbundle pharmacy services.

“This is not a new concept,” Slavin said. “In fact, they only recently rebundled their pharmacy services in 2021. We have won several large BCBS plans on an integrated basis within the last two years and are confident in our ability to serve these large, sophisticated plans. BSC’s decision will have no impact to our 2023 guidance and an immaterial impact on our longer-term outlook.”

That PBMs operate in a black box has been a common criticism lobbed at the industry. Blue Shield of California hopes to inject some transparency into the process with a simple net price system meant to cut out rebates and hidden fees

“The supply chain for how a drug gets from the point where it’s manufactured into the hands of one of our members is ridiculously complex,” Clarke said. “And a lot of those points have costs built into them that are based on—in layperson’s terms—what I would call the list price of the drug or by generating higher volumes. It doesn’t create a situation where people have any incentive to reduce the cost of drugs at that list-price level.”

However, not everybody’s convinced that Blue Shield of California’s effort will work.

Adam Fein, Ph.D., the chief executive of the Drug Channels Institute, which provides research on the pharmaceutical supply chain, told The Wall Street Journal that he thinks the companies involved “are trading the black box for a collection of competing interests. They may be biting off more than they can chew.”

To which Clarke responded to Fierce Healthcare: “Everyone needs skeptics. It keeps you honest and keeps you checking yourself.”

A project with so many corporate heavy hitters needs to be phased in and not too quickly, she said. The partnership with Prime Therapeutics will begin in 2024, and the other components of the program will be added in 2025.

“We would not have invested the time and energy and commitment to this if we did not believe that it was possible,” Clarke said. “I firmly believe that we have this group of philosophically aligned, like-minded partners who want to do something different, who agree with us that this is an area just ripe for massive change.

“And when we make this work in California, which is an extremely complicated and very large state, we will show that it can be done on a broader scale,” she said.