CVS Health shares experienced a sharp 9% decline on Thursday after a big announcement by Blue Shield of California. The company stated that it would discontinue its utilization of CVS Health’s pharmacy benefit management services. This essentially changes the game for how Americans pay for their prescription drugs, hopefully pushing us toward a less complicated and less predatory system.
Blue Shield intends to establish a new partnership with Mark Cuban’s Cost Plus Drugs company and Amazon Pharmacy.
The new collaboration is put forth as a cost saving measure on pharmaceuticals for their nearly 5 million members.
This development implies a shift away from the system we’ve gotten used to for health insurers, resulting in a decrease in the stock prices of other companies offering these same services. Cigna and UnitedHealth Group reported drops of about 7% and 1%.
Pharmacy benefit managers (PBMs), like CVS Health, maintain catalogs of drugs covered by health insurance plans and then negotiate discounts with drug manufacturers. However, these groups have recently faced increased scrutiny from lawmakers due to their involvement in inflating drug prices, leading to a surge in healthcare expenses and a lack of care for underserved communities.
For over 15 years, CVS Health’s Caremark has served as Blue Shield’s PBM partner. In a departure from this long-standing partnership, Blue Shield will collaborate with five different companies to provide a solution that delivers convenient and transparent access to medications while concurrently reducing costs.
According to Blue Shield’s CEO, Paul Markovich, this initiative, slated for a full launch in 2025, has the potential to save the company up to $500 million annually.
Blue Shield has unveiled a fresh pharmacy care approach aimed at rectifying issues within the current flawed prescription drug system.
According to Paul Markovich, CEO of Blue Shield, the prevailing pharmacy system is characterized by exorbitant costs, a lack of transparency, excessive complexity, and a focus on maximizing participants’ profits rather than enhancing quality, convenience, and affordability for consumers. He stated, “This is precisely why we are collaborating with partners who share our vision, in order to establish an entirely new, transparent system that ensures the right medications reach the right individuals, promptly and at significantly reduced costs.”
As part of this initiative, Amazon Pharmacy will facilitate cost-free delivery of medications to members, while the Mark Cuban’s Cost Plus Drug Company will introduce a pricing model that Blue Shield asserts will be both uncomplicated and budget-friendly. Additionally, two other companies will provide supplementary services.