Blue Shield of California looks to cut reliance on CVS, taps Amazon

By Bhanvi Satija

(Reuters) -Non-profit insurer Blue Shield of California plans to depend less on CVS Health as its pharmacy benefit manager and work with others such as and Mark Cuban’s drug firm to reduce reliance on companies that negotiate drug prices.

CVS shares slid over 6%, while rivals Cigna Group and UnitedHealth Group, which also have pharmacy benefit management units, fell 5% and 1%, respectively, in early trade.

Pharmacy benefit managers (PBMs), which maintain lists of drugs covered by health insurance plans and negotiate prices with manufacturers, have recently come under scrutiny from lawmakers for their role in rising healthcare costs.

Blue Shield, which has health plans that cover 4.8 million members, said it will now work with five different companies, including Mark Cuban Cost Plus Drug Company, to provide “convenient, transparent access to medications while lowering costs”.

“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 Elizabeth Anderson, analyst at Evercore ISI.

Blue Shield will still retain CVS Caremark for its specialty pharmacy services, while Amazon will provide delivery of prescription medications as well as upfront pricing. Mark Cuban Cost Plus Drug Company will work to reduce surprise drug costs at the pharmacy pick-up counter.

“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 said in a statement.

Privately held Abarca will pay prescription drug claims, while smaller PBM Prime Therapeutics would work with Blue Shield to negotiate savings with drugmakers, the non-profit insurer said.

Blue Shield said it expects to save up to $500 million in annual drug costs once its multi-year strategy is fully implemented.

The loss of the Blue Shield pharmacy benefit management contract is another blow to Caremark, which is also set to lose the contract to manage Centene’s $40 billion annual pharmacy needs from next year.

(Reporting by Manas Mishra, Mariam Sunny and Bhanvi Satija in Bengaluru; Editing by Shweta Agarwal, Pooja Desai and Krishna Chandra Eluri)