In a recent announcement, Blue Shield of CA (BSCA) indicated that they are dropping CVS Caremark as their PBM in favor of a new arrangement that is expected to result in savings of $500 million for the plan. “The insurer is contracting with Amazon Pharmacy for at-home drug delivery; online pharmacy Mark Cuban Cost Plus Drug Company for access to low-cost medications; PBM services company Abarca for claims processing; and PBM Prime Therapeutics to negotiate savings with drugmakers.” BSCA will continue to rely on CVS for its specialty pharmacy. “TD Cowen analyst Charles Rhyee estimated BSCA accounts for less than 1% of CVS’ earnings per share.
One of the key challenges facing BSCA, and the primary reason for skepticism, is the health plan’s ability to operationalize this change. Anyone who has shifted from a sole supplier to multiple vendors will readily attest to the challenges posed by managing multiple vendors. Clearly, the potential savings of $500M is a key driver, as well as the added transparency & control. However, the most interesting aspect of this story involves the unknowns.
Is BSCA going to be the domino that will tip over the other dominoes and fundamentally alter the way that health plans and employers operate?
Will this drive other health plans and employers to “cut the cord” with PBMs and carve out components of what a PBM typically offers?
Will others follow suit or wait until there are some measurable results?
Is BSCA trying to get ahead of the numerous PBM-focused bills?
Will this be used as a negotiating tool with PBMs to gain more favorable terms?
Given the difficulty of this initiative, no one has the answers to these questions yet and a fair amount of skepticism has been offered by the experts. The potential for disruption and fundamental change in market dynamics warrants careful evaluation (with some speculation sprinkled in) and close monitoring of this story..
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