California nonprofit insurer Blue Shield announced Thursday that it will stop using prescription benefits management intermediaries to negotiate contracts with pharmaceutical companies. Instead, we plan to combine alternative models and terminate the PBM contract. CVS Health It relies on multiple service providers, including (CVS). Amazon (AMZN) Home delivery pharmacy.
CVS Health shares fell 8.8% in Thursday’s stock market action. united health group UNH (UNH), which includes major PBM in Optum Medical Services, fell 1.2% but survived early lows. Meanwhile, Amazon stock rose 0.3%.
CVS, PBM model dump
The Wall Street Journal reported that Blue Shield, Calif., which has 4.8 million members, is terminating its contract with CVS Health’s prescription benefits management division, Caremark. PBM is a target of reform for both parties because it targets the hefty rebates paid by pharmaceutical companies. But an analysis by the Congressional Budget Office concluded that eliminating these rebates would increase the price Medicare pays for drugs.
But Blue Shield of California believes there are hidden costs because the PBM model lacks transparency and includes incentives that may encourage drug use. The medical plan says it expects to save up to $500 million in drug costs annually if the plan is fully implemented.
The reason UNH’s stock may have fallen along with CVS is that Blue Shield says it will eventually open up the new model to other insurers and employers, according to the WSJ.
Amazon and Cuba Join PBM Alternatives
The Blue Shield of California has not completely abandoned CVS. The company will continue to use his CVS Caremark for specialty pharmacy services for patients with complex conditions. In addition to Amazon Pharmacy, the nonprofit insurer will also factor in access to low-cost medicines from the Mark Cuban Cost Plus Drug Company. Abarca is a much smaller pharmacy benefits management company that processes prescription drug claims. Prime Therapeutics will work with Blue Shield to develop a value-based model for negotiating drug pricing with manufacturers based on efficacy and patient health outcomes.
Adam Fain, CEO of research firm Drug Channel Institute, told the WSJ that Blue Shield, Calif. “may be biting more than it bites” in trying to replace the “black box” PBM model. said.
Still, Fain noted on his blog this week that “the chances of major national legislation on the pharmacy benefit management (PBM) industry being implemented are more likely than ever.” The goal, he said, is to ensure that PBM rebates are passed on to plan sponsors, who can then share those rebates with plan members.
This means that threats to the PBM model come from two sides.
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