Blue Shield of California (largely) drops CVS

That is the news according to a report in Healthcare Dive.

Blue Shield of California…will drop CVS Caremark as the sole manager of its pharmacy benefits. In Caremark’s place, Blue Shield of California will contract out the job to five separate companies…Blue Shield of California, or BSCA, expects to save $500 million a year from the move, calling it a “milestone” for a “broken prescription drug system.”

While it's unclear if this cost savings will be realized, the approach will put additional burden on BSCA to coordinate across multiple PBMs. What are the pros and cons of integrated PBMS?

PBMs say they help lower drug prices and slow drug spending growth. But as middlemen between payers and drugmakers, PBMs are at the center of public ire?over high drug costs. To critics, PBMS favor high-cost drugs so they earn larger rebates and therefore reap higher profits.?They have also been slammed?for hidden fees, self-dealing and?complex black box contracts?that?health insurers and employers say leave them in the dark.

The article also notes that "Satisfaction with traditional PBMs has reached its lowest point in nearly a decade..."

How does BSCA plan to replace CVS Caremark? They are using a multipronged approach:

• Amazon will deliver non-specialty brand and generic medications to members’ homes.
• Mark Cuban's Cost Plus Drug Company will supply generic drugs at retail pharmacies,
• Prime Therapeutics, a midsize PBM, will negotiate drug rebates
• CVS Caremark will continue to provide specialty pharmacy dispensing. The article argues that the definition of what constitutes a "specialty" drug may become more narrow under the BSCA-CVS arrangement.
• BSCA will be in charge of their own formulary strategy and benefits design.

Where does BSCA expect to realize costs savings? Largely from directing individuals to more generic drugs where available, particular generic drugs for specialty products.

...42% of the drugs?on CVS’ high-priced specialty lists are generics. Of the specialty generics on CVS’ formulary, 71% could be filled at Cost Plus as of 2021, the nonprofit research firm found.

If this approach saves money, will employers be interested? Maybe, maybe not. Certainly yes if it lowers health care cost, but...

“If I’m a company with 20,000 employees in the U.S. and 5,000 in California, and now I have to educate those 5,000 employees on a new prescription drug plan that might save me 1% of cost, I got other things to do,” [Mike] Fox said.

So will large PBMs be totally cut off from the BSCA plan? Not entirely. As mentioned above, CVS is still providing specialty pharmacy dispensing. Additionally, Prime Therapeutics is already partnering with large PBMs.

Prime partnered with Express Scripts in 2019. Under the deal, Express Scripts handles rebate negotiations with drugmakers, along with retail pharmacy network contracting for most of Prime’s business...Specifically, Prime sources formulary rebates via Ascent Health Services, the Switzerland-based group purchasing organization created by Express Scripts in 2019. Prime joined Ascent’s ownership later that year, though Express Scripts remains Ascent’s controlling owner.

Will the BSCA plan work? That will take many years and much data to find out. However, what we do already know is that providing health care is certainly complex.

Originally posted at Healthcare Economist.?

The views expressed herein are those of the author and not necessarily the views of?FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.