Blue Shield of California said Thursday it will soon work with several companies to manage the prescriptions of its nearly 5 million health plan members, including Amazon Pharmacy, Cuban’s company and a fast-growing pharmacy benefit manager known as Abarca, which will “pay prescription drug claims.” Financial terms of the arrangement were not disclosed.
But CVS Caremark will continue to provide specialty pharmacy services for Blue Shield “members with complex conditions, including education and high-touch patient support,” the health plan said.
And it’s the specialty pharmacy business that may be a bigger deal to CVS and patients looking for a better deal on their costliest medicines.
As more expensive specialty drugs from Alzheimer treatments to new drugs for cancer hit the U.S. market, those handling prescriptions and their claims are bracing for an even larger focus on these costly medicines.
Health plans and pharmacy benefit managers that manage drug costs say specialty drugs now account for 50% or greater of the total prescription spending they manage. In some cases, employer clients are seeing specialty costs account for 60% or even greater of their total drug spending.
“We think the announcement actually highlights the value of legacy PBMs and limitations of newer models as Blue Shield is keeping the fastest growing and largest portion of its drug spend with CVS,” Lisa Gill, managing director at J.P. Morgan Securities, and her colleagues wrote in a report Thursday.
Stocks of companies that operate large PBMs, including CVS; UnitedHealth Group, which runs OptumRx; and Cigna, which runs the Express Scripts PBM, were hit hard Thursday. The price of CVS shares closed down more than 8% Thursday on the New York Stock Exchange.
But the story is a bit more complicated.
Long gone are the days when health plans and PBMs had to worry about the launch of a new cholesterol pill or prescription antidepressant that would cost $4 each and be taken by millions of Americans. These days, it’s specialty drugs derived from biotechnology that may only be 1% to 2% of the claims health plans process for an employer or government client but are becoming a more dominant part of what they have to administer and manage.
“Based on nearly 20 years of success, we have retained the specialty business for Blue Shield of California,” CVS Health said in a statement Thursday afternoon. “Specialty pharmacy spend now represents over 50% of pharmacy benefit spend in the marketplace.”
To be sure, the Blue Shield move might even carry more risk than reward, analysts say.
“Blue Shield’s new model essentially carves out various PBM functions; Amazon will offer home delivery, Cost Plus Drug Company will provide access to generics, Abarca will process claims, Prime (Therapeutics) will negotiate with manufacturers to move towards a value-based model, and CVS will provide specialty pharmacy services,” Gill wrote in a report Thursday. “Historically, the driving force behind carve-outs has been to secure better discounts and improve transparency. However, we think the decision to carve out so many different offerings carries potential executive risk that could result in a less coordinated offering for patients.”
CVS said the services it provides, from managing prescriptions to delivering them to patients, is more seamless.
“Fragmentation in the health care industry is one of the primary reasons health care remains too complex and expensive,” CVS said in its statement Thursday afternoon. “We remain confident in the value we provide our customers and that our integrated solutions will continue to resonate in the marketplace. Customers choose CVS Caremark because of our ability to seamlessly administer complex pharmacy and specialty pharmacy benefits to their members with high levels of customer service and satisfaction.”