© Reuters. FILE PHOTO: CVS Well being brand is seen displayed on this illustration taken, Might 3, 2022. REUTERS/Dado Ruvic/Illustration/File Photograph
By Bhanvi Satija and Patrick Wingrove
(Reuters) -Blue Defend of California plans to cease utilizing most of CVS Well being (NYSE:)’s pharmacy profit administration providers and work with others, together with Amazon.com (NASDAQ:) and Mark Cuban’s drug agency, in a bid to cut back drug prices for its insurance coverage plan members.
The non-profit insurer, which serves roughly 4.8 million members, mentioned on Thursday it now plans to faucet 5 totally different companions for providers usually supplied by pharmacy advantages managers, which negotiate drug costs with producers.
The regional medical insurance supplier will nonetheless retain CVS Caremark for managing specialty medication, that are expensive medicines used to deal with advanced circumstances like most cancers and rheumatoid arthritis.
Nonetheless, it expects to avoid wasting $500 million yearly in medication prices as soon as this system is totally launched in January 2025.
Paul Markovich, Blue Defend of California’s CEO, mentioned in an interview that the transfer had been within the works for a while however was spurred by CVS’s reluctance to cowl a less expensive model of Johnson & Johnson (NYSE:)’s most cancers drug Zytiga this yr.
“We managed to get to the identical drug for about $160 a month (from round $3,000) and went to CVS and mentioned we would like them to promote it, however they informed us ‘no’ for about 5 months till they might,” he mentioned.
CVS shares slid over 9%, whereas rivals Cigna (NYSE:) Group and UnitedHealth Group (NYSE:), which even have pharmacy profit administration (PBM) items, fell 6% and 1%, respectively, in early commerce over investor issues that different insurers could undertake the same mannequin.
“Many within the business will probably be watching this case intently as managing the 5 partnerships may show tough, but when it (Blue Defend) is profitable, we may see extra regionals transfer extra in the same course,” mentioned Elizabeth Anderson, analyst at Evercore ISI.
Different analysts highlighted logistical challenges with executing the brand new mannequin as an alternative of CVS’ full vary of PBM providers.
Markovich mentioned the insurer had sufficient lead time and expertise working with a number of distributors, hospitals and physicians to handle any logistical challenges.
“I do not wish to trivialize the truth that there’s coordination concerned right here, however (logistics) is what we do for a dwelling,” he mentioned.
Amazon Pharmacy will present at-home supply of pharmaceuticals in addition to upfront pricing, whereas Mark Cuban’s Price Plus Drug Firm will present entry to generic medication, Blue Defend mentioned.
CVS mentioned it was wanting ahead to “offering look after Blue Defend of California’s members who require advanced, specialty medicines – as we now have for practically 20 years.”
The change, nonetheless, marks one other blow to CVS Caremark, which is about to lose the contract to handle Centene (NYSE:)’s $40 billion annual pharmacy wants from subsequent yr.
Blue Defend of California’s different companions embrace privately held Abarca for processing claims associated to pharmaceuticals, whereas smaller PBM Prime Therapeutics will work to barter financial savings with drugmakers.