Why Blue Shield of California's CEO thinks more payers will leave traditional PBMs behind

Blue Shield of California CEO Paul Markovich won't be surprised if other payers ditch traditional pharmacy benefit managers for a new model. 

The Oakland-based BCBS affiliate made headlines in August when it said it would not renew its contract with CVS Caremark to manage pharmacy benefits for its 4.8 million members, opting instead for a partnership with Amazon Pharmacy and Mark Cuban's Cost Plus Drugs as preferred pharmacy providers. Despite the shakeup, CVS will continue to administer Blue Shield's specialty drug benefits.

"We're going to launch it, we're going to make it work, and we're going to push everybody else to probably adopt something similar, because if they don't, they're going to have a worse consumer experience and they're going to have a hard time keeping up unless they adapt," Mr. Markovich told Becker's. 

CVS Health's stock dipped in the days following Blue Shield's announcement, though the pharmacy giant said the decision would not impact its 2023 earnings. Specialty drugs account for about 50 percent of Blue Shield's drug spending, CVS said in a regulatory filing. 

Mr. Markovich detailed how the company went through a rigorous contract procurement process for specialty benefits, and CVS Caremark remained the best option for that segment. 

"It's not that we're unwilling to work with the pharmacy benefit manager per se. It's just that we have to work with them in a way that's consistent with the new model that we want to deliver. In this case, [CVS Caremark] is willing to do that, which is big, and they're the best option on the market," Mr. Markovich said. 

"I would not be surprised if we see a lot more competition in that specialty space, especially with our announcement," he added. 

Under the new model, Puerto Rico-based Abarca Health will pay the company's prescription drug claims and Prime Therapeutics, which is collectively owned by 19 BCBS plans, will negotiate costs with drug manufacturers. 

There wasn't one particular moment that led Blue Shield to consider a new approach to pharmacy benefits, but the need for change became clear through analysis of short-term and long-term trends, Mr. Markovich said. 

"We did some forensic analyses on the financials, to see where the money was going, and it became clear pretty quickly that this is structurally, deeply, irretrievably flawed as a system," he added. 

Some industry analysts have expressed skepticism of the new plan. Adam Fein, PhD, CEO of the Drug Channels Institute, told the Wall Street Journal that Blue Shield is trading the "black box" of a PBM for a "collection of competing interests." 

Mr. Markovich said he's confident in the new model's ability to decrease costs — the company estimates it could save up to $500 million in drug costs annually. 

"The reason there's going to be savings is that we are treating pharmacy like a cost and quality center," he said. "It's a place that can improve the quality of our members' health and reduce costs, as opposed to a revenue and profit center. Right now, everyone in the value chain is treating it like a revenue and profit center."

Though Blue Shield is swapping one company managing its pharmacy benefits for five, Mr. Markovich noted that the company managed its own pharmacy benefits until about 10 years ago, so the switch is not completely novel.

"Even today, we handle customer service and we set our own formulary — our pharmacy benefit manager does not," he said "Some of those things are going to work the same way they do today. … Everything our partners aren't doing, we will do. We've sketched that out enough to have confidence we'll be able to get it done." 

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Top 40 articles from the past 6 months