Amazon Pharmacy handles prescription deliveries, Abarca Health pays prescription drug claims, Navitus Health Solutions provides management of the pharmacy retail network, Prime Therapeutics negotiates drug manufacturers, and CVS Health manages the specialty drug network.
Becker’s sat down with Blue Shield’s chief pharmacy officer, Matt Gibbs, PharmD, on the Payer Issues Podcast to discuss pharmacy trends disrupting the health insurance industry.
Question: What’s your vision for pharmacy care at Blue Shield moving forward?
Matt Gibbs: You can have the best member digital tools, the best decision support, and present hundreds of options to a patient or member in terms of how they can make more informed healthcare decisions, but those tools are only as good as the data that goes in. What has been missing in pharmacy for so long is that the information presented to a patient is often clouded by other forces that don’t necessarily provide accurate information, particularly regarding the actual cost of a drug.
Are you seeing what a drug costs at a certain pharmacy on a certain day? Or are you seeing what your PBM or insurance plan is presenting to you? Our goal is to break that apart. If we really want to leverage our great digital assets, we need to give the member actual information based on the cost of a drug, so they can make an informed decision.
We want to strip it all away and show the net cost to the member. That shouldn’t be hard. It sounds simple, but it’s revolutionary because this is one part of the U.S. economy where the real price is rarely presented to the consumer.
Q: What strategies or initiatives are you prioritizing as you’ve come into this new role to drive these changes?
MG: The first thing that had to be done as a health plan was to take back our management of pharmacy. Health plans throughout the country have outsourced their pharmacy departments, their services, and even their clinical reviews to PBMs. Now they’re scratching their heads, asking, ‘Why are my costs going up? Why do I not have flexibility in what drugs I cover? Why does my PBM always want to change my contract when I want to do something new or work with a different pharmacy?’
Health plans are waking up to the fact that pharmacy is no longer 10% of your total healthcare spend, it’s 30% or 50%. Taking control of that function is key to your future existence as a health plan, no matter how big or small you are. We saw the big health plans early on merge with big PBMs because they saw this coming. They knew that pharmacy had to be an owned and controlled asset if you wanted to control your healthcare destiny.
Blue Shield is saying, ‘We want to do that too, but we don’t want to be owned by or own a big PBM because we know there are lots of problems there. We want to break it apart and go back to the way things were in the ‘90s when health plans owned and managed their own pharmacy benefits. Blue Shield is ahead of the curve on this because we’re going to blow the traditional PBM model away. We did that in 2024 by dismantling certain parts, and now we use five different service providers to uniquely contract and supplement our pharmacy offering where we own the relationship and we own the contract.
All these combined prevent what happens in a vertically integrated PBM, where one entity controls everything, siphoning money from one area, employing from another, offering rebates, and making money at the expense of the health plan. Operating separately allows me to negotiate in a much more linear fashion. It also allows me to describe the services and give flexibility in the contracts that allow me to get to this more transparent net price. Removing vested interests is key.
Q: Many insurers are facing financial headwinds from expensive specialty drug costs, especially GLP-1s. What’s your perspective on this ongoing cost trend and the future of managing these medications?
The lion’s share of revenue made by any PBM today is actually coming from specialty pharmacy. That gives me pause as a health plan because now their biggest revenue driver is based on the highest-cost item for me as a health plan. That does not align well.
What you have to do is two things. One, you want to make sure that your specialty arrangement is a “cost plus” arrangement, meaning that you’re getting acquisition cost at the specialty pharmacy plus the dispensing fee at every drug level. Many health plans contract across all their specialty drugs with an average, and unfortunately, they get taken advantage of.
The second thing you want to make sure you’re doing on the specialty side, outside of the acquisition cost, is the ability to do direct contracting on certain specialty drugs. The reason costs are going up is because the hands are still in the basket, whether it’s manufacturing, white-labeling, or house-branded biosimilars. It’s all motivated by profit, and it’s not in the best interest of the health plan, the consumer, or our downstream employer clients. Most importantly, it’s not in the best interest of our members. We’re cleaning that up as much as we can, one drug at a time, but you need flexibility in your contracts.
Health plans need to wake up and understand that pharmacy is the future. Whether it’s gene therapy, more specialty drugs, or other advanced treatments, gone are the days of testing and surgery being the main focus. We’re already seeing that in many areas.
