The U.S. system of pricing and insurance coverage for prescription drugs has come under immense criticism for being overly complicated and costly. Now, a major health insurer — Blue Shield of California — says it is opting out of that system to try a new model “designed to fix problems in today’s broken prescription drug system.”
The non-profit insurer, with some 4.8 million members, said Thursday that it will stop using the CVS Caremark pharmacy benefit management service. Pharmacy benefit managers serve as middlemen who negotiate drug prices and rebates with manufacturers in a complex and opaque system that critics contend drives up costs. Blue Shield of California will instead work with five different companies, including Amazon.com and Mark Cuban's Cost Plus Drug Company, in an effort to lower drug costs for those it insures. Blue Shield of California said it will continue to use CVS Caremark to manage specialty drugs for members with complex conditions.
“The current pharmacy system is extremely expensive, enormously complex, completely opaque, and designed to maximize the profit of participants instead of the quality, convenience and cost-effectiveness for consumers,” Paul Markovich, president and CEO of Blue Shield of California, said in a statement. “That is why we are working with like-minded partners to create a completely new, more transparent system that gets the right drugs to the right people at the right time at a substantially lower cost."
Blue Shield of California reportedly aims to eliminate rebates and hidden fees from its negotiations with drug companies. It says that once its strategy is fully implemented it expects to save as much as $500 million a year, or roughly 10% to 15% of what it now spends on drugs.
Industry experts said that the logistics of the new approach and coordinating among so many companies will likely prove challenging — and that the discounts achieved under the new system might not match the ones negotiated by pharmacy benefit managers. "Many in the industry will likely be watching this situation closely as managing the five partnerships could prove tricky, but if it (Blue Shield) is successful, we could see additional regionals move more in a similar direction," Evercore ISI analyst Elizabeth Anderson told Reuters.
