Insurer teams with Amazon, Mark Cuban, CVS and more on new Rx model 

August 24, 2023

Blue Shield of California is making headlines following the announcement of their new prescription drug strategy for their fully insured business. Blue Shield is dropping a traditional PBM partnership with CVS Caremark to work with a selection of companies that will perform designated functions. The insurer expects to achieve savings of 10% to 15% of what they currently spend on drugs – and they say they will pass these savings on to their customers. The new model will fully launch in 2025 after a limited rollout next year. What is unique to this strategy is the partnerships with vendors that have not historically had a big footprint in the commercial insurance space.

• Amazon Pharmacy will provide home-delivery of prescriptions.
• Mark Cuban Cost Plus Drug Company will provide access to low-cost generic medications, including at retail pharmacies.
• Abarca will process drug claims.
• CVS Caremark will continue to be the specialty pharmacy manager.
• Prime Therapeutics will handle rebates and drug contracting.

It is common practice for large insurance companies to use a “managed competition” approach to maximize value, while also requiring different entities to work collaboratively. Health plans have been purchasing services from separate vendors for years; specialty drug distribution and mail-order drugs are just two examples of this. This has meant that plans need to ensure coordination between services, as they do for the many point solutions that can get bolted onto the prescription drug benefit.

What is unique to this new arrangement is that Blue Shield is purchasing so many key PBM services separately, which need to work seamlessly together. It’s a bold move, as Rx is a very visible benefit and patients will be aware in real-time – at the pharmacy counter – if coordination is not working as it should.  

Mercer supports strategies that challenge the norm and bring competition to the drug benefit management market. As the Blue Shield program rolls out, we will be paying attention to two things: savings and member experience.

We can’t comment on whether the savings projections announced by Blue Shield are reasonable, especially given that specialty drugs are the biggest driver of pharmacy benefit cost (typically accounting for 50% or more of a plan’s total drug spend) and that part of the Blue Shield program is not really changing. Generics represent about 90% of all dispensed prescriptions, but only about 20% (or less) of total prescription drug spend, which limits potential savings from the partnership with Mark Cuban Cost Plus Drug Company. As the program rolls out for Blue Shield’s fully insured lives, we will be watching for reductions in plan premiums stemming from the value Blue Shield is passing along.

Maintaining member experience is always challenging for a new program. This new model will require Blue Shield to dedicate internal resources and develop business rules to get all these vendors to work together to ensure a seamless member experience.

This new program is only the latest example of ongoing market disruption in the pharmacy space and is focused on what we all want: greater value and an enhanced patient experience.