Shares of the companies that own the U.S.’s three largest pharmacy-benefit managers fell early Thursday, following an announcement from a major nonprofit health insurer that it was turning away from the pharmacy benefit management industry.
The decision by the insurer, Blue Shield of California, which was earlier reported by The Wall Street Journal, could pose a major threat to the three big pharmacy-benefit managers, which are owned by
CVS Health
(ticker: CVS),
Cigna
(CI), and
UnitedHealth Group
(UNH). The pharmacy-benefit managers stand between health insurers and drug companies, negotiating prices on behalf of the insurers.
But now, Blue Shield of California says it will go without a PBM, instead managing its drug benefits by cobbling together five services that compete with certain aspects of the PBM business. Its new offering will include at-home drug delivery from
Amazon,
while CVS will continue handling specialty drugs for Blue Shield of California’s 4.8 million members. Access to low-cost medications will come via Cost Plus Drug Company, the mail-order pharmacy owned by Mark Cuban, the billionaire owner of the Dallas Mavericks.
“We look forward to providing care for Blue Shield of California’s members who require complex, specialty medications—as we have for nearly two decades,” CVS said in an emailed statement.
Shares of CVS, which currently provides pharmacy benefit management services to Blue Shield of California, were down 9.2%. In a note early Thursday, Evercore ISI analyst Elizabeth Anderson estimated that the decision by Blue Shield of California alone could cut CVS’s 2025 earnings by $0.02 to $0.06 per share.
Cigna
shares fell 6.4%, while UnitedHealth shares slipped 1.3%.
The business model of the pharmacy-benefit managers, or PBMs, has come in for growing criticism in recent years. PBMs are opaque middlemen, offering little disclosure regarding the deals they cut. Drugmakers and other critics have characterized them as extracting profits while offering little value, but PBMs say their negotiating power drives savings for their customers..
Blue Shield’s move could raise worries that other insurers might do the same. While Aetna, Cigna, and UnitedHealthcare are likely captive markets for the PBMs, as each shares a corporate parent with a major pharmacy benefit manager, smaller and regional insurers could be in play.
“Many in the industry will likely be watching this situation closely as managing the five partnerships could prove tricky,” Anderson wrote Monday. “But if BS of CA is successful, we could see additional regionals move more in a similar direction.”
Blue Shield said he plan could save it around $500 million annually and will fully launch in 2025 after a limited rollout next year.
Amazon
‘s increasing presence in healthcare has been a growing concern for CVS stock, as the companies have clashed in bids to acquire health-services providers.
“With the help of Amazon’s upfront pricing, on-time delivery, and round-the-clock access to clinical care, we can provide a customer-centric pharmacy experience that supports better health outcomes,” said John Love, vice president of Amazon Pharmacy, in a joint statement with Blue Shield of California.
Write to Adam Clark at [email protected]
Read the full article here
