CVS Takes Major Hit at the Hands of Amazon and Mark Cuban’s Company

CVS Takes Major Hit at the Hands of Amazon and Mark Cuban’s Company

CVS took a major hit on Thursday.

Blue Shield of California announced a new pharmacy care model that is designed to "fix problems in today’s broken prescription drug system."

The company said it will no longer use CVS Health’s Caremark as its pharmacy benefit manager and instead will partner with several companies, including Amazon Pharmacy and Mark Cuban Cost Plus Drug Company. The insurer expects to save up to $500 million in annual drug costs once the multi-year plan is fully implemented.

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CVS's stock lost more than 8% today.

CVS just two weeks ago announced the layoff of up to 5,000 workers. It is unknown if the layoffs, in part, were in anticipation of the loss od the Blue Shield of California business.

“The nonprofit health plan is transforming how medications are purchased and supplied to its 4.8 million members by selecting organizations that share Blue Shield’s vision for more affordable and transparent pharmacy services,” said Blue Shield.

Thursday’s announcement is a major milestone in Blue Shield’s Pharmacy Care Reimagined initiative, which will help provide its members with convenient, transparent access to medications while lowering costs. Once Blue Shield’s multi-year strategy is fully implemented, the health plan expects to save up to $500 million in annual drug costs.

Most American adults take at least one prescription drug annually, with more than a third of adults taking at least three medications per year. Already a significant cost, total prescription drug spend in the United States is consistently rising. In 2021, the American healthcare system spent more than $600 billion on prescription drugs – about $1,500 per person, per year.

The current pharmacy care system rewards some stakeholders for selling more drugs at higher costs. Blue Shield is seeking to transform the system into a value-based model that provides members with the medications they need at a more affordable cost.

“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,” said Paul Markovich, president and CEO of Blue Shield of California. “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."

The company said CVS will retain one piece of the work "CVS Caremark will provide specialty pharmacy services for members with complex conditions, including education and high-touch patient support."