Blue Shield of California drops CVS, taps Amazon and others to lower drug costs

(Reuters) -Non-profit insurer Blue Shield of California plans to drop CVS Health (NYSE:) as its pharmacy benefit manager and work with Amazon (NASDAQ:) and others to cut drug costs for its members and reduce reliance on companies that negotiate drug prices.

The move sent shares of CVS sliding 8%, while rivals Cigna (NYSE:) Group and UnitedHealth Group (NYSE:), which also have pharmacy benefit management units, fell sharply in premarket trading.

Pharmacy benefit managers, which maintain lists of drugs covered by health insurance plans and negotiate prices with manufacturers, have recently come under scrutiny from lawmakers for their role in rising healthcare costs.

Blue Shield, whose health plans cover 4.8 million members, said it will now work with five different companies, including Mark Cuban’s drug company, to provide “convenient, transparent access to medications while lowering costs.”

The news was first reported by the Wall Street Journal.

“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, the CEO of Blue Shield.

Amazon will provide delivery of prescription medications, as well as upfront pricing, while Mark Cuban Cost Plus Drug Company will work to reduce surprise drug costs at the pharmacy pick-up counter.

Privately held Abarca will pay prescription drug claims, while Prime Therapeutics will work with Blue Shield to negotiate savings with drugmakers, the company said.

Blue Shield will also work with CVS Caremark for specialty pharmacy services.

The loss of the Blue Shield pharmacy benefit management contract is another blow to Caremark, which is also set to lose the contract to manage Centene (NYSE:)’s $40 billion annual pharmacy needs from next year.

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