How one health insurer is trying to change the industry

Blue Shield of California, one of the state’s largest health insurers, is switching up the way it buys prescription drugs in an effort to lower costs for its 4.8 million members.

The non-profit health insurer yesterday announced plans to drop CVS Health’s Caremark, the pharmacy-benefit manager it currently uses, in favor of a multi-pronged approach to purchasing prescription drugs and getting them to patients.

• Pharmacy-benefit managers are companies that use their wholesale power to negotiate rebates with drug makers, then pass those savings on to health insurers (after keeping a portion for themselves).
• However, some experts and advocacy groups argue PBMs actually end up inflating prices for health insurers and consumers, since they’re incentivized to favor more expensive drugs with higher profit margins.

🛡️ The new approach: Instead of exclusively using Caremark, Blue Shield will start working with four additional companies that each perform a designated function, including the Mark Cuban Cost Plus Drug Company for low-cost medications, Caremark for specialty drugs, and Amazon for at-home drug delivery.

The health insurer estimates it’ll save up to $500 million in annual drug costs under the new system, resulting in “substantially lower” prices for its members.

👀 Looking ahead… Blue Shield is aiming to fully launch the plan in 2025 after a limited rollout next year. If successful, the new system could encourage other health insurers and employers to abandon traditional PBMs in favor of lower-cost setups, CNBC reports.