Flipping the PBM Script

​Blue Shield of CA has a new PBM prescription for their 4.8M members – “flipping that (the current pharmacy supply chain) on its head.” according to CEO Paul Markovich.
 
The health insurer announced a move away from CVS as their PBM and is instead replacing it with multiple partners:

• CVS – will continue to be the pharmacy dispensing specialty medications
• Abarca – will be the claim adjudication platform
• Mark Cuban Cost Plus – will be responsible for the retail pharmacy network development and management
• Prime Therapeutics – will be responsible for rebates (Prime is part of Ascent GPO with Cigna/Express Scripts)
• Amazon Pharmacy – will be the mail order pharmacy

In a recent interview with The Wall Street Journal, Blue Shield's CEO, Paul Markovich, highlighted the challenges within the current pharmacy supply chain, characterizing it as a complex and opaque structure designed to maximize profits for its participants. “The current pharmacy supply chain is a forest of opacity and profit,” said Paul Markovich, Blue Shield’s chief executive officer “It is overwhelmingly complex, it is designed to maximize the earnings of the participants.” His company’s new setup, he said, will be “flipping that on its head.”

Blue Shield has unveiled a groundbreaking initiative that aims to bring greater transparency and efficiency to their pharmacy benefit management strategy.

Key highlights of Blue Shield's new setup include:

1. Diverse Partnership Approach: Blue Shield is diversifying its partners to manage different aspects of their pharmacy benefit management. The new partners include CVS for specialty medications, Abarca for claim adjudication, Mark Cuban Cost Plus for retail pharmacy network development, Prime Therapeutics for rebates, and Amazon Pharmacy for mail-order services.
2. Transparency and Cost Control: By breaking down the components of their pharmacy benefit management, Blue Shield intends to enhance transparency and provide insights into the cost structure of each part. This strategic move could potentially address the lack of visibility into cost breakdowns that often plague the traditional pharmacy supply chain.
3. Employer Implications: While this unique model might be challenging to replicate in its entirety for larger organizations, smaller Pharmacy Benefit Managers (PBMs) have been adopting similar approaches. Some employers have found success in outsourcing specific components of their pharmacy benefit management while retaining control over others. This decentralized approach often results in increased transparency and decreased conflicts of interest between the PBM and the plan sponsor.
4. Industry Watch: While Wall Street analysts are observing this transformation closely, it's yet to be seen if other large organizations will follow suit in the near term. Blue Shield's initiative will likely be scrutinized for its potential to deliver savings and operational efficiency while upending the status quo in the pharmacy supply chain.

Why would Blue CA move this direction?
By breaking apart the components, the new approach can provide more transparency into the cost of each part of the pharmacy benefit. Wall Street analysts don’t believe other large organizations will follow suit in the short term but will be watching closely to see if the new decentralized approach can be executed appropriately and is delivering on the projected savings.
 
What could this mean for employers?
It will be difficult for most employers to replicate this exact model. However, some smaller PBMs have taken the approach to outsource different components themselves. For example, they may own the adjudication platform but outsource the network, rebates, and specialty pharmacy. Some employers like this model as they believe the costs are more transparent and it reduces conflicts of interest between the PBM and the plan sponsor.
 
Lockton Pharmacy Point of View:
We are generally supportive of this approach and have implemented similar structures / components with some health plans clients. By breaking up the sole PBM, there is greater transparency for the cost associated with each component of the pharmacy benefit. Employers can select the best of each vendor to perform these functions. This strategy more likely to be effective for larger, more forward leaning groups. We don't see it working for smaller clients (at least not for right now).
 
Some operational questions

• Mark Cuban Cost Plus will need to build out a retail network that does not exist today. Currently they only have less than 10K pharmacies set up to take their discount card. Will members have adequate access in CA and nationwide?
• Will the member experience be impacted by the separation of these components and having to deal with multiple vendors?
• Will the obligation to pay fees to five vendors offset the drug cost savings that may ensue from more transparency?

 
Adam Fein wrote a great article on this move on his Drug Channels blog "A Reality Check on That Blue Shield of California Announcement"