Blue Shield of California CEO on PBM Shakeup: ‘It’s Going to Become the Norm’

2024-03-07

Pharmacy benefit managers (PBMs) are getting a reprieve after PBM reforms were left out of congressional funding bills. But Blue Shield of California is still taking steps to lower prescription drug prices through its recent PBM shakeup, and predicts that others will follow, CEO Paul Markovich recently said. MedCity News hosted a fireside chat at ViVE with Markovich, launching a series of intimate networking events at healthcare conferences. Called Tête-à-tête Health, these conversations feature executives discussing how healthcare can be transformed to make the system work equitably and affordably for all. Blue Shield of California announced in August that it will be largely cutting out CVS Caremark as its pharmacy benefit manager (though keeping it around for specialty pharmacy services). It is also partnering with Amazon Pharmacy for home delivery services, Mark Cuban Cost Plus Drug Company to build a more transparent pricing model, Abarca to handle the payment of prescription drug claims and Prime Therapeutics to negotiate savings with drug manufacturers. “I expect once we’ve been successful with it, it’s going to become the norm or something along these lines is going to become the norm. … The whole world is going to have to shift. Now I’m not saying pharmacy benefit managers are going to go away. But they’re going to have to change their model, as will everybody. It’s not just them, it’s everybody in the middle who is going to have to change their model,” Markovich said during the fireside chat. He added that the insurer chose to make these changes — which will go into effect in 2025 — because of the troubling incentives that are in the pharmacy system. “There are about eight players in the middle between a pharmacy manufacturer and the patient, and they all get paid,” he said. “They get more revenue and more profit when we sell a higher volume of more expensive drugs. That’s just structurally inflationary.” Markovich said the company chose its partners in the new system after going through a request for proposal process. The insurer broke down different parts of the pharmacy care system into separate pieces and bid them out. “We said no, we’re not bidding this as a package, we’re just bidding them out,” he said. “We found those that were philosophically aligned and had the capabilities and we signed them up.” Still, CVS Caremark is in control of specialty drugs, which is a major driver of healthcare costs. Markovich noted that customer satisfaction is high with CVS Caremark when it comes to specialty drugs. In addition, handling specialty drugs is very complex and there aren’t a lot of new entrants in the space, so “there aren’t as many alternatives.” When asked if he thinks the Federal Trade Commission will do something about PBM practices, he responded that “predicting what any government agency is going to do is definitely above my pay grade.” The FTC is currently investigating PBMs, though they aren’t fully cooperating with the investigation, according to a recent report by the Ohio Capital Journal. While Markovich said he can’t predict what the FTC will do about PBMs, he said he does expect a lot more scrutiny on healthcare costs as a whole, but it won’t be isolated to one player. “I think we’re all going to get a lot of scrutiny,” he stated.

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