CVS Health Corp (NYSE:CVS) shares fell more than 7% in pre-market trading on Thursday after The Wall Street Journal reported that Blue Shield of California will no longer be using CVS Health's Caremark as its current pharmacy-benefit manager.
Blue Shield of California, which has around 4.8 million members, will instead work with a select group of companies that perform a designated function, including Amazon.com for at-home drug delivery.
Mark Cuban's Cost Plus Drug Company will also be a Blue Shield partner, delivering access to low-cost medications including through retail pharmacies, while Abarca will process drug claims.
"The current pharmacy supply chain is a forest of opacity and profit," and the new setup will be "flipping that on its head," Blue Shield CEO Paul Markovich told The Wall Street Journal.
Blue Shield reportedly stated that by working with different partners, it would attempt to negotiate prices with pharmaceutical makers in a different way from the typical approach in order to eliminate rebates and hidden fees.
Its new plan, which is targeted to fully launch in 2025, could save it about $500 million yearly, or approximately 10% to 15% of what the insurer currently spends on drugs, according to the company.
Shares of CVS Health have fallen 22% year to date.
Contact Sean at sean@proactiveinvestors.com