CVS shares fall after Blue Shield of California cuts retailer’s pharmacy services

Actions of CVS Health plunged 8% on Thursday after Blue Shield of California said it would drop the company’s pharmacy benefit management services and instead partner with Mark Cuban’s Cost Plus Drugs company and amazon pharmacy to save on drug costs for its nearly 5 million members.

The announcement hints at the possibility of health insurers abandoning the traditional pharmacy benefit management, or PBM, system and reducing the shares of other companies that offer PBM services.

Cigna and UnitedHealth Group fell 6% and 2%, respectively.

PBMs maintain lists of drugs covered by health insurance plans and negotiate drug discounts with manufacturers. But recently they have come under scrutiny from lawmakers for their role in inflating drug prices and sending health care costs skyrocketing.

CVS Health Caremark has been a Blue Shield PBM partner for more than 15 years.

Blue Shield will now work with five different companies to provide “convenient and transparent access to medications while reducing costs.”

Blue Shield CEO Paul Markovich said the plan, which is scheduled to launch in full in 2025, could save the company up to $500 million annually.

Amazon Pharmacy will offer home delivery of medications. Cuban’s Cost Plus Drug Company will provide access to low-cost medications through retail pharmacies. Another company, Abarca Health, will process drug claims.

Blue Shield will retain the CVS Caremark for its specialty pharmacy services, which provide specialized therapies and advice to patients with complex conditions.

“We look forward to providing care to Blue Shield of California members who require complex specialty medications, as we have for nearly two decades,” Michael DeAngelis, a spokesman for CVS Health, said in a statement to CNBC.

Still, the loss of Blue Shield’s PBM partnership is another blow to Caremark, which will also lose a contract with rye next year.