California Blue Shield Deal Exposes Amazon’s Pharmacy Limitations

This week’s announcement that a regional health plan in California would stick with CVS Health for its specialty pharmacy needs exposes a key missing component to Amazon’s effort to build a national pharmacy business designed to reign in rising prescription costs.

Blue Shield of California Thursday made a big splash with a Wall Street Journal “exclusive” story that said the health insurer “aims to save millions on drug costs and plans to drop CVS Caremark as pharmacy-benefit manager.” Instead, Blue Shield would use Mark Cuban’s Cost Plus, Amazon and others to manage prescription costs of its health plan members.

But CVS and its Caremark PBM will continue to manage the fastest-growing part of almost any health insurer’s or employer’s budget for drugs. And neither Amazon, nor Mark Cuban’s Cost Plus Drugs will be involved in the provision of specialty pharmacy services for the nearly 5 million Blue Shield members with complex conditions.

These days, pharmacy benefit managers and pharmacies in generally are grappling with the coming wave of emerging complex drugs derived from biotechnology that treat everything from autoimmune diseases and cancer.

But Amazon doesn’t dispense or administer or supply specialized prescriptions. “We’re not a specialty pharmacy,” an Amazon spokeswoman said Friday.

To be sure, Amazon Pharmacy says on its website that it “carries a large range of medications for common uses such as high blood pressure, high cholesterol, diabetes, depression, anxiety, birth control, and more.”

“It’s also easy to identify generic versus name-brand items,” Amazon says on its website. “Some medications such as medical devices, schedule II drugs, suspensions, vaccines, and other specialty medications are not available through Amazon Pharmacy.”

Instead, California Blue Shield said CVS would continue to “provide specialty pharmacy services for members with complex conditions, including education and high-touch patient support.”

This is important because taxpayers, government health insurers and companies are spending more on pricey specialized prescription drugs. Last year, for example, specialty prescription spending for U.S. employers was 49% of total pharmacy costs, according to the big benefit consultancy Mercer.

ut some employers and government health insurers, including state Medicaid programs are reporting specialty prescriptions account for 60% to 70% or even more of total pharmacy

“It is important to note none of these companies offer wraparound PBM services, which we believe are a significant value-add to clients in providing access to drugs and managing total drug spend,” J.P. Morgan Securities managing director Lisa Gill noted in reference to Amazon, and Cuban’s company in a report she wrote Thursday. “Generics represent only ~15% of total drug spend, and our survey work has consistently indicated rising specialty costs, not generics, are the biggest pain point for large employers.”