CVS, other pharmacy-benefit stocks drop as major health insurer targets ‘broken’ prescription-drug system

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Pressure builds on prescription-drug middlemen as Blue Shield of California cuts reliance on CVS Caremark.

Shares of CVS Health Corp. CVS, -9.76% and other pharmacy-benefit companies fell sharply Thursday after a major health insurer announced a new prescription-drug model that reduces its reliance on CVS Caremark services.

The shift is “designed to fix problems in today’s broken prescription drug system,” Blue Shield said in a release, adding that it will be working with “organizations that share Blue Shield’s vision for more affordable and transparent pharmacy services.” The news weighed down shares of some major PBM operators. CVS’s stock fell about 10% Thursday, while Cigna Group CI, -7.90%, which owns PBM Express Scripts, dropped 7% and UnitedHealth Group Inc. UNH, -1.41%, which operates a PBM through its Optum unit, fell 1%. Shares of large drug distributors, including McKesson Corp. MCK, -3.08%, Cardinal Health Inc. CAH, -3.93% and AmerisourceBergen Corp. ABC, -2.44%, also fell.

Industry players will be watching the Blue Shield strategy closely, Evercore ISI analysts wrote in a note Thursday, as managing the various partnerships “could prove tricky.” But if the model is successful, “we could see additional regionals move more in a similar direction,” the analysts wrote.

 

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