Why Recessions Forge Great CEOs Who Think Beyond Cost-Cutting
04/15/2025
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But the CEOs who make history in downturns aren’t the ones with the deepest cuts
August 21, 2023: CVS stock plunges after Blue Shield of California drops retailer’s pharmacy services to save on drug costs.
The CEO of the nonprofit health insurer, which spent over $3 billion on member prescriptions in 2022, calls the move a significant milestone in its efforts to move toward a value-based model for pharmacy care.
“I expect we’re going to be saving $500 million a year,” said Paul Markovich, CEO of Blue Shield of California. “So, this is a significant cost reduction that we ultimately, as a nonprofit that caps our income, will be putting back into our premiums.”
The health insurer will continue to use CVS Caremark for specialty drugs to provide prescriptions and services for patients with complex conditions. Still, online pharmacies will offer services to the rest.
Shares of CVS dropped about 6% in early trading Thursday.
CVS Health has been Blue Shield’s pharmacy benefits partner for over 15 years. Analysts at Evercore ISI estimate that specialty drugs represent roughly 50% of Blue Shield’s pharmacy costs.
“Helping customers achieve common goals is one of the many ways we provide value to health plans of all shapes and sizes,” said Michael DeAngelis, a spokesman for CVS Health, in a statement. “We look forward to providing care for Blue Shield of California’s members who require complex, specialty medications as we have for nearly two decades.”
Amazon Pharmacy, which launched a $35 per month insulin program this week, will provide what the companies are calling up-front pricing, free delivery, and round-the-clock access to pharmacists through its online services.
California Blue Shield is only the second insurer to sign with Cost Plus, which sells drugs at 15% above wholesale prices, since the online pharmacy launched in January 2022. Capital Blue Cross, based in Harrisburg, Pennsylvania, with 1 million members, signed with Cuban’s venture last fall.
“It takes time. There are a lot of bad habits they need to break,” said Cuban, Cost Plus co-founder, about the challenges of contracting with health insurance plans, often called payers.
“I think all payers realize that now that Cost Plus has made the price of medications transparent, providers and patients can see what prices should be, and the entire industry will have to adjust,” Cuban said.
But the CEOs who make history in downturns aren’t the ones with the deepest cuts
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But the CEOs who make history in downturns aren’t the ones with the deepest cuts
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