The California Public Employees Retirement System (CalPERS) has inked a five-year contract with CVS Caremark as its pharmacy benefits manager, the organization announced Tuesday. CVS is replacing OptumRx, which served CalPERS for nine years.
CalPERS is a public pension fund, offering retirement and health benefits for state, school and public agency members. Through the new contract, CVS will provide outpatient prescription drug benefits for about 587,000 members enrolled in basic or Medicare HMO or PPO plans, accounting for about 40% of the 1.5 million members who receive health benefits through CalPERS, according to the announcement.
The new contract goes into effect on January 1, 2026. As part of the contract, CVS will have to meet certain cost and quality targets. The company is at risk of $250 million if they do not meet these goals, particularly related to improving care for high blood pressure and diabetes.
“By holding the PBM accountable for delivering results, we’re aligning their interests with those of our members and their public sector employers,” said Don Moulds, CalPERS chief health director, in a statement. “This contract is designed to ensure that every dollar spent on prescription drugs delivers value for our members and ensures the sustainability of our program.”
CalPERS said in its announcement that it selected CVS Caremark over other vendors because of its “demonstrated ability to deliver more affordable drug benefits and its commitment to performance guarantees in key areas such as managing pharmacy cost trends and ensuring clinical quality.”
CVS said it is “honored” to be working with CalPERS.
“Every day we work to negotiate the lowest net cost for medications, identify safe and clinically effective therapies, and support the unique needs of our customers,” said Ed DeVaney, president of CVS Caremark, in an email. “Through innovation and a relentless focus on improving the member experience, we are driving better health outcomes and lowering out-of-pocket costs for consumers. We are committed to building a strong, collaborative relationship with CalPERS to deliver affordable coverage and expand access to high-quality health care for their plan members.”
The contract with CVS comes at a time when PBMs (particularly the Big Three: CVS Caremark, OptumRx and Express Scripts) are facing a lot of scrutiny for their vertical integration with insurers and are often blamed for rising prescription drug costs. These three PBMs control 80% of the prescription drug market.
Just last week, a group of bipartisan legislators introduced a bill that would crack down on PBMs. Numerous other bills have also been introduced tackling PBMs, and the state of Arkansas recently created a law banning PBMs from owning pharmacies in the state.
Photo: megaflopp, Getty Images
