CalPERS board approves CVS Caremark as pharmacy benefit manager for 2026–2030 with $250M risk guarantees

CalPERS recommended and the board approved entering a five-year outpatient pharmacy benefits contract with CVS Caremark to serve PPO and many HMO members starting Jan. 1, 2026. Staff said CVS offered lower predicted drug costs, larger rebates and lower dispensing fees that, combined with negotiated contractual terms, produced a projected savings of about $600 million versus the current contract over five years on a total spend of roughly $10 billion. The contract binds CVS to $200 million in cost-trend guarantees over five years based on a 6.5% trend target and to $10 million per year in clinical performance guarantees ($5 million for basic plans and $5 million for Medicare plans) tied to two quality alignment measures: controlling high blood pressure and diabetes care. Staff also described transition steps including targeted outreach, a 90‑day prior‑use exception for impacted members and a 24/7 dedicated customer-service cohort to reduce disruption.

Board members and public commenters asked about member-facing details: when a list of formulary switches will be published, how open‑refill data will be used to identify enrolled members for outreach, language access for non‑English speakers, and previous lessons from plan transitions. Staff said CVS will populate and publish its formulary and will receive data on open prescriptions to direct targeted mail, phone and email outreach; CVS has agreed to in‑person training in August and higher‑than‑normal staffing estimates for transition. Staff estimated that roughly 5% of basic plan members and about 15% of Medicare members could be asked to switch medications because of formulary changes but that most changes involve non‑clinically significant brand‑to‑generic substitutions and that 95–99% of members would be able to fill prescriptions at their current pharmacy.

After questions, a motion to approve the contract was made and seconded; board members conducted a roll‑call vote and the motion passed. Staff said implementation activities, including member communications, will start immediately after contract execution and run up to the Jan. 1, 2026 effective date.