By Katherine Hamilton

CVS Health's Caremark business signed a new pharmacy benefits contract with the California Public Employees' Retirement System, known as Calpers.

The five-year contract provides outpatient drug benefits for about 587,000 Calpers members, which represents roughly 40% of its clients that receive health care benefits. CVS will begin providing benefits starting on Jan. 1.

Calpers is switching to CVS from OptumRx, which is part of UnitedHealth Group. The California pension fund said it chose CVS Caremark because it offered more affordable benefits than other vendors. The new contract requires CVS to put $250 million at-risk if they don't meet goals for controlling pharmacy benefit costs and ensuring quality.

CVS also stood out from competitors because of its commitment to managing pharmacy costs and ensuring clinical quality, Calpers said. The new contract also provides for increased transparency, audit and oversight provisions.

The move comes as UnitedHealth struggles to maintain its footing as a leader in the U.S. healthcare industry. The conglomerate, which owns several healthcare businesses including the nation's largest health insurer, said in April it was facing higher-than-expected medical costs in its Medicare business. In May, it suspended its full-year outlook and said Andrew Witty, who stepped in as Chief Executive following the death of Brian Thompson, would leave immediately for personal reasons. Shares have lost more than 40% of their value this year.

CVS, meanwhile, has stood out among its peers as relatively stable. In May, it beat Wall Street estimates with higher-than-expected adjusted earnings per share. It said its Caremark business was boosted by favorable pricing for the weight-loss drug Wegovy.

Calpers said CVS stood out from competitors because of its commitment to managing pharmacy costs and ensuring clinical quality. The new contract also provides for increased transparency, audit and oversight provisions.

Most members will continue to fill their prescriptions at the same pharmacy they currently use, Calpers said. There will be some changes that may impact copays for some Basic and Medicare members or involve a change in medication.

Write to Katherine Hamilton at katherine.hamilton@wsj.com


(END) Dow Jones Newswires

07-15-25 1914ET