Press Release

CalPERS Announces New Pharmacy Benefits Contract With CVS Caremark to Foster Affordability and Improve Quality

Issued by CalPERS [California Public Employees' Retirement System]

July 15, 2025

New agreement aims to address rising prescription drug costs while improving quality for CalPERS members. 

SACRAMENTO, Calif. – CalPERS announced a new pharmacy benefits contract with CVS Caremark (CVS) today that is designed to address rising costs of prescriptions while ensuring access to safe and effective medications for members. The five-year contract includes new financial terms with CVS putting $250 million at-risk over the term of the contract for controlling drug costs and improving the health of CalPERS members.

“This new contract reflects CalPERS’ ongoing commitment to affordability and quality for our members,” said Ramón Rubalcava, chair of the CalPERS Board of Administration Pension and Health Benefits Committee. “By putting CalPERS’ values in the driver’s seat, we’re ensuring that our members and their families have access to the medications and support they need to manage their health.”

What This Means for CalPERS Members

The contract with CVS will provide outpatient prescription drug benefits for approximately 587,000 members enrolled in Basic or Medicare HMO and PPO plans. This represents about 40% of the 1.5 million members who receive health care benefits through CalPERS.

CalPERS agreed to contract with CVS Caremark instead of 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. The contract also provides for increased transparency, audit, and oversight provisions throughout the five years of the contract. CVS will begin providing benefits for CalPERS members starting on January 1, 2026, replacing OptumRx.

Important facts that members need to know with this new contract include:

• Most CalPERS members will continue to fill their same prescriptions at the same pharmacy they use currently.
• The new contract will result in some formulary changes that may impact copays for some Basic and Medicare members or involve a change in medication to an equally effective alternative. Together with CVS, CalPERS will develop a range of options for our members to navigate any change and ensure medications are available when and where they’re needed. 

Performance Guarantees to Drive Accountability

A cornerstone of the new five-year agreement is the inclusion of performance guarantees that hold CVS accountable for meeting cost and quality targets. The new contract requires CVS to put $250 million at-risk if they do not meet goals for controlling pharmacy benefit costs and ensuring clinical quality outcomes for our members. The clinical guarantees that apply to both Basic and Medicare HMO and PPO plans align with two clinical measures in CalPERS’ Quality Alignment Measure Set for improving care for high blood pressure and diabetes.

The cost trend guarantees help ensure financial predictability over the course of the contract and provide additional sustainability to our overall health program. Taken together, these performance guarantees represent groundbreaking improvements by aligning CVS’ financial interests with CalPERS’ concerns for quality and financial affordability that have generally been lacking in the pharmacy benefits industry.

“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. “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.”

A Model for Innovation

The new PBM contract builds on CalPERS’ broader efforts to align health care affordability with quality and equity. By aligning these pharmacy benefits with our overall health care goals, CalPERS aims to create a model that can serve as a blueprint for purchasers across the nation.

“This agreement represents a significant step forward in addressing one of the most pressing challenges in health care today — the rising cost of prescription drugs,” said CalPERS Chief Medical Officer Dr. Julia Logan. “CalPERS is demonstrating that it’s possible to achieve affordability, quality, and transparency through terms that put our members’ and our public employers’ interests at the forefront of this multi-year arrangement with CVS.”

CalPERS officials also expressed gratitude to leaders and teams at OptumRx. “We thank OptumRx for providing pharmacy benefits to our members over the past nine years,” Moulds said. “We look forward to building on that foundation with CVS to deliver continued value and service across PPO and HMO plans.”

About CalPERS

For more than nine decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 2 million members in the CalPERS retirement system, making us the largest defined-benefit public pension in the nation. We also administer health benefits for more than 1.5 million members and their families, making CalPERS the nation’s largest purchaser of public employee health services behind the U.S. government.

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