What happened

Shares of drugstore chain and pharmacy benefits manager CVS Health (CVS -0.22%) got hammered Thursday morning, falling 11% through 10:35 a.m. ET after Reuters reported a big client loss for the company.

Blue Shield of California, it seems, is diversifying away from CVS Health.  

So what

Blue Shield of California counts 4.8 million souls as members of its various health plans. And previously, Blue Shield favored routing drug prescriptions for these members through CVS Health for fulfillment. Now, however, Blue Shield will expand the list of pharmacy benefit managers (PBMs) it does business with to five companies.

Specifically, Reuters reported that:

  • Blue Cross will use Com (AMZN 3.43%) for delivery of prescription drugs.
  • Mark Cuban's Cost Plus Drug Company "will work to reduce surprise drug costs."
  • Payment of prescription drug claims will be routed through privately held Abarca.
  • And PBM Prime Therapeutics will help Blue Shield negotiate savings with Big Pharma.

CVS itself won't be left entirely out in the cold. Reuters noted that Blue Shield "will still retain CVS Caremark for its specialty pharmacy services." But Blue Shield is taking a lot of other jobs away from the company, hoping to save up to $500 million in drug costs annually.

And that $500 million is coming out of CVS's pocket.

Now what

Even if all the above is true, though, an investor might justifiably wonder: How does subtracting $500 million from CVS's revenues -- and presumably something less than $500 million from CVS's annual profits -- justify investors subtracting more than $10 billion from CVS Health's market cap today?

The answer is: It doesn't -- unless Blue Shield's experiment works out, the $500 million in savings materializes as expected, and other insurance companies get jealous and decide to similarly diversify away from CVS Health. In that regard, Reuters noted that CVS is already losing a $40 billion contract with Centene (CNC -2.22%) next year.

The danger here is that where Blue Shield and Centene have led, other CVS clients may follow.