Reuters | CVS Caremark Corp will remove Walgreen Co from its pharmacy benefits
management network in retaliation for Walgreen’s decision to stop
filling prescriptions for new CVS Caremark business.
The two drugstore rivals’ shares fell Wednesday as both stand to lose
in the dispute. Shares of Walgreen, which gets about 7 percent of its
revenue from the CVS drug plan business, were down 0.9 percent, while
CVS’s shares slipped 0.8 percent.
CVS Caremark’s pharmacy benefits management (PBM) business administers prescription drug benefits for employers and health plans, as well as a large mail-order pharmacy.
Walgreen said Monday it would not be a provider for any new or renewed drug plans handled by CVS’s PBM network, because it favored CVS pharmacies. It cited efforts by CVS to divert more patients to its own drugstores and reimbursement rates that did not reflect the market.
But CVS said Wednesday it would terminate Walgreen’s participation in its retail pharmacy networks in 30 days, adding the agreement did not permit a selective partnership. CVS said Walgreen gets reimbursement rates similar to other big national chains.
CVS will also end Walgreen’s participation in one of its Medicare retail pharmacy networks as of Jan. 1.
Analysts doubted the two largest U.S. drugstore chains would disengage for good over the long term. Some see CVS rivals in the PBM sector, such as Medco Health Solutions Inc and Express Scripts Inc, picking up business, while the Walgreen fight works itself out.
“I still think it’s a negotiating tactic on both sides. CVS has upped the ante,” said Gabelli & Co analyst Jeff Jonas.
CVS’s PBM business lost $4.8 billion in contracts last year and the company also has much at stake in this dispute, Gimme Credit’s Director of Research Carol Levenson said in a note.
“Not only is Walgreen the nation’s biggest pharmacy chain, but it also fills one out of every five prescriptions in the U.S.,” she wrote.
Walgreen holds an 18 percent market share.
TIT FOR TAT
CVS, which bought Caremark for $27 billion in 2007 to expand its PBM operations, said it tried to negotiate with its rival to no avail and downplayed the importance of Walgreen’s business.
CVS estimated that, of the 64,000 pharmacies that participate in its PBM business, about 7,000 are Walgreens drugstores. It also said member access to its network of pharmacies would remain basically unchanged without Walgreen.
The Walgreen move earlier this week did not cover existing PBM contracts, which it said tend to last for about three years. As a result, Walgreen did not expect the full revenue impact from its decision to hit for several years.
“Walgreens’ announcement was nothing more than a transparent attempt to try to raise the pharmacy. Top reimbursement rates it receives from CVS Caremark,” CVS PBM President Per Lofberg said in a statement.
He accused Walgreen of using such tactics in the past against employers and health insurers.
“We believe this approach is totally contrary to the needs of our clients who are all struggling to keep pharmacy health care affordable,” he said.
Walgreen’s Executive Vice President of Pharmacy Kermit Crawford said in response that CVS’s actions showed a “patent disregard for patient choice and broad access” when it comes to filling prescriptions by canceling all participation outright.
CVS is the subject of a Federal Trade Commission investigation into its business practices.
The FTC, which approved CVS’s purchase of Caremark, has been looking into allegations the merger gave CVS incentives to convince patients to get their prescriptions filled at their pharmacies.
“There have been many complaints about it (the merger) in its aftermath,” Richard Feinstein, director of the FTC’s Bureau of Competition, said Wednesday at a breakfast to discuss antitrust matters. He declined to discuss the status of the investigation, which began in August 2009.
Walgreen shares were down 28 cents at $30.33, while CVS shares fell about 26 cents to $30.86 in midday trading. Medco rose 1.5 percent and Express Scripts gained 1 percent.
who cares?? I need estrogen for my manboobs, i will get it at walmart!!
Per the article, the President of the CVS/Caremark PBM stated that Walgreens move (aimed at getting better reimbursement rates) is “totally contrary to the needs of our clients who are all struggling to keep pharmacy health care affordable.”
Bad Walgreens! You’re taking money away from John Q Public! Or are you? Oh wait, you’re not.
When a person fills a script at a Walgreens, CVS, Walmart, etc, they are generally going to pay their copay and their employer or healthplan will pick up the remainder. That’s the nature of a pharmacy benefit plan. If WAG wants better reimbursement rates from CVS …it will NOT impact what John Q. has to pay to get his medication. That copay is set by his employer as part of his benefits package.
So what does WAG want from CVS? To get fairly compensated for the medications it dispenses to folks with coverage provided by CVS/Caremark. Does that directly impact John Q and his antibiotics/pain meds/whatever? No.
I say boo too CVS for trying to make it appear that WAG’s business struggles with CVS would have a direct and negative impact on the individuals trying to fill their prescriptions.
CVS buys a PBM and is SURPRISED when their key rival refused to do business with them??? REALLY!?!?
Since the CVS acquisition of Caremark,CVS has made every effort to drive Caremark patients to either their CVS stores or the Caremark mail order pharmacies to get their prescriptions filled. Anyone who knows the history of these two mega-chain pharmacies is aware that WAG has been willing to draw the line in the sand if a PBM offers reimbursement rates that they deem to be unfair or unprofitable.
CVS has continued to decimate Caremark staff and taken control of key functions to their headquarter in RI. The problem is that CVS doesn’t understand PBM operations, but their sheer arrogance drives them to make stupid decisions like this that are based on greed and profitability.
Bottom line: do companies like CVS and Walgreens REALLY care about people or just their money???
Flush big corporate pharmacy giants and go find a locally owned pharmacy and give them the business. Call your PBM (Caremark or otherwise) and let them know you will not patronize CVS or Walgreens.
As a CVS care(less)mark drug plan customer, I can with out a doubt say they are trying to push their customers to switch to CVS. They are using unfair tricks like offering CVS caremark customers the ability to get the drugs by mail price for any prescription if they pick it up at any CVS retail location. Telling CVS caremark customers that CVS pharmacy drugs will be cheaper for them and have a lower co-pay then if they went to a non-CVS pharmacy. Heck they are even using incentives like a 20% off card for FSA qualifying items at the local CVS store, good for 1 year and for unlimted transactions.
There is no way that a company can offer 20% off all FSA qualifying items for the indefinate future. That is unless your are using it as a marketing ploy / enticement where by you take a hit on those items in order to drive the customer to switch their perscriptions to your store. Perscriptions which are much more lucrative and profitable in the long run. There by leveraging your control and relationship unfairly and potentially illegally (FTC ivestigation) to take market share and drive their comptetitors into the ground.
I won’t even go into what a terrible drug plan this is and how it so far after 5 months, has not paid 1 penny for the drugs I have had to buy for my family. If I had my choice, I would ditch them in a heartbeat. I hope the FTC sticks it to them!
CVS – shame on you, you should know better!!!