Shot Across the Bow or First Blow – Walgreens

arrow.jpgI expected to see a lot more buzz yesterday after Walgreens announced that they were going to pull out of several contracts with CVS/Caremark over reimbursement.  Obviously, the two are huge competitors so I don’t find it surprising at all.

I assumed CVS would push on Walgreens through their PBM contracts.  What I wonder is whether this is a shot across the bow by Walgreens in a very public manner or whether this is the beginning of multiple blows back and forth between the two companies.  It should be very interesting.

The announcement: “After many months of talks over unreasonably low and below-market payment rates by CVS Caremark Corp. for four prescription plans, Walgreens today withdrew as a pharmacy provider from the plans.”

Affected Plans: ArcelorMittal, Johnson Controls, Inc., Progressive Casualty Insurance Co. and Wisconsin Education Association Trust.

A few quotes from Trent Taylor (president of Walgreens Health Services):

“This is not where we wanted negotiations to lead”

“We’re sorry that our pharmacy patients and CVS Caremark’s clients are caught in the middle, and we’ll do all we can to ensure a smooth transition for our patients to another pharmacy.”

“Leaving a benefits plan is an extraordinary step for us, but it demonstrates how extraordinarily low our payments were from CVS Caremark. We can’t continue accepting reimbursement rates that are drastically below market, while offering patients needed special services such as 24-hour pharmacy access and drive-thru pharmacies.”
“In an effort to be as open and transparent as possible in negotiations, we even offered to open our books directly to the employer groups and show them how much our pharmacies are paid by CVS Caremark,” said Taylor. “Unfortunately, CVS Caremark wouldn’t allow us to do that.”

A few editorial comments…

  • Why does this play out in the press?  This is the same thing that both of them did when they opted out of the mandatory mail networks for several clients.

  • I can’t imagine that the individual pharmacist who actually has the patient relationship at Walgreens is going to be really happy about this.  It is one thing at a corporate level, but very different in the trenches.

  • I don’t buy the argument of “special services” such as 24-hour and drive-through pharmacies being a reason to justify higher cost.   Nice features.  I am surprised he wouldn’t have talked about value delivered – generic substitution, formulary compliance, medication therapy management, etc.

  • I love the last comment about opening the books.  Would he do the reverse and open up the books for how much their PBM pays CVS, how many lives they have on mandatory mail, their costs, etc.?  It’s always great to offer something that you know can’t happen.

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