CVS and Walgreens Reach Resolution

I’ve tried to stay out of this since my initial posts on this, but it has certainly added some excitement to the industry over the past couple of weeks. I can’t remember one topic stirring so many reporters, analysts, sales people, and other potentially affected constituents.

As I’ve predicted from the beginning, both CVS Caremark and Walgreens came to resolution. It was in their mutual interest. I know there are a few sales people at the other PBMs that are disappointed as they hoped for this to be a wedge in several open RFPs. I think it may actually work against the other PBMs depending on the terms.

We know that Walgreens wanted higher reimbursement rates that other pharmacies. My question is whether they were acting like the UAW with the Big 3 auto companies. The UAW would reach agreement with two of them and then strike the 3rd one. Did the other PBMs give Walgreens higher reimbursement rates and then CVS Caremark finally draw the line in the sand? If so, does CVS Caremark have better rates and will they be even more aggressive around pricing in the sales cycle this year?

On the other hand, I know people at the other PBMs that were hoping for either a validation of the limited network concepts that have been around forever with limited adoption or to see them come to terms and hope that they can draw a line in the sand similar to CVS Caremark. For those outside the two companies, it was a win-win scenario while it was a lose-lose scenario for the two players if they didn’t reach resolution.

So, what happens now?

Will there be a Maintenance Choice offering with Walgreens in the network for 90-day scripts? I’m not sure here. Retailers have always struggled to over mail reimbursement rates at retail especially with less foot traffic, but I have to imagine that CVS and Walgreens have similar buying power.

Does this validate the concept of a retailer owned PBM (which as I’ve pointed out before is not unique to CVS)? I’ve talked many times about my support of this concept and think it’s only those with something to gain who are keeping this concept an issue. The independent pharmacies who are losing to mostly chains but also mail and the other big PBMs especially Express Scripts that had made a bid for Caremark before CVS bought them.

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