Walgreens Bids Adieu to Express Scripts
After a long negotiation battle, Walgreens Co. allowed its contract with Express Scripts Inc., the pharmacy-benefits manager (PBM), to end on News Years Day. Beyond the loss of billions in direct pharmacy sales, Walgreens stands to lose the pharmacy-related traffic generated by Express Scripts network customers.
Customers signed up with Express Scripts will have to go to a competitor to get their prescriptions filled or pay more at Walgreens. By Sunday, CVS, Rite Aid and Walmart were running commercials touting that they accept Express Scripts.
Walgreens issued a statement last Friday listing several steps it was taking to hold onto Express Scripts customers. They included:
- A special discount in January for Express Scripts members on the annual membership fee for Walgreens’ Prescription Savings Club;
- A boost in Walgreens’ pharmacist and consultant staff, including adding call center personnel;
- Contacting high-volume patients;
- Offering coupons for discounted health and wellness products and gift cards to some Express Scripts members.
"While we remain open to any fair and competitive offer from Express Scripts, we firmly believe that accepting their proposal was not in the best interests of our shareholders," said Walgreens chief executive Gregory D. Wasson in a statement.
Walgreens said its negotiations with health plans and employers had resulted in retaining 11.4 percent, or about 10 million, of the 88 million prescriptions managed by Express Scripts that were filled by Walgreens in the fiscal year that ended Aug. 31. Express Scripts’ prescriptions-based revenue in Walgreens’ fiscal year ended Aug. 31 represented about $5.3 billion of Walgreens’ annual revenue, which was $72.2 billion in fiscal 2011.
Walgreens has said it would rather give up the revenue it gets from Express Scripts than continue filling unprofitable prescriptions. The drugstore argued that it should be compensated for its new health-care services that help patients manage their medications and also reduces expenses for Express Scripts and its customers. But Express Scripts argued that Walgreens would become the most expensive pharmacy for basically doing the same thing that other pharmacies do.
Mr. Wasson said Walgreens continues to negotiate with employers and health plans and expects to eventually retain 25 percent of the customers who have Express Scripts plans.
"These results, and what we’re seeing in the marketplace, confirm our confidence as next year’s P.B.M. selling season begins," said Mr. Wasson in the statement. "We’re already working with many health plans and P.B.M.’s who value the role Walgreens and community pharmacies play in lowering overall health care and prescription costs."
- Walgreens Launches Comprehensive ‘Patient Transition Plan’ for Express Scripts Members to Minimize Disruption and Inconvenience – Walgreens Co.
- Express Scripts Reports Third Quarter Results – Walgreens Co.
- Walgreens Launches Plan To Retain Express Scripts Customers – Dow Jones Newswire/The Wall Street Journal
- Walgreens unveils plan to keep Express Scripts clients after contract between companies ends – The Associated Press/The Washington Post
- Walgreens Facing Big Loss in Fight With Express Scripts – The New York Times
Discussion Questions: What is your take on the decision by Walgreens to let its contract with Express Scripts expire? How big a competitive advantage falls to those stores accepting P.B.M. plans?