Inside This Issue - News
As market shifts, Wasson assesses Walgreens’ position
May 21st, 2012
PALM BEACH, Fla. – During the National Association of Chain Drug Stores Annual Meeting here last month, Greg Wasson, the organization’s new chairman, exuded a sense of confidence despite the considerable challenges faced by the industry.
The view that the future of community pharmacy has never been brighter stems from Wasson’s 32 years at Walgreen Co., the nation’s biggest drug store chain, where he is now president and chief executive officer.
In many respects, Walgreens epitomizes pharmacy operators’ efforts to secure a larger, more meaningful role in health care delivery.
The retailer in recent months has started to open more of its health and daily living format stores, which bring the pharmacist out from behind the prescription counter to facilitate patient interaction. The new outlets offer a broader range of services — including immunizations, health screenings and patient education — than found in most pharmacies and are staffed by so-called Health Guides who help customers sort through the vast array of products and services on offer.
“The No. 1 question we hear is, ‘How soon can you do this on a scale that will truly make a difference?’ ” says Wasson. “That tells me that payers understand that we can help them in ways that impact their total medical costs, versus just the pharmacy piece.
“I tell people all the time that Walgreens has 247,000 employees and health care expense is a big item reflected on my profit and loss statement, one with a B[illion] behind it. I want someone that can help me adapt, improve patient access and the quality of care, and help reduce the size of that item, instead of just the sliver of it that happens to be my pharmacy cost. I think that’s where most people are headed.”
A value orientation is central to Walgreens’ vision of retail pharmacy and the contributions it can make. “We’ll see more of a focus on performance going forward, but people need to be clear about what that means,” Wasson notes. “There’s been some talk about restricted [pharmacy] networks gaining traction. We haven’t seen that. Now, what I do see people are more interested in are performance-based networks.”
Limiting the size of a network might yield savings of 1% to 2%, not enough to justify inconveniencing patients and interfering with their relationship with pharmacists, according to Wasson. However, when value — as measured by such criteria as generics utilization, efficiency in converting patients to generics and medication therapy management — is the focal point rather than a reduction of network size, the potential savings can rise considerably.
“We’ll see more employers, health plans and the government moving toward performance-based models,” he says. “Walgreens and its peers in community pharmacy are willing to compete on that basis versus a PBM trying to restrict a network based solely on reimbursement, which doesn’t address the larger health cost issue.
“Payers are looking for pharmacy to step in and help manage medication adherence and compliance as a means to hold down overall health care spending. They are also beginning to understand that we can efficiently deliver such services as immunizations and health screenings to complement the work of physicians.”
To achieve that vision, Walgreens and other pharmacy operators have to demand fair remuneration for the contributions they make, according to Wasson.
“When I was managing a store I worked for a district manager who used to say, ‘Anybody can sell dollar bills at two for a buck.’ You’ll grow revenue, but you won’t be in business for long. Walgreens isn’t going to give pharmacy away; there’s no reason we should. What we do today produces great value, and there’s even more in the incredible future that we have ahead of us.”
Wasson’s vision for this vital sector of the health care system has taken on added importance amid the ongoing shifts in the pharmacy benefits management market.
Recently the Federal Trade Commission cleared the controversial $29 billion Express Scripts-Medco Health Solutions merger, creating a dominant PBM with broad market share and clout. Consumer advocates, state attorneys general and others challenged the merger, saying it would reduce patient choice and access, hurt the quality of care, and raise health care costs for employers.
Looking toward the post-merger situation, drug store industry observers worry that Express Scripts’ approach to Walgreens in their contract-renewal talks last year will turn out to be a harbinger of things to come for all of community pharmacy. During the talks Express Scripts demanded what Walgreens executives characterize as below-market reimbursements and other onerous terms that would have made it harder to provide quality care. As a result, the drug chain ceased to be part of the Express Scripts network after the old contract expired on December 31, 2011.
While Walgreens’ stand may have had a short-term impact on its sales and earnings, Wasson is confident of the company’s long-term future and the opportunity to demonstrate that the product community pharmacies deliver is a health outcome, not simply pills in a bottle.
“The market is shifting, and there are a lot of folks that see the opportunity to work with us to differentiate themselves from Express Scripts,” he says. “Our intention is to help them produce savings and better health outcomes for more clients.”
Wasson adds that heading into this year’s PBM selling season, “employers and health plans are wanting to protect themselves from a possible major mid-contract disruption to their pharmacy network. We’re already seeing benefit consultants advising their clients to insist on contractual language that in some cases is as specific as ‘If you lose Walgreens in your network then this agreement is null and void.’ They understand the importance of having America’s No. 1 pharmacy provider in their plan.”
Request for proposal activity in the PBM sector is as intense as he has ever seen, Wasson notes, with Walgreens’ commitment to extending the scope and enhancing the impact of retail pharmacy drawing widespread interest. “People are very supportive of where we’re headed.”