Inside This Issue - News
Walgreens, CVS Caremark settle PBM standoff
June 28th, 2010
NEW YORK – Walgreen Co. and CVS Caremark Corp. have settled their fight over pharmacy benefits management.
Walgreens will continue participating in the CVS Caremark retail network for current, new and renewed plans, the companies announced. They did not disclose the financial terms of their new contract.
“We are very pleased with the outcome of this mutual, multiyear agreement that meets our business objectives,” says Walgreens executive vice president of pharmacy Kermit Crawford. “The agreement makes good business sense, provides the framework we need to operate our business going forward, and assures choice and convenience for the many consumers who look to us for quality pharmacy care. The agreement is good for our patients, pharmacists and shareholders, and it will allow us to continue to meet the needs of our customers across the country through the CVS Caremark network.”
Per Lofberg, president of CVS Caremark’s PBM business, says, “We are pleased to have reached a mutually agreeable solution together with Walgreens that is consistent with our top priority to provide convenient access to affordable high-quality pharmacy health care. This new contract enables Walgreens to continue participating in CVS Caremark’s PBM national pharmacy network, provides enhanced network stability, eliminates any current or long-term disruption for our clients or their members and allows us to continue to fulfill our obligation to deliver cost-effective pharmacy benefits for our clients.”
With the continuing participation of Walgreens, the CVS Caremark PBM network will have more than 64,000 pharmacies, including ones in chain and independent stores as well as supermarkets and other major retailers.
The conflict was initiated when Walgreens announced that it would stop filling prescriptions for new and renewed Caremark plans starting next year. Walgreens cited bias against non-CVS pharmacies and the “unpredictability” of reimbursement rates.
CVS Caremark struck back with plans to dump Walgreens from its PBM network in July. Up to 53 million patients would have been affected by the move.
Lofberg called Walgreens’ action “a transparent attempt” to try to raise reimbursement rates. “We’ve seen Walgreens use this approach in the past, targeting employers, health insurers, government entities and other plan sponsors,” he said. “We believe this approach is totally contrary to the needs of our clients, who are all struggling to keep pharmacy health care affordable in today’s challenging environment.”
Crawford declared that Walgreens was “disappointed but not surprised” at CVS Caremark’s move, noting that the action showed “patent disregard for patient choice and broad access.”
Both companies minimized the impact of the standoff on their businesses.
“Regardless of CVS Caremark’s decision, we are confident of our ability to continue to grow our business as a provider in hundreds of other pharmacy benefit networks and as a direct provider to employers,” said Crawford.
CVS Caremark chairman and chief executive officer Tom Ryan noted that the company’s PBM network would still have more than 57,000 stores without Walgreens.
Walgreens president and CEO Greg Wasson said about 10% of the company’s patients are CVS Caremark plan members. He said increased business from other clients would offset the lost business.
“Nine out of 10 patients who walk into a Walgreens pharmacy are not CVS Caremark patients,” he said. “There’s another huge market out there.”
Still, CVS Caremark customers generate 7% of Walgreens’ sales, or some $4.4 billion.
In firing the first salvo of the dispute, Walgreens criticized CVS Caremark’s Maintenance Choice plan, which requires members who do not fill their prescription at a CVS store or through a Caremark mail-order facility to pay up to full price. CVS Caremark claims that Maintenance Choice increases options for employees who would otherwise be restricted to mail-order scripts.
CVS Caremark also stated that Walgreens already received reimbursement rates comparable to those of other large national chains, including CVS, but had continued to seek higher rates.