Express Scripts Inc. customers will again fill prescriptions at Walgreen Co. pharmacies.

Walgreens, Express Scripts, contract dispute, multiyear agreement, pharmacy network, pharmacy benefit manager, PBM, Walgreens pharmacies, Express Scripts contract, Greg Wasson, George Paz, Express Scripts network, Wade Miquelon, contract impasse, pharmacy benefits, Geoff Walden

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Walgreens settles differences with Express Scripts

August 13th, 2012

DEERFIELD, Ill. – Express Scripts Inc. customers will again fill prescriptions at Walgreen Co. pharmacies.

The two companies have announced an end to the contract dispute that has left Express Scripts plan members unable to get their scripts at Walgreens since January 1.

Their multiyear agreement includes rates and terms under which Walgreens will participate in the broadest Express Scripts retail pharmacy network available to new and existing clients, as of September 15. The companies are not disclosing the terms of the new pact.

Pharmacy benefit manager (PBM) Express Scripts promised to work to ensure a smooth transition for plan sponsors who will want to include Walgreens pharmacies in their network.

Moody’s called the resolution “credit positive” for Walgreens as it gives the chain the chance to win back the 85% of the prescriptions covered by its Express Scripts contract that went to other retailers.

“As I’ve said, we are in the business of providing a broad range of pharmacy, health and wellness services to help meet the needs of all of our customers,” said Walgreens president and chief executive officer Greg Wasson. “I am pleased that Walgreens and Express Scripts have been able to reach an agreement that works for both parties and is consistent with our company’s principles. This agreement is good for our shareholders, our employees, and the patients and communities we serve every day. We look forward to once again filling prescriptions and offering our health and wellness services as part of the Express Scripts network.”

Express Scripts chairman and CEO George Paz commented, “We are happy to include Walgreens in our broadest network of pharmacies, and we are pleased to reach an agreement to do so. Our business model is based on strong alignment with our plan sponsors — employers, health plans, unions and government health programs — providing them with a clinically sound and economically responsible pharmacy benefit.”

The broadest Express Scripts network will offer more than 64,000 pharmacies nationwide, including Walgreens.

The dispute dated to the start of last summer, when Walgreens vowed to pull out of the Express Scripts network after failing to come to terms on a new contract. Express Scripts prescriptions were worth an estimated $5.3 billion for Walgreens in 2011.

While the move drove down Walgreens’ same-store pharmacy sales this year, the chain’s executives said over the winter a line had to be drawn to stop what many in the industry see as PBMs’ continual squeezing of community pharmacies.

“We believe the long-term implications of accepting Express Scripts’ below-market proposal would have been much worse than the short-term impact on earnings,” Wasson said at the company’s annual shareholders meeting in January. “The benefits of this decision will be far more positive in the long term than the negative impact they have had in the short term.”

Predictions that the loss of the prescriptions covered by Express Scripts would cause irreparable harm were premature, Walgreens chief financial officer Wade Miquelon added. “We are set up to be successful with or without Express Scripts,” Miquelon stressed.

The contract impasse centered on reimbursement rates that the retailer said were making it unprofitable to fill prescriptions for patients whose pharmacy benefits were managed by Express Scripts. In addition, Walgreens could not convince Express Scripts to compensate it for new health care services helping patients manage their medications.

Express Scripts argued that Walgreens’ rates were not competitive with those of other chains. “Without Walgreens providing reasonable adjustments to its rates, our clients and patients will bear the financial burden of branded price inflation, while not receiving the full economic benefit of increased generic utilization,” the PBM said.