Express Scripts replaces CVS with Walgreens for TRICARE

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ST. LOUIS — Express Scripts Inc. is changing out CVS Pharmacy for Walgreens in its retail pharmacy network for TRICARE, the U.S. military’s health care and drug benefits program.

Plans call for Walgreens pharmacies to join the Express Scripts network for TRICARE on Dec. 1. At that time, CVS pharmacies — including CVS locations in Target stores — will no longer be part of the TRICARE network.

Pharmacy benefit manager Express Scripts, the pharmacy contractor for TRICARE, said Friday that it reached a new network agreement with Walgreens.

“The new network will have more than 58,000 locations nationwide and ensures TRICARE beneficiaries have timely access to retail pharmacies in their community,” Express Scripts stated, adding that its pharmacy network includes national pharmacy chains, grocery chains and independent pharmacies.

“This change is intended to provide better value and maintain convenient access for beneficiaries,” the PBM added. “The addition of Walgreens into the network means that 98% of TRICARE beneficiaries will still have a network pharmacy within five miles of their home.”

Express Scripts said it’s working with TRICARE to inform all beneficiaries of the pharmacy network change and help give those using CVS for prescriptions — including specialty medications — time to switch to another network pharmacy so there’s no gap in coverage.

TRICARE has nearly 9 million beneficiaries in the United States, and last year they filled more than 120 million prescriptions. According to Deutsche Bank Securities health care analyst George Hill, TRICARE presents a billion-dollar opportunity for Walgreens

“We estimate the mail penetration in the TRICARE book is about 25%, creating an opportunity to serve about 90 million prescriptions at retail,” Hill wrote in a research note.

“We believe the benefit to Walgreens will likely be $1 billion to $1.5 billion in new revenue. Many TRICARE prescriptions are filled at pharmacies on the military bases, and the total network will include more than 57,000 pharmacies nationwide,” he explained, adding that the annual revenue gain for Walgreens likely would have a lower-than-average gross margin. “We believe most of this benefit would come at the expense of CVS, who is exiting the network.”

Hill noted that Walgreens has been out of the TRICARE pharmacy network since 2012.

“We view this announcement as consistent with the recent strategy from Walgreens to gain volume through additional PBM partnerships,” he said in his report. “We also view Walgreens as a more attractive partner for PBMs — such as Express Scripts in this case — than CVS pharmacies because of the competition with CVS in the PBM market.”



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