Walgreens to end relationship with Express Scripts due to proposed cut in reimbursement rates

Walgreens announced last week that it is ending its relationship with pharmacy benefits manager (PBM) Express Scripts as of January 1, 2012.

Walgreens has approximately $5.3 billion in annual sales from its Express Scripts business, wrote CEO Greg Wasson in a letter to Walgreens’ store managers and staff. However, “any time an intermediary continues to disproportionately grow its profit per prescription at the expense of the provider delivering the service, the relationship is out of balance,” Wasson wrote. “All parties involved in providing healthcare must work together to bring down costs,” he added.

A major sticking point in negotiations was ESI’s proposal to cut reimbursement rates to “unacceptable levels below the industry average cost to provide each prescription,” according to Wasson. However, Walgreens did propose “to lower rates on behalf of the Department of Defense Tricare program. The reimbursement cost for the DoD would have been lower than under Walgreens’ commercial rates,” Wasson wrote.

ESI also rejected Walgreens’ request to be informed in advance if ESI intends to add or transfer a prescription drug plan to a different ESI pharmacy network and provide patients with equal access to Walgreens’ retail pharmacies, according to Wasson.

In related news, the National Community Pharmacists Association (NCPA) said it is supporting a new bill that enhances the ability of independent community pharmacies to negotiate with PBMs. The Preserving Our Hometown Independent Pharmacies Act (H.R 1946) was recently introduced by U.S. Rep. Tom Marino (R-PA).

H.R. 1946 would allow independent community pharmacies to collectively negotiate the terms and conditions of insurance contracts to produce plan designs that would allow patients to have more choices in pharmacy providers.

“For years, small pharmacies have had to endure one-sided, take-it-or-leave-it contracts that can disadvantage community pharmacists with onerous contract terms, while impeding true competition for consumers. By contrast, large pharmacy chains have a greater ability to negotiate contracts, as evidenced by Walgreens’ recent decision,” said B. Douglas Hoey, RPh, executive vice president and CEO of NCPA.