Walgreens has announced that it plans to sever its relationship with Express Scripts pharmacy provider network, turning away from more than $5 billion in annual revenue. The national pharmacy chain said contract renewal negotiations with the pharmacy benefit manager (PBM) have been unsuccessful, and as a result, it will not be a part of the Express Scripts’ pharmacy provider network as of Jan. 1, 2012.
“While we have sought to negotiate a contract renewal agreement over the past several months, those talks have been unsuccessful,” said Walgreens president and CEO Greg Wasson in a press release. “Under the terms proposed by Express Scripts, it would not make good business sense for the strategic direction of our company to continue our relationship with them. Walgreens is committed to providing quality, convenient and cost-effective pharmacy services to our patients, but we cannot continue to deliver these services under the terms and rates Express Scripts offered. As the largest retail provider in their pharmacy network, we were surprised by Express Scripts’ ultimate stance during our talks, which made it clear to us that they no longer had an interest in continuing a meaningful relationship.”
Walgreens is terminating its relationship with Express Scripts because the PBM:
• proposed cutting reimbursement rates to unacceptable levels below the industry average cost to provide each prescription
• rejected Walgreens request to be informed in advance if Express Scripts intends to add or transfer a prescription drug plan to a different Express Scripts pharmacy network, and to provide patients with equal access to Walgreens retail pharmacies
• insisted on being able to unilaterally define contract terms, including what does and does not constitute a brand and generic drug
Express Scripts processes approximately 90 million prescriptions that Walgreens will fill in fiscal year 2011, representing approximately $5.3 billion in annual sales. “We believe the long-term ramifications of accepting Express Scripts’ proposal with below market rates and minimal predictability for the services we provide would have been much worse than any short-term impact to our earnings,” said Walgreens Executive Vice President and Chief Financial Officer Wade Miquelon in a statement. “All parties involved in providing health care must work together to bring down costs. In a world where cost effectiveness and access to health care is so important, 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.”