On June 7th, benefit plan professionals received notice that the "Hatfield and McCoy's" in the pharmacy benefit manager (PBM) world will not longer be playing nice with each other. You may have seen yesterday's announcement that Walgreens will not participate in future CVS Caremark pharmacy network plans. According to the announcement, plans that are currently out to bid or that are renewing for the next plan year will not have access to Walgreens pharmacies if the business commences after June 7 to CVS Caremark.

The Walgreens announcement states that a letter was sent to CVS Caremark informing the company of its decision. Walgreens' reasons focus on CVS Caremark's programs that limit patients to using a CVS pharmacy or Caremark mail service pharmacy, a lack of knowledge when plans adopt this type of program, and unpredictability in reimbursement rates to Walgreens. Walgreens executive vice president of pharmacy, Kermit R. Crawford, stated, "In the three years since the CVS-Caremark merger, it has become increasingly clear to us that Caremark's approach to Walgreens as a community pharmacy within CVS Caremark's retail network has fundamentally changed, and we are no longer viewed as a valued community pharmacy within its PBM network."

This announcement could cause potential disruption in the marketplace, particularly for plans considering CVS Caremark. With 7,500 pharmacies nationwide, Walgreens operates pharmacies within five miles of nearly eight in 10 Americans and it currently maintains about a 20% market share. It remains to be seen how and when the relationship between both organizations will be resolved. Medco's retail pharmacy networks are unaffected by Walgreens' letter to CVS Caremark.

We have obtained a copy of the Walgreens announcement, with a link to a brief FAQ and a replay of a webcast held June 7 by Walgreens. We anticipate this will spark some bidding of drug plans this year for employer's valuing access of network pharmacies who view ownership of retail pharacies and a PBM as a conflict of interest.

A 50% GENERIC RATE IS NO LONGER ACCEPTABLE A recent study was conducted of employer groups by the Pharmacy Benefit Management Institute (PBMI). Here are the latest 2009-10 generic dispensing rate results:

Generic Retail Dispensing rate = 63.5%

Generic Mail Order Dispensing rate = 53.6%

"Drug benefit management indicators are trending in the right direction as a result of effective use of economic incentives and clinical tools, says Dana H. Felthouse, MBA, PBMI president. "Employer use of multiple-tier drug benefit designs continues to increase for a third year, encouraging plan member use of low cost medications when medically appropriate. Generic dispensing rates increased in both retail and mail, with the average retail rate at 63.5% and the average mail rate at 53.6%."

For the first time, the study notes differences among fully-insured, self-insured, carve-out and carve-in drug benefit programs. For example, self-insured employers and those with carve-out drug plans are most likely to use multi-tiered cost sharing. Another significant difference occurs in management of specialty pharmacy. More carve-out employers than carve-in employers offer a specialty pharmacy benefit, with carve-out employers more likely to use their PBMs as exclusive suppliers of specialty drugs.

The 2009 survey was completed by 417 U.S. employers representing more than 7 million members. Almost 70 percent of the respondents have a self-insured plan compared to 32 percent with a fully-insured plan. There's a fairly even use of carve-in and carve-out designs.

Click here for your free copy of the 2009-10 Prescription Drug Benefit Cost and Plan Design Report.