Walgreens and CVS Draw Line in the Sand

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.