By Kate H. Gamble
Contract renewal negotiations between Walgreens and pharmacy benefit manager Express Scripts, Inc. have broken down, according to the drugstore chain. Beginning on January 1, 2012, Express Scripts’ network will no longer include Walgreens’ 7,700 pharmacies nationwide, including more than 250 Duane Reade pharmacies in the New York City area.
“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 statement. “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 cited the following reasons for the split:
In their intermediary role as a pharmacy benefit manager, Express Scripts processes approximately 90 million prescriptions that are expected to be filled by Walgreens in fiscal 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 Wade Miquelon, Walgreens executive vice president and chief financial officer. “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.”
Walgreens noted that Medicare Part D patients who use its pharmacies will continue to have the option during the open enrollment period near the end of the year to choose a Part D plan that includes Walgreens. In addition, some Express Scripts clients may have the ability to include Walgreens as part of their benefit offering. As a result, Walgreens said it will look for opportunities to have discussions with Express Scripts clients to ensure their beneficiaries can continue to use Walgreens.