Walgreens, Express Scripts split sends customers scrambling for new options
This article first appeared in the St. Louis Beacon, Jan. 6, 2012 - Consumers filled 88 million discounted prescriptions at Walgreens last year under the chain's agreement with Express Scripts, the pharmacy benefit company based in St. Louis. The arrangement gave Walgreens access to millions of additional customers while allowing Express Scripts to negotiate lower prices for company, government and union health plans.
While it may have seemed like a good deal for both parties, on Jan. 1, the relationship came to a halt. Walgreens decided not to renew the contract after negotiations broke down over new pricing for prescriptions. The upshot, says the drug chain, is disruption for customers whose drug plans are managed by Express Script.
"A lot of people are trying to find where they can go now to pick up their prescriptions," says Robert Elfinger, spokesperson for Walgreens. He says many consumers are missing the convenience of filling prescriptions at his stores, some of which offered 24-hour pharmacies and drive-through service.
"A lot of them have long-standing personal relationships with their pharmacists, and they don't want to give that up."
To help customers make the transition, Walgreens is offering discount cards to give customers a break on many generic and brand-name drugs. But the catch is that customers must pay a small fee to get the discounts. The fee is reduced this year to $5 for individuals and $10 for families, instead of $25 for individuals and $35 for families.
Thom Gross, spokesperson for Express Scripts, says the disruptions have been minimal because Express Scripts has many members to accommodate those leaving Walgreens. Besides independent and hospital-based pharmacies, the network includes several major pharmacies, including CVS, Medicine Shoppe, Walmart, Sam's Club, Costco, Target, Schnucks, Shop 'n Save, Dierbergs, and Kmart, says Gross.
"We're sorry that Walgreens unilaterally decided to leave our network," he adds. "But we've been working with our clients and members to transfer prescriptions to other pharmacies in our network. There have been fewer calls or complaints than we anticipated. Our clients have decided overwhelmingly to move forward without Walgreens."
Consumers scramble for alternatives
But some consumers have complained, blaming both sides for the inconvenience.
"I think it is terrible they could not work out the deal," says Scott Rhoades, 38, a resident of St. Charles. "It is inconvenient. Walgreens is my closest pharmacy. Now I have to go to another one that is farther away and in a grocery store."
Echoing some of those views was Peggy Kruse, 68, a retiree who lives in Florissant.
"We switched our pharmacy prescriptions to Schnucks. We're also switching more of our prescriptions to the Express Scripts mail order, which results in less co-pays. It's OK, but the Schnucks is about 10 minutes and several stoplights away, while the Walgreens is less than five minutes and no stoplights away."
Some consumers question the motives of both sides.
"It is a deplorable situation," says Alice Geary Sgroi, a St. Louisan who did not want to disclose her age. "Two giant corporations, both of which I am sure are making profits hand over fist, will not budge to come to an agreement."
Robert Valle, 91, of Glen Echo Park, says he liked the convenience of using Walgreens. His new pharmacy, he says, "is not as convenient" while Walgreens was closer to his home and offered 24-hour service. He says he doesn't understand why the parties have to fight "and leave patients out in the cold."
He adds that he couldn't have made the transition to another pharmacy without help. "I'll bet lots of senior citizens are still confused and not getting their medication."
Marilyn Vollet, 55, of Ballwin, chose CVS after no longer being able to have her prescriptions filled at a Walgreens. She says the switch has advantages.
"I don't have to fight crowds at larger stores to get prescriptions filled. CVS will now get my shopping business as well."
She described the dispute as "an unfortunate example of two businesses who made a non-consumer-driven decision and who put American's health-care needs last. This situation is the poster child for the many things wrong with health insurance in this country."
In addition to being charged a fee to join the Walgreens prescription club, customers face other disadvantages, Gross argues. He notes that the discounts apply only to certain drugs and that federal law forbids their use by recipients of Medicare, Medicaid and the Defense Department health benefit plan, one of Express Scripts' biggest clients.
"We feel patients are better off transferring their prescriptions to a network pharmacy that can manage all their needs at no extra fee," Gross says. "Transferring to another network pharmacy is very simple and very safe."
Other pharmacies may see benefits
Like many other area pharmacies, Schnucks has seen an increase in business since Walgreens left the Express Scripts network.
"Toward the end of last year, we did see an increase in the number of new prescriptions," says Paul Simon, a spokesperson for Schnucks. "That has continued through the new year."
Walmart spokesperson Tara Raddohl says many customers from Walgreens are also transferring their prescriptions to Walmart and that his company remains "prepared to take care of any customers put out by the situation."
Prices offered through the Walgreens discount program don't necessarily match those by some other area pharmacies. Raddohl notes that Walmart charges $4 for a 30-day supply of hundreds of prescription drugs and $10 for a 90-day supply. Schnucks offers a similar pricing schedule. At Walgreens, the prices of some of those same prescriptions range from $9.99 for a 30 day supply and $12 for a 90-day supply.
Although many pharmacies have been wooing Walgreens customers, none would reveal the exact amount of prescription business they have reaped. But the volume may be significant. Nobody could offer a breakdown of the local volume or value of Walgreens' prescription through the Express Scripts network. But, nationwide, Walgreens recorded $5.3 billion annually in sales through its agreement with Express Scripts. The agreement with Express Scripts represented less than 10 percent of Walgreens' prescription business, Elfinger said. By contrast, Express Scripts says the agreement represented two of every 10 prescriptions (or 20 percent) filled by all of its members last year.
"It's important to know that the retail pharmacy network is very important to us and to our members," Gross says. "We're not trying to replace it with mail order."
Still, each side says its decision amounted to doing what was in its best interest.
Express Scripts negotiates new contracts with its suppliers every three years and usually seeks lower prices.
"If you are dispensing drug X, you are doing the same service whether drug X costs $5 or $50," Gross says. "If the price of that drug moves from $5 to $10, you are getting more money for doing exactly the same thing that you were doing back when the cost was $5. That's why we try to negotiate a lower rate to make up for that inflationary impact."
During the negotiations, Gross says Walgreens said it wanted an increase in rates.
"A whole lot of major brand drugs will lose their patents over the next few years and will be subject to generic competition," Gross says. "Some of the changes Walgreens proposed would have restricted the savings available to our clients and patients."
Walgreens spokesperson Elfinger says Express Scripts wanted to "cut our reimbursement rates to levels below the industry average cost of providing each prescription."
He says the company offered to keep reimbursement rates at the level in effect at the end of last year. "We were not seeking an increase in rates," he says.
Gross says his company was still open to negotiations even though a new contract year already had begun, but Walgreens says it has no plans for further talks.
Walgreens reinvents itself
This standoff comes as Walgreens is trying to remake itself. Just as pharmacies have changed from the days when customers could once find soda fountains and ice cream cones at every corner drug store, Walgreens says it wants to offer a new model.
The chain is beginning to stock fresh fruits and vegetables in some stores in neighborhoods having few supermarkets. The centerpiece of the new model is what's known as a "health and daily living store," whichs offer preventive care services, like vaccines, and in some cases, nurse practitioners to treat minor illnesses and injuries.
It's unclear whether the parting with Express Scripts will cause Walgreens to scale back that model or expand it. But this much is known: No new health and daily living stores, or those selling fresh fruits and vegetables, will show up any time soon in St. Louis.
Eflinger, the Walgreens spokesperson, says, "We do have fresh food stores coming on line, but at this point we still don't have any announcements about St. Louis."
Meaning it won't happen here soon?
"Right," he says.
Funding for the Beacon's health reporting is provided in part by the Missouri Foundation for Health, a philanthropic organization that aims to improve the health of the people in the communities it serves.