Walgreens and Express Scripts
Express Scripts Inc has decided that Walgreens will no longer be in it's network, doing so has upset thousands of customers.
Prescription Savings Club at Walgreens
Express Scripts and Walgreen have been battling over payment issues for months, setting off a decline in Walgreen’s share price of about 25 percent since the dispute became public in June. The price of Walgreen shares dipped 1 percent, or 39 cents, on Wednesday, closing at $34.01.
Analysts estimate Walgreen could lose more than $4 billion in annual revenue from the end of the Express Scripts deal.
Walgreen filled more than 80 million prescriptions managed by Express Scripts in the fiscal year ended Aug. 31. If it lost them all, Walgreen’s total prescription volume for fiscal 2012, which began Sept. 1, 2011, would most likely drop 1 to 3 percent, compared to growth of about 9 percent a year for the last decade. Walgreen stores filled 819 million prescriptions in fiscal 2011.
Walgreen, based in Deerfield, Ill., is the nation’s largest pharmacy chain with more than 8,200 outlets in the United States operating under the Walgreen’s and Duane Reade names.
A spokesman for Express Scripts said the company remained open to having Walgreen in its network, “but only at rates and terms that are right for our clients and in line with other pharmacies in our network.”
Most Walgreen customers with an Express Scripts plan are expected to switch to another pharmacy to maintain better coverage and pay less for drugs.
But Kermit R. Crawford, a Walgreen president, told reporters after the meeting that a record 200,000 customers had already taken advantage of a special discount the company offered this month on membership in its prescription savings club.
For the month of January, Walgreen lowered the discount club’s price to $5 a year for individuals and $10 for families. Normally, membership is $20 a year for individuals and $35 for families.
In the meantime, competing pharmacies have taken to the airwaves, the Internet and print media, to promote their acceptance of Express Scripts’ drug cards. Last weekend, for example, CVS ran an advertisement in 49 million of its circulars distributed in newspapers and other publications, and it plans to run a similar ad this weekend.
CVS has the opportunity to pick up 20 million prescriptions in 2012, potentially adding $175 million to $235 million in incremental operating profit, said a spokesman, Michael J. DeAngelis.
At the shareholder meeting, one shareholder wondered whether Walgreen was putting itself in danger, since Express Scripts is seeking to buy Medco Health Solutions, another leading pharmacy benefit manager.
Mr. Wasson said he was uncertain how the proposed $29 billion merger would affect Walgreen. However, he said the chain would not do business with the combined company if the rates Express Scripts proposed were adopted by the larger company.
Walgreens on Twitter
That's the tweet, sent out by Walgreens Thursday morning, that ignited a battle royale on Twitter between the pharmacy and Express Scripts (ESRX, Fortune 500), a prescription drug insurer. Walgreens paid the social network to promote the tweet, making it show up in feeds of all Twitter users, even those who don't follow the pharmacy online.
@Walgreens' Twitter campaign spurred Express Scripts to tweet back a barrage of "facts" about its failed negotiations with the pharmacy chain. Walgreens in June announced that it would no longer accept Express Scripts insurance beginning in 2012, citing what it described as the insurer's low-ball offer on prescription drug coverage rates.
"On our negotiations with Walgreens... Fact 2: Walgreens' proposed rates/terms would make them the most expensive pharmacy in our network," Express Scripts snapped back on the microblogging site.
Though the decision was first made public seven months ago, Walgreens has continued to take a beating for it. Shares of Walgreen (WAG, Fortune 500), the parent company of the drug store, has fallen 26% since the decision to drop Express Scripts, the nation's third-largest pharmaceutical insurance company.
The issue returned to the limelight on Wednesday when Walgreen held its shareholders meeting in Chicago. Nervous investors voiced concerns that the company had made an error in judgment.
Walgreen CEO Gregory Wasson sought to assure them that although the company will take a short-term beating on its earnings, the long-term impact of the deal Express Scripts wanted would have been far more damaging to the pharmacy.
Taking to Twitter to influence the court of public opinion, Walgreens transformed its feed from an advertiser for cough medicines to an attack dog.
"We tried to take care of our Military families, but Express Scripts said no," the company tweeted Thursday afternoon.
"Patients should be able to choose their pharmacy, not @ExpressScripts," Walgreens tweeted earlier in the day.
In response, Express Scripts tweeted that 56,000 other pharmacies still accept the company's coverage, saying that the "vast majority" of clients and members have already moved on from Walgreens.
Meanwhile, Express Scripts is trying to buy Medco, the nation's largest prescription drug coverage company, for $29 billion. Walgreens currently accepts Medco, but it can't yet be known how that deal would impact negotiations with the insurer.
Though some pharmaceutical industry analysts believe the Medco (MHS, Fortune 500) deal may reduce the price of prescription drugs, the bid has faced antitrust scrutiny and may have a difficult time getting approval from regulators. To top of page
Walgreens on Facebook