Walgreen (WAG) Cuts Out Express Scripts (ESRX)
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Walgreen Co. (NYSE: WAG) reports that contract renewal negotiations with pharmacy benefit manager Express Scripts, Inc. (Nasdaq: ESRX) have been unsuccessful, and as a result the company is planning not to be part of Express Scripts’ pharmacy provider network as of Jan. 1, 2012.
Beginning next year, Express Scripts’ network would no longer include Walgreens 7,700 pharmacies nationwide, including Walgreens more than 250 Duane Reade pharmacies in the New York City area.
From the release: "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 Walgreens Executive Vice President and Chief Financial Officer Wade Miquelon. “All parties involved in providing health care must work together to bring down costs. In a world where cost effectiveness and access to health care is so important, 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.”
Moving forward, 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, consistent with their contractual agreements, to ensure their beneficiaries can continue to use the convenience of Walgreens nationwide locations."
Beginning next year, Express Scripts’ network would no longer include Walgreens 7,700 pharmacies nationwide, including Walgreens more than 250 Duane Reade pharmacies in the New York City area.
From the release: "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 Walgreens Executive Vice President and Chief Financial Officer Wade Miquelon. “All parties involved in providing health care must work together to bring down costs. In a world where cost effectiveness and access to health care is so important, 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.”
Moving forward, 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, consistent with their contractual agreements, to ensure their beneficiaries can continue to use the convenience of Walgreens nationwide locations."
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