Walgreen (WAG) Drops CVS Caremark’s Drug Plan

Medco Health Solutions (MHS) and Express Scripts Inc. (ESRX), rivals of CVS Caremark Corp. (CVS), may gain business after Walgreen (WAG), the largest U.S. drugstore chain, said it will no longer honor new or renewed prescriptions from CVS Caremark’s pharmacy benefit manager [PBM] plan. The news prompted CVS shares to decline to their lowest level in seven months, sinking more than $4.00, or 12 percent, to $29.75 before rebounding.

In a letter to CVS Caremark, Walgreen said that “CVS’s promotion of prescription drug plan designs such as Maintenance Choice disrupts networks by requiring patients with chronic conditions in many plans to use CVS pharmacies or Caremark mail service facilities for their prescriptions instead of Walgreens.”

Chief Executive Officer Greg Wasson noted that “as a result of CVS Caremark’s pharmacy benefit management practices toward Walgreen, it no longer makes good business sense for Walgreens to be part of [CVC’s] network for new and renewed plans.”

Walgreens also said in a statement that CVS Caremark’s reimbursement rates for drugs were unpredictable and “often don’t reflect the market.”

In response to the announcement from Walgreen, CVS said they were “surprised and disappointed by Walgreens’ announced intention not to participate on a go forward basis in CVS Caremark PBM pharmacy networks.

According to CVS, today’s announcement by Walgreen “is nothing more than a transparent effort to raise its reimbursement rates at the expense of plan sponsors and members and illustrates an inability to adapt to the demands of the marketplace in today’s challenging and rapidly evolving health care environment.”

Walgreen fell $0.46, or 1.49 percent, to $30.38 at 1:35PM EDT in New York Stock Exchange trading. CVS declined $2.47, or 7.30 percent, to $31.32.

1 Comment on Walgreen (WAG) Drops CVS Caremark’s Drug Plan

  1. CVSCaremark sent a ltr. effective Jan.1, 2010 that their retail outlets will honor Plan prescriptions at the same price as via the mail. win/win for CVS: no handling/postage if ordered via phone; customer in retail outlet waiting for prescription wil walk store and possibly make additional purchase. Letter became too good to be true. The retail store now tells customers that it is cheaper to order via the mail…only if they are asked. I checked the price on a new prescription 2 weeks ago at both the retail outlet and via the mail-order telephone. The retail outlet was 41% higher! I shop for my prescriptions at CVS only because I must do to my Company's Plan. Otherwise, I wouldn't give them a dime. Yes, I already miss Walgreens!

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