The Walgreen Company on Tuesday braced Wall Street for a projected loss in 2012 of more than $3 billion in revenue because of the planned loss of business from customers who have their prescription drug coverage managed by Express Scripts, a large pharmacy benefit manager the drug store giant is battling over payment issues.
The proposed merger between Express Scripts and Medco Health complicates matters, given that federal regulators are scrutinizing the deal.
Going without Express Scripts is a high-stakes gamble for Walgreen, the nation’s largest pharmacy chain. Deerfield, Ill.-based Walgreen generated $5.3 billion, or 7 percent, of its $72 billion fiscal 2011 revenue from customers with drug coverage managed by Express Scripts, but the company is hoping to retain some of those dollars.
Much of the rift, which began three months ago, centers on how much Walgreen is getting paid by Express Scripts to dispense prescriptions and how much the benefit manager pays the drugstore giant for the costs of the drugs. Express Scripts is a pharmacy benefit manager, which works as a middleman of sorts between employers and drugmakers when it comes to buying prescription drugs.
“We are planning not to be part of the Express Script network as of the first of the year,” Greg Wasson, the chief executive of Walgreen, told analysts and investors.
In a conference call following the company’s fourth-quarter and full-year fiscal 2011 earnings release, Walgreen executives outlined three “potential” scenarios where they could retain from 25 percent to 75 percent of the customers who have Express Scripts benefit plans.
Depending on retention, Walgreen said the company could experience a negative impact of 7 cents to 21 cents a share for its fiscal 2012, which began Sept. 1 and runs through Aug. 31, 2012. Its contract with Express Scripts expires at the end of this year, leaving open the possibility that some resolution could be reached in the coming months.
To mitigate the threatened loss of business from Express Scripts customers, Walgreen said it had been in talks with large health plans and employers about ending relationships with Express Scripts and contracting directly with Walgreen, but the pharmacy chain would not provide specifics or name companies that were considering leaving.
“We’re not going to speculate on retention,” Mr. Wasson said. “We’re encouraged by the response we are receiving.”
The imbroglio comes at the peak of fall open enrollment season when companies disclose to workers their benefit options for the following year. It’s during this time that workers will be deciding which health plans to choose. In addition, seniors covered by Medicare health insurance for the elderly will also soon be choosing their drug coverage options for 2012.
Both sides say they are trying to provide the best deal to employers while saving the health care system money.
Express Scripts says Walgreen’s fees and costs to provide prescriptions are too high. “We would still welcome back Walgreens in our network at rates that are more aligned with rates that are right for our clients,” said Brian Henry, a spokesman for Express Scripts.
But Walgreen says its rates are in line with the market and it gives customers the best buy at the pharmacy counter with its services that include educating customers and moving them to cheaper generic drugs. Walgreen also markets a program where consumers can get a 90-day prescriptions at the pharmacy counter.
Article source: http://feeds.nytimes.com/click.phdo?i=a44842db8518c1b32bc3730d25658f72
Speak Your Mind
You must be logged in to post a comment.