On Jan. 1, Walgreens’ contract with Express Scripts expired, and millions of Walgreens customers covered by ESI were forced to either move their pharmacy business or come up with some other way to stick with Walgreens. Drug Store News interviewed Walgreens president and CEO Greg Wasson on what the company is doing to hold on to those customers and how it is appealing to payers.
DSN: Can you talk a little bit about some of the steps that Walgreens is taking to keep Express Scripts customers from moving their business and what options are available to them? Can Walgreens make it worth their while to stick with Walgreens?
Greg Wasson: Well, first we’re working on two fronts: We’re working with the patients themselves, and we want to try to take care of our patients the best we can, first and foremost. And many of them are taking advantage of our Prescription Savings Club card that we’ve had out there for a few years and looking to continue to use their Walgreens pharmacy. As you know, it covers 7,000 to 8,000 drugs, [and] it’s got discounts on several generics and brands, so many of them are looking for the opportunity to use it. At the same time, if indeed we can’t find a way or a solution for a patient to continue to use us, we’re helping them find another pharmacist. We’re in the business of taking care of our people, and that’s what we’re doing.
On the other front — the B-to-B or client front — we have already been able to secure about 10 million prescriptions from the ESI book of business. We won’t know until CMS releases data on the Part D enrollment period, but we feel we were pretty successful in helping patients choose plans or find plans that were appropriate for them that included Walgreens. And we have clients notifying us daily that they have found a way to continue to use Walgreens within their contract and/or have switched PBMs to continue to have Walgreens in their network. So, we have close to 120 or 130 clients that have already found a way to continue to keep Walgreens in their network, and we’re working with the rest of the market out there to continue to help them find ways to use us.
DSN: Walgreens’ position has been that forcing Walgreens out of the Express Scripts network doesn’t really produce any meaningful cost savings for payers. Can you take us through some of the numbers here and help us understand what you mean by that?
Wasson: Let’s first start at a macro level. There’s a narrow band of cost between network providers within a pharmacy benefit — maybe 4% to 5%. That band, even at its most on say a $60 average prescription, is $2 to $3. And then you figure, if we fill 1-out-of-5 prescriptions in this country, and therefore most likely you can extrapolate that to ESI, by removing us, even if we were at the max of that narrow band of pharmacy costs to the network, you’re talking about pennies, cents on a $60 prescription. We believe our costs are competitive, we think we are within that narrow 5% band. ... And then when you consider the fact that we typically lead the industry in generic utilization, and the fact that we offer a 90-day retail supply of chronic medications, if you remove us, in many cases, costs [are] going to go up.
DSN: You’re actively taking this pitch out to employers, and you’ve successfully got 120 to 130 of ESI clients to find a way to keep Walgreens a part of the option. Take us through the pitch: How do you make it worth the payers’ while? A lot of the focus is always on the cost of dispensing in pharmacy reimbursement, and there isn’t always a lot of focus on some of the other ways that Walgreens is able to lower costs for payers.
Wasson: I think the No. 1 thing we do is we help clients — whether they’re employers or health plans — understand what we just walked through, so they know what their true costs are. In many cases, a client never realizes, or never sees, the true cost of a pharmacy provider that they provide to a PBM. And the reason is, is there’s a markup that the PBM as a middleman is collecting from that client over and above the cost of the network. So in many cases, when we are able to talk directly to a client or a health plan and help educate them as to the value we provide, the fact that in many cases what they’re realizing is not the cost that we’re providing to the intermediary, they begin to do the math themselves and realize, ‘Hey, wait a minute. There isn’t a significant cost savings, if any, here. In fact, in many cases, if I remove Walgreens, if I really do the math, my costs are going to go up, and I’m going to lose access to community pharmacy within the markets I do business in.’
And I think one way of looking at this would be of those 100 to 120, 130 clients that have chosen or have found ways to keep Walgreens in their network, if there was a significant cost savings by removing Walgreens, and if indeed removing Walgreens’ 7,700 dots on a map, as they’ve been referred to, does not create any inconvenience, then why not do that? Why would 120 and growing clients give up this huge cost savings versus take advantage of it?
DSN: At the same time that all of this is happening, the proposed Express Scripts-Medco merger hangs in the balance. All the focus has been in the short-term on the deal directly with Express Scripts and the Jan. 1 deadline, but how could the potential merger weigh into this? Is the Medco business potentially at risk as well?
Wasson: I’m not going to comment on the merger itself, but as I’ve commented publicly, if the terms and conditions that we’re being offered by Express Scripts are not acceptable to us, then they’re not acceptable to us from any PBM. And so if the merger occurred and the terms and conditions and the value that Express Scripts is looking to provide us is the same from Medco, then we wouldn’t take that from anyone. Now, with that said, I think as we all know, Medco’s book of business is much less today than it was a year ago. And I believe that there’s going to be a lot of uncertainty around both ESI and Medco next year with the upcoming selling season, and folks are going to be looking to understand that. Therefore, that’s a reason that we’re excited, because we have hundreds of other plans, PBMs and health plans, that we work with that are really looking for this opportunity by having Walgreens in their network and potentially greater access with the value we provide to compete against those that either have Express Scripts as their PBM or health plans that use Express Scripts and/or Medco.
DSN: Since Jan. 1 passed, and even before then, many of your competitors have begun actively marketing to Express Scripts customers that they could move their business to their pharmacies. Some people might say that if CVS and others can accept the lower rate, why can’t Walgreens? Is that too simple an argument and how would you respond to that?
Wasson: I can’t speak for others. What I can say is, this came about because we were in the final year of a three-year contract with Express Scripts, which ended Dec. 31, and we had started trying to reach an acceptable agreement earlier in the year. So I don’t know when others’ contracts with Express Scripts end or start, I don’t know what the terms and conditions are. I will say that from Walgreens’ standpoint, the terms and conditions that we were offered were not acceptable — they’re below industry costs to fill a prescription, average cost to fill a prescription. And I do think that this is a stance, frankly, that’s not just about Walgreens but I do believe is about the future of the community pharmacy industry and the value that we can provide going forward.
We’ve had representatives from nearly every stakeholder in the healthcare landscape or healthcare industry in many of our new concept stores here in the Chicagoland area. And I think the No. 1 comment I get is, ‘This is exactly what we need. How soon, how fast can community pharmacy move in this direction?’ So I think the value of community pharmacy is to be able to provide access and affordable, high-quality healthcare services as we go forward. And that’s where we’re headed.
DSN: Is there still a way for Walgreens and ESI to work out a deal here or have we passed some kind of point of no return? What do you think it would take at this point?
Wasson: As I say all the time, we are in the business of filling prescriptions. So what we’re looking for is a fair value for the services we provide, and if we were able to achieve that, certainly we would fill prescriptions. But at the same time, we also are looking forward to working with the partners that are out there that see the value of community pharmacy, see the value we provide and are looking for deeper relationships with us. And we’re going to work with those to help them win and compete in the marketplace.
For the full audio Q&A, click here.