Walgreens breaks down Express Scripts business in 8-K filing
DEERFIELD, Ill. — In an 8-K filing earlier this week, Walgreens broke down its Express Scripts business and challenged many assertions that have been made regarding contract negotiations with Express Scripts. The overarching theme of the filing suggested Express Scripts has little to gain without Walgreens within the pharmacy network fold but much to lose.
"Many payers recognize that excluding Walgreens does not provide meaningful savings because our unit prices are competitive with other pharmacies. The vast majority of pharmacy reimbursement is within a narrow band, typically less than 5% of one another," Walgreens noted. "Payers recognize that while excluding Walgreens will result in little to no savings, in some cases it will actually raise costs while causing significant patient disruption, risking gaps in care and increasing administrative costs on plan sponsors caused by member complaints and dissatisfaction."
Approximately 45% of Walgreens’ Express Scripts prescription volume comes by way of health plans, a number of which have signed or are in the process of signing agreements that would allow them to retain access to Walgreens, according to the filing. "Many other health plans want Walgreens, but have found their contract with Express Scripts limits their options for now. As a result, these plans’ product offerings are less competitive without Walgreens — in both the Medicare and commercial segments — and we believe they are saving little to no money by Express Scripts excluding Walgreens," the filing reads. "We are confident many of these plans will choose a different PBM partner in the future."
Large employers make up approximately 25% of Walgreens’ Express Scripts prescription volume. Walgreens has entered into direct contract or custom network arrangements with select clients in an effort to minimize disruption until those employers are contractually able to switch PBMs, Walgreens reported.
Medicare Part D represents approximately 10% of Walgreens’ Express Scripts prescription volume, however patients currently are in the open-enrollment period and Walgreens is proactively reaching out to that group. The remaining Express Scripts volume of 20% is represented by the Department of Defense/TRICARE. Walgreens has attempted to engage in separate negotiations with Express Scripts for this group from contract negotiations in general to no avail, the company reported.
Walgreens noted that there has been no prescription share erosion through September because of the talks, and based on an October comparable gain of 2.5% in prescriptions filled, the company feels confident that prescription growth for the company continues to rise. However, today Walgreens still is part of the Express Scripts network — the current agreement doesn’t expire until the first of the year.
"WAG is betting that they are a critical part of the pharmacy distribution network and ESRX is betting that they can successfully sell a PBM network without WAG," noted Credit Suisse analyst Ed Kelly. "We won’t know which company is right until 2012, but both appear ready to find out." Credit Suisse Securities is acting as an adviser to Express Scripts on the announced acquisition of Medco Health Solutions.
Walgreens expects to achieve 97% to 99% of its fiscal 2011 prescription record volume of 819 million prescriptions in fiscal 2012, the company reported. Any share loss should go to CVS or Rite Aid, suggested Kelly, over supermarket or independent pharmacies. Utilizing Metromarket Studies’ database, Credit Suisse determined of the 355 markets in which Walgreens currently operates, CVS’ weighted average market share in these markets is 22% while Rite Aid’s weighted average market share in these markets is 8%.
Walgreens plans to distribute the attached informational materials regarding Express Scripts to various industry participants, the company told the Securities and Exchange Commission. For the full document, click here.
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Glooko cable, app allow users to download blood-glucose data to iPhone
NEW YORK — A new app for the iPhone allows users to keep track of their blood-sugar levels on a daily basis, according to published reports.
Glooko has launched the logbook app and MeterSync cable, which allow patients to automatically download data from their blood-glucose meters to their iPhones, add notes and send results to their healthcare providers.
The cable costs $40 and works with popular glucose meters made by Bayer, FreeStyle and OneTouch.
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Holiday season 2011: Driving in-store traffic via mobile devices
With the holiday season fast approaching, there has been a significant amount of press coverage regarding the role mobile devices will play in driving retail sales this season. The consensus is that mobile devices are changing the shopping landscape, and that the 2011 holiday season will be the tipping point — the year that consumers widely integrate mobile devices into their shopping routine. “This November holiday season will mark the true advent of the post-PC era with consumers demonstrating a heightened interest in adding mobile devices to their holiday shopping arsenal,” noted IBM’s John Squire, in response to an IBM Coremetrics Benchmark analysis showing that 15% of people in the United States accessing a retailer’s website are expected to do so via mobile devices.
What does this mean for the retail community? Are shoppers going to be bypassing in-store shopping in favor of online mobile purchasing? In consulting engagements with large consumer packaged goods companies and retailers, we are seeing concern that mobile commerce (m-commerce) will diminish in-store traffic, as shoppers abandon stores in favor of phone and iPad purchasing. This is a valid fear, as m-commerce is a second channel (in addition to PC-based ecommerce) which allows shoppers to purchase without walking the aisles.
But not so fast. Based upon multiple indicators, including in-depth interviews with drug, grocery and big-box retailers conducted for a recent whitepaper on mobile marketing and the retail channel, we have every reason to believe that mobile devices will actually DRIVE foot traffic for those retailers who choose to participate in the mobile revolution. It’s counterintuitive, maybe, but consider this — by-and-large, shoppers aren’t using mobile devices to make purchases. Shoppers are using mobile devices to gather information, compare prices and make decisions, and this oftentimes takes place in the aisle of a store.
According to a recent PriceGrabber survey, just 4% of 2,322 consumers interviewed regarding their holiday shopping plans stated that they would make purchases via mobile devices, up from 3% last year. While mobile apps are making it easier for shoppers to buy via mobile devices, shoppers aren’t yet making the switch to mobile purchasing. For brick-and-mortar retailers, this is good news. There is a real opportunity for retailers to develop innovative mobile strategies, resulting in increased customer loyalty and “traction” among consumers. The investment in mobile will pay benefits all year long, not just during the shopping season.
How, then, does mobile drive traffic to stores? What is yielding results? Via interviews with retailers, we’ve identified key tactics that are being used to increase store visits.
- E-coupons: In its 2011 holiday survey report, Deloitte noted that 41% of smartphone owners plan to receive coupons via their mobile handset.
- “Daily deals”: We can expect to see more “short-term” deals this holiday season, with retailers offering deep discounts for a limited number of days. This can be a surefire way to drive traffic over a concentrated period of time.
- Innovative social media: Most of the major drug stores have Twitter options, which allow the retailers to “tweet” new discounts and promotions. For the 2011 season, Walmart has launched 3,500 store-specific Facebook pages (which can be accessed via mobile devices). These pages alert shoppers to “Rollback Alley” deals, new products and special events.
The 2011-2012 time frame is a golden opportunity to implement a mobile strategy to increase foot traffic. Retailers acting quickly will help shape the m-commerce landscape, and will be well-positioned as smartphone and tablet adoption increases and technology improves. As the New Year approaches, ask yourself what you are doing to win shoppers via this channel. By developing a mobile communication strategy with consumers now, retailers can grow shopper loyalty and traction, increase mindshare and drive sales.
Moira Koch is a VP at Maia Strategy Group, where she leads consumer packaged goods engagements with an emphasis on retail insights. Prior to joining Maia Strategy Group, she was responsible for developing and launching Bluebeards Original, a premium line of Men’s beard care products sold in retail stores nationwide. Her latest whitepaper “How Mobile Technology is Changing the Retail Environment” is available here.