Walgreens announced yesterday it would no longer do business with CVS Caremark. The drugstore chain believes CVS's pharmacy benefits management (PBM) division is set up to drive down its profits while pushing consumers to do business at CVS stores.
In particular, Walgreen took issue with CVS Caremark's Maintenance Choice program. The drugstore chain said the CVS program forces many patients to either use its mail order service or one of its pharmacies.
"In the three years since the CVS Caremark merger, it has become increasingly clear to us that Caremark's approach to Walgreens as a community pharmacy within CVS Caremark's retail network has fundamentally changed, and we are no longer viewed as a valued community pharmacy within its PBM network," Kermit Crawford, executive vice president of pharmacy for Walgreens, said in a press release.
CVS Caremark put the blame squarely back on its rival."Today's announcement by Walgreens 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 ... The fact is our clients, not retail pharmacies, dictate plan designs. Unfortunately, Walgreens has a demonstrated pattern of publicly objecting to plan designs not to their liking, such as mail based programs and other innovative programs that are designed to reduce costs and meet client needs."
The move, assuming the two parties don't arrive at a truce, could be costly for both companies.
Walgreen, which said it would handle current Caremark contracts but not new ones, gets about seven percent of its annual revenue from doing business with its rival based on an Associated Press report.
CVS Caremark could find it more difficult to get companies to sign on for its PBM program if Walgreen was not an option for filling prescriptions.
Discussion Question: What is your take on Walgreens' decision to no longer work with CVS Caremark's pharmacy benefits manager business?
- Walgreen ending CVS Caremark network relationship - The Associated Press/The Washington Post
- CVS Caremark Issues Statement in Response to Walgreens Unexpected Announcement - CVS Caremark
- Walgreens Will Not Participate in Future CVS Caremark Pharmacy Network Plans - Walgreens
- Walgreen Cuts Future Ties With CVS Caremark-Administered Plans - The Wall Street Journal