In Walgreens Dispute, Express Scripts Seeks Knockout Blow to Pharmacies – and Patients

By Zachary French

Walgreens recently announced that beginning January 2012 it would no longer participate in Express Scripts’ pharmacy networks.  Walgreens reportedly made this decision because Express Scripts reimbursements to its national chain of pharmacies are so low under the terms of the proposed new contract that the retail pharmacy giant thought it more reasonable to risk losing an estimated $5.3 billion in annual revenue generated from prescriptions filled by members of health plans that Express Scripts manages.

Assuming the media reports regarding these negations are accurate, NCPA sees ominous consequences for patients, health plans and community pharmacies in Express Scripts’ windfall profit-driven negotiating position. Regardless of how this impasse is resolved, it should spotlight how small business community pharmacies and their patients are regularly steamrolled by pharmacy benefit managers (PBMs) like Express Scripts. If a provider with the clout of Walgreens can be forced into a virtual contract stalemate that risks  disrupting existing patient/pharmacist relationships and reducing patient access to care, it’s easy to see how much more inequitable PBM contracts can be for an independent community pharmacy “negotiating” with a billion-dollar corporation.  To help address these issues, NCPA has endorsed The Preserving our Hometown Independent Pharmacies Act (H.R. 1946) and the Pharmacy Competition and Consumer Choice Act (S. 1058/H.R. 1971).

 Express Scripts’ reported posture in these negotiations seems to encapsulate three of the major PBMs’ most egregious business practices that put PBM profits before patients and the pharmacies that provide their care.

First, optimizing PBM profits by squeezing pharmacy reimbursement rates to the point that the viability of small community pharmacies is placed at risk.  This practice jeopardizes patient access to close-to-home care and has clinical repercussions such as increased risk of non-adherence (patients not taking medications as prescribed by their doctors).  Clearly, if Walgreens concluded that Express Scripts’ pharmacy reimbursements are financially unsustainable, the tipping point has long ago been reached for small pharmacies. Express Scripts and its PBM brethren need to immediately discontinue retail “spread pricing” – the practice of marking-up pharmacy claims filled at retail to generate PBM profits.

 Second, scheming on generic drugs. Beyond the reimbursement disagreements with Walgreens, Express Scripts is reportedly seeking the right to unilaterally change the definition of “brands” and “generics.”  This is a favorite PBM contracting scheme that is designed to further increase PBM windfall profits. Previously, it was solely inflicted upon unsuspecting health plans and their members. Walgreens obviously sees this scheme for what it is.

If only health plan sponsors were aware of the financial impact these types of PBM schemes have on their potential generic savings, they too would reject them out of hand, opting instead for contract language that precisely defines a brand and generic drug.  With so many blockbuster drugs coming off patent over the next two years, health plans have an unprecedented opportunity to leverage huge generic savings – assuming the big PBMs don’t retain those savings as undeserved profit.

Third, pushing restricted pharmacy networks that will increase PBM profits and reduce the number of pharmacies available to provide patient care.  Media reports  indicate that Express Scripts plans to limit patient access to care by pushing forward with restricted access pharmacy networks. This allows PBMs to reduce the number of pharmacies available to patients so that that the PBMs can squeeze pharmacies for more profit per claim.  Of course, this will mean that patients will suffer as a result. Long-standing relationships with local pharmacists would be disrupted and patients may have to drive further to get their prescriptions filled.

There is a financial impact to health plans as well. Restricted access networks, with their associated longer driving distances to obtain medications, help PBMs like Express Scripts sell heath plan sponsors on herding their members into PBM-owned mail order pharmacies that dispense generic drugs 10 to 13 percent less frequently than at community pharmacies.  In 2010, Express Scripts’ mail order service had the lowest generic dispensing rate of the three largest PBM-owned mail services – costing its health plan clients millions of dollars in unrealized generic savings.  Research finds that for every 1 percent increase in generics utilization, a health plan can save 2 percent.

 On behalf of 23,000 independent community pharmacies NCPA continues to be extremely concerned about the negative impact that the ever-growing list of egregious PBM practices has on pharmacy patients. Some of these are on display in the Walgreens-Express Scripts negotiations that may cause pharmacy patients anxiety and worry about their ultimate access to care.

12 Responses to “In Walgreens Dispute, Express Scripts Seeks Knockout Blow to Pharmacies – and Patients”

  1. 1 Dee July 7, 2011 at 2:20 pm

    good article, glad to know the details of the big fight

  2. 2 Kirby Lester July 7, 2011 at 4:18 pm

    Great. We finally see in print what we independent owners have known for years. We have always complained, moaned and groaned, and continued to accept the pitiful reimbursements. NCPA even became a part of the problem with its activities around Community Care, which was eventually sold to one of the most odious PBMs.
    What we need is 1. legislation that prohibits “self referral” by PBMs to any mail order drug outlet (I refuse to consider these places pharmacies) that the PBM has any ownership, rebate agreement, or any coercive incentive for use, and 2. Exemption from anti-trust for independent pharmacies to negotiate reimbursement.
    Additionally, we need pharmacist to stand up and act like health care professionals. As Pogo said, “We have met the enemy and he is us”. We have allowed the profession to be dictated by $4 generic give-a-ways, the idea that we have to crank out 300 scripts every eight hours, and above all, bow down to the PBMs, insurance companies, and big box drug outlets. We have allowed our profession to be reduced to a technical, commodity selling job.
    We say we are patient advocates, and our service save the health care system billions annually. I say we stand our ground and get paid what we are really worth.
    Walgreens will eventually settle with ES. ES will just get the money for Walgreens from the rest of its providers, so its gain will be our loss.

    • 3 ncpa1 July 7, 2011 at 6:36 pm

      Agree with your call for legislation. To that end, NCPA has endorsed and is pushing The Pharmacy Competition and Consumer Choice Act (H.R. 1971/S.1058) and The Preserving Our Hometown Independent Pharmacies Act (H.R. 1946). Every independent pharmacist should contact their U.S. Senators and Representatives and urge them to support these bills. Learn more and take action here. You can encourage your state elected officials to get involved as well, as is happening in New York.

  3. 4 Kevin Sands July 7, 2011 at 7:00 pm

    This is EXACTLY why we need healthcare reform and regulation! If we don’t PBMs and huge Pharmacy chains will cheat all of us out of our customers and our jobs(not to mention the huge amount of money they take out of the system)! Greed is a terrible human quality and money never trickles down to the working people!
    If you don’t believe me…give it another year and see where we are.
    WAKE UP Pharmacists and all Americans for that matter…PBM’s screw us all!!!

  4. 5 jay July 8, 2011 at 4:15 am

    Pharmacists and pharmacy associations have incrementally given away the profession, unable or unwilling to stand up together for the profession . The actions of Express Scripts has for years been anti-pharmacy. We failed to stand together when needed when they were small, now they have great power. NCPA will have few pharmacists available to even consider joining.

  5. 6 Luke Vander Bleek July 11, 2011 at 5:28 pm

    I am not at all surprised by the impasse reported by the media between Walgreens and Express Scripts. Although not clearly reported, after all these are “private negotiations”, I suspect that the biggest area of contention is the arbitrary generic reimbursement that is entirely contractually controlled by Express Scripts. I can understand why so many independents have proxied this form of reimbursement to these uninvited business partners. But why have the big retail providers? Surely, they have the resources to demand accountability for the arbitrary and rapid depreciation of reimbursement for multi-source drugs. I suggest that things are kept simple with regard to legislation and regulation. My top priority is to have the PBMs agree to defend their MAC lists with verifiable references to actual market prices and supplies. When did we give them a pass on this? For the last five years none of the PBMs have been willing to reference a verifiable source of a generic drug that we have challenged. I can’t think of any other industry where business is successfully conducted with a customer that guarantees no volume, hasn’t agreed to a price, and yet has a contractual agreement to be served in return for whatever he deems appropriate.

  6. 7 Dutch September 13, 2011 at 7:40 pm

    I have been having unending battles with express-scripts about prescriptions. They pretty much refuse to fill any name brand prescriptions and want to push generic alternatives, even-though there is a real reason they are not always desired or useful. They capitalize what Obamacare stands for. “Hurry up and die”.

  7. 8 Stewart Lawson October 5, 2011 at 4:51 pm

    What is the greatest value that a “pharmacist” provides in filling a prescription?. If that has value it will be paid for otherwise who needs pharmacists and big box outlets with minimum wage staff will be the low cost supplier.

  8. 9 KaliGirl October 21, 2011 at 9:44 pm

    I also have had many problems with express scripts — My glaucoma medication prescription has been lost now three times by them. There is no generic, yet they find some reason not to fill . . . the lost the prescription, there is a generic and are waiting for the doctor to call . . . really stupid excuses. It even got to the point of not having my medication for a month because they refused refills — my refills at Walgreens are now $50.00 per month when express scripts pays. They have put my eye mediation prescripts on generics or I have to pay the full price — $180 per mo for one $130 per mo for the other if I don’t order thru the mail. I am so disgusted . . . I will call my local politicians right after I type this in.

    • 10 ncpa1 October 24, 2011 at 8:03 pm

      Thank you for sharing your story with us, and for taking action in calling your elected officials and notifying them of the problems you are having with mail order. We understand and sympathize with your situation and have heard countless stories of patients who have endured similar circumstances due to the mail order facility mishandling the prescription, leaving patients without their medication. There are several resources on, which is a patient focused initiative which provides valuable information and an outlet to take action. There is a predrafted letter you can personalize that can be sent to your employer urging them to reconsider mandatory mail plans and others that can be sent to elected officials to notify them of issues that affect you as a patient. You can also signup to receive a bimonthly newsletter that provides updates on legislative issues and other developments that may impact a patient’s ability to select a pharmacy of their choice.

  9. 11 Shawn May 2, 2012 at 10:46 pm

    Stop complaining half of you people were against so called Obamacare, so you get what you get. Let the corporations have the free market to dictate your care.

    For senior citizens with a million medical problems try generic, try Walmart Pharmacies alot of their generics are $4 for a 30 days supply and $10 for a 90 days supply this is the cash price without insurance.

    Its a new day you have to take charge of your health by exercising, healthy diet and living a healthier lifestyle plain and simple. Pills can cure years of neglict and self destruction.

  10. 12 Patrick February 28, 2013 at 6:05 pm

    Express Scripts is communist controlled of medications people need.I have been able to take my meds from the local pharamcy and had no problems,Now my insurance carrier wants me to go with Medco/Express Scripts and since they told me if i don’t i will have to pay full price at the local pharamacy if i don’t do it there way.I have one medicine i get from Express scripts and after taking it i had a anaphalitic reaction and almost quit beathing.These people are controlling the medication industry and using bad medications at the same price you can get better meds down the road.Pissed off customer and hate you all…

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