Drug Stores' Low Cost Clinic and Prescription Drug Coverage Plans

(1/15/12)- Gregory W. Watson, the chief-executive officer of Walgreen Company, speaking at the company's annual meeting in Chicago, defended the company's position in its battle with the prescription benefits manager (PBM) Express Script after being dropped from the Express Script network as of December 31, 2011.

Analysts estimate that Walgreen could lose more than $4 billion in annual revenue as a result of no longer being in the PBM's network. Walgreen filled more than 80 million prescriptions through Express Script, which represents about 11% of the 819 million prescriptions filled by the chain in 2011.

Walgreen, which is headquartered in Deerfield, Ill., is the nation's largest pharmacy chain store, operating over 8,200 outlets in the United States.

To counter the loss of the Express Script business, Walgreen lowered its discount drug club's price to $5 a year for individuals, and $10 for families. Normally the membership fee is $20 for individuals and $35 for families.

(1/5/12)- Walgreen Co., and Express Scripts have failed to reach an agreement so that if you purchase any prescription drug at one of their pharmacies, the drug will be considered as having been purchased out-of-network,. That in turn means that Express Scripts members will be reimbursed for the purchase at a lower amount than if purchased in-network.

Walgreen's has announced a new plan that it hopes will help to keep Express Script members buying their prescriptions at their pharmacies. The plan includes a special discount in January for Express Script members on the annual membership fee for Walgreen's Prescription Savings Club; an increase in their consulting staff to help customers with any questions that they may have concerning their prescriptions; adding call-center personnel; contacting high-volume patients; and offering coupons for discounted health and wellness products, and gift cards to some Express Script members.

(1/3/12)- Back in June, Walgreen Co., which is also the parent organization for the Duane-Reade drug store chain, said that it would no longer be part of the Express Scripts pharmacy-benefits manager's (PBM) network when the current contract expires on December 31, 2011. According to the latest news on this matter, the parties still have not reached agreement on a new contract.

With no agreement having been arrived at, this means that members of the Express Script program would be buying their prescription drugs at an out-of-network site if they made the purchase at a Walgreen or Duane-Reade pharmacy. As an employee of a firm in which Express Script is our PBM, I have received notification that if I purchase a drug at a Walgreen or Duane- Reade pharmacy, I will have to pay the cost for the drug in full, and then I would be reimbursed by Express Script at the non-network price.

It is an issue of money between these two parties. Walgreen feels that it should be compensated for prescriptions at a higher rate that other pharmacies because of the additional health-care services that it offers to its customers. These customer advisory services cost the drug store money and in the long run benefit Express Script members. For additional information on the Walgreen health care plan, please see our article "The New Wal-Mart Stores Inc. Health-Care Clinic and Drug Coverage Plans"

Express Scripts argues that Walgreen is asking for higher payments than other drug stores are requesting when, in fact it is not helping to reduce the cost of the drugs being used by its customers.

Express Script accounts for about 88 million prescriptions filled at Walgreen in the year ended August 31, and represents about $5.3 billion of Walgreen's annual revenue of $72.2 billion in fiscal 2011.

Rival pharmacies are trying to benefit from this dispute by having posters in their front windows advising customers that they can have their prescriptions filled in their stores which are covered by Express Script as the PBM.

(10/14/11)- Aetna Inc. and CVS Caremark Corp's retail division announced that they are teaming up to co-brand a new Medicare prescription drug plan that will be available in 43 states and Washington, D.C. for those using Part D prescription drug coverage under Medicare.

The plan will cost $26 a month, with no deductibles for generic drugs.

Part D members may use the plan at any of the 7,200 CVS pharmacy locations in those states and more than 65,000 pharmacies in Aetna's Medicare network. CVS entered a twelve-year agreement last year with Aetna and its approximately 10 million members to provide prescription benefits management services.

(10/5/11)- As we mentioned in our item dated 7/6/11 below, Walgreen Co. and Express Script Inc. have broken off contract negotiations for the renewal of the contract between the prescriptions benefits manager (PBM) and the large drug store chain. In a speech given to investment professionals last week, Walgreen estimated that it could cost the company an estimated $3 billion in lost revenue if the contract is not renewed.

Express Script is presently in merger talks with Medco Health Services, and if the deal is allowed to be consummated by anti-trust officials, it would create the largest PBM in the United States.

Walgreen generated $5.3 billion, or 7% of its $72 billion fiscal 2011 revenue from customers with drug coverage managed by Express Script.. Incidentally, Duane Reade is a subsidiary of Walgreen, so that means Express Script members will not be reimbursed if they have their prescriptions filled at Duane Reade after January 1, 2012 unless the two parties come to an agreement concerning coverage by that date.

Express Script says that Walgreen's fees and costs to provide prescriptions are too high. Walgreen says its rates are in line with the market. Walgreen began to heavily promote it Prescription Savings Club, which provides discounts on generic drugs and 5,000 branded medications and rebates on store-brand products several years ago.

(7/6/11)- Walgreen Co., the nation's largest drug store chain and Express Script Inc., one of the nation's largest prescription benefits managers (PBMs) announced that they have broken off contract renewal talks. The dispute is similar to the situation that we wrote about in our item dated 6/16/10 below, wherein Walgreen and CVS Caremark had a similar dispute.

The companies plan to sever ties starting January 1, 2012 unless talks resume.

Walgreen claimed that Express Script wanted to change the definition of what constituted a generic drug and refused to give sufficient time when making changes to its prescription drug plans.

(4/18/11)- Is it anti-competitive when you have one company that is both a prescription benefits manager(PBM) and a retail drug store also? This is the gist of the question being addressed by both the Federal Trade Commission and the attorneys general of 24 states who are investigating the four year old merger of CVS, which was strictly a retail drug chain, and Caremark, which was a PBM before the merger of the two companies.

The company is also being accused of using confidential patient information from Caremark to steer consumers to CVS pharmacies.

According to a letter that was sent to Jon Leibowitz, the chairman of the FTC, and signed by 5 consumer groups (Community Catalyst, Consumers Union, the National Legislative Association and Prescription Drug Prices and U.S. Pirg) this problem had to be dealt with by the agency. The letter called for the breaking up of the company.

In referring patients to the retail pharmacy gave CVS an unfair advantage over other retail pharmacies, and limited the consumers choice in the matter.

CVS Caremark countered that the merger is helping its customers by reducing the costs and improving health outcomes.

(4/2/11)- Walgreen Co. announced that it would pay $409 million to acquire the Web business of, a company that sells more than 60,000 over-the-counter health, beauty, and vision and skin-care products.

Walgreen had recently announced that it was selling its pharmacy benefits management business for $525 million.

(12/3/10)- UnitedHealthcare, one of the nation's largest prescription benefits managers (PBMs) announced a program allowing its Medicare Part D members to pay reduced co-pays on hundreds of generic drugs when purchased through Kroger and Safeway pharmacies.

Under its Pharmacy Saver program members in 2011 will have co-payments "as low as $2…for hundreds of prescription drugs." The drugs covered under the plan are mainly generic drugs.

AARP Medicare PreferredRx Plan, which is under the umbrella of UnitedHealthcare, charges a co-pay of $7 for Tier 1 generics. For the Enhanced plan with a higher premium, the Tier 1 generics co-pay is $4. Walmart's generic drug plan has a co-pay of $4 also.

(6/19/10)- Walgreen Co. and CVS Caremark announced that they have reached an agreement under which Walgreen will continue participating in the CVS Caremark pharmacy benefit management national retail network for existing, new or renewal plans. For more details on this matter, please see our item dated 6/16/10 below.

It is a multiyear agreement, but financial terms or other details have not been disclosed. We will post the particulars of the agreement as soon as they become available to us.

(6/16/10)- Walgreen Co., which recently acquired Duane Reade is the nation's largest drugstore chain. CVS Caremark, a combination of a drug store and a prescription benefits management company that was created through the $27 billion merger in 2007 of CVS and Caremark.

Walgreen and CVS are now engaged in a bitter battle that began when Walgreen said it wouldn't fill prescriptions for patients newly covered under pharmacy-drug plans administered by CVS's Caremark unit.

Walgreen said it objects to how some CVS prescription plans use discounts to force patients with chronic conditions to use CVS stores or its Caremark mail-order pharmacy. The change affects patients with new or renewed prescription plans signed starting in July 7.

CVS Caremark countered by blocking as many as 53 million patients for filling prescriptions at Walgreen drugstores.

About 7% of Walgreen's sales come from customers whose prescriptions plans are handled by CVS Caremark's pharmacy benefits management business. CVS Caremark's network covers about 64,000 pharmacies, including 7,500 Walgreen stores and more than 7,000 CVS stores.

CVS Caremark is also terminating Walgreen's participation in its Medicare prescription-drug plan network as of January 1, 2011.

(9/8/09)- To clarify our item dated 9/2/09 below, Caterpillar will keep its benefit manager to handle rebate negotiations with the drug manufacturers. These rebates can amount to a considerable amount of money, as is shown by the fact that Medco Health Solutions, one of the largest of the PBMs collected $4.45 billion in rebates from manufacturers last year. It in turn passed 82% of the rebate to the health-care provider that bought the drugs.

Although Caterpillar will design its own price list, most companies feel that they don't have the expertise to do this. With control of a price list, benefit mangers can save health-care providers money by pushing manufacturers for rebates.

(9/2/09)- Caterpillar Inc. announced that Walgreen Co. would offer prescription drugs directly to its workers, retirees and dependents starting January 1, 2010. This program is similar to the pilot program that the company has with Wal-Mart Stores Inc., which was due to end this year, but now has been extended for two years.

The agreement means that employees of the company will not be using the services of prescription benefits managers (PBMs), since the participant will be dealing directly with the seller of the drug.

Caterpillar will negotiate pricing directly with Walgreen and Wal-Mart instead of using the services of a PBM to accomplish the cost. Both Walgreen and Wal-Mart will offer Caterpillar employees or retirees discounts on non-pharmacy goods.

The pact with Caterpillar is the first time Walgreen has worked directly with a company to supply prescription drugs, though it already manages a network of onsite health-care centers for major companies, including Walt Disney and Toyota Motor Company.

Caterpillar has about 70,000 workers, retirees and dependents.

(5/20/09)- In a very interesting development, hospitals are beginning to become affiliated with the retail clinics being opened up at some of the large discount drug store chains. Hospitals are now affiliated with 25 Wal-Mart clinics. The Cleveland Clinic has lent its name and backup services to several CVS drugstore clinics in northern Ohio, and the Mayo Clinic is operating a Express Care clinic at a supermarket in Rochester, Minn., and a second one across town at a shopping mall.

CVS Caremark Corp.'s pharmacy competitors are complaining to the Federal Trade Commission about a letter that the company sent to patients covered by its benefits program, in which it stated that co-payments would rise to 50% of the cost of their drugs from 25% unless they switched their prescriptions to a CVS pharmacy.

The letters appear to relate to a program called " Maintenance Choice", under which patients can opt to fill 90-day prescriptions through CVS's mail-order pharmacy or pick them up at a CVS drugstore for the same cost.

The CVS Caremark merger in 2007 combined one of the nation's largest drugstore chains consisting of more than 6,900 stores, with one of the larger prescription benefits managers (PBM), which administered the prescription benefits for more than 82 million Americans. When the merger was approved by the FTC many independent pharmacies objected to the merger for fear that it would create a monster that would drive many of them out of business.

(3/28/09)-Walgreen Co.'s Chief Executive Gregory Wasson stated recently: "Consumer behavior has changed dramatically in recent months, beyond just the kinds of products they are purchasing."

He went on to state that Walgreen, the Deerfield, Illinois based discount-drug chain store is seeing sales increases in the types of generic drugs targeted by Wal-Mart Stores Inc, and other discount drug chain stores. These stores have been promoting generic prescription drugs, because they carry higher profit margins for the drug stores, and the consumer benefits by purchasing a lower costing generic drug.

Walgreen's club now has 1.7 million members, who pay $29 to $35 a year to receive discounts such as a 90-day supply of more than 400 generic drugs for $12 each.

(1/24/09)- Walgreen Co. continues to expand its network of pharmacies and in-store clinics as we discussed in our item dated 1/7/09 below. It is expanding its "Complete Care and Well-Being" program as it pursues corporate and government employers nationwide.

Under the program, participating employees at work would be able to get checkups, preventive care and other services including dentistry and optometry at the Walgreen's Take Care health clinics outside of business hours. Retirees and employees' family members would also be entitled to these same services.

The clients would be entitled to a 15% discount on Walgreen's private-label products sold in the store. In addition, the company would continue to offer discounted prescription drugs at its pharmacies.

Walgreen has about 350 of these centers operating now, and as the company's president Gregory D. Wasson indicated, expects to expand the number to over 600 clinics in the coming years. The company operates over 6,600 pharmacies nationwide.

(1/7/09)- The Saturday January 3 edition of the New York Times had an interview by Amy Zipkin with Gregory D. Wasson, the president and chief operating officer of Walgreen Company in a column entitled "Drugstores, Too, Feel Recession Pain". One of the questions and Mr. Wasson's response was of particular interest, and is reprinted below, since it deals with the in-store clinics issue for the large chain drug stores:

Q. Your company has created more than 600 in-store clinics and work site health centers. What's the importance of the centers? On a work site, what steps have you taken to protect worker privacy?

A. There are millions of Americans going to emergency rooms for care for common ailments were able to treat in our clinics. We feel there's a huge cost reduction available to treat those types of conditions. We feel there's opportunity to be a big part of this nation's health care solution by providing nurse practitioners in our retail stores.

Employers across the country are looking for ways to lower their health care costs and deliver better employee benefits. This is a way for an employer to do both. The employer has absolutely no access to the patient records that we care for on their campus. We're looking to have 800 retail and employer retail clinics open by the end of calendar 2009.

(12/28/08)- The big retail pharmacy chains continue to strongly promote their drug discount programs, and this has been one of the major reasons that we are seeing lower prices for generic drugs.

Wal-Mart Stores Inc. introduced $4 generic prescriptions for one-month supplies of hundreds of unbranded drugs in 2006. In recent months, three big pharmacy chains have unveiled or expanded drug discount programs. To see more on the Wal-Mart plan please see our article: The New Wal-Mart Stores Inc Employee Health Care and Drug Coverage Plan, and also our item dated 1/29/08 below.

Walgreen began to heavily promote it Prescription Savings Club, which provides discounts on generic drugs and 5,000 branded medications and rebates on store-brand products.

CVS offered a 90-day supply of more than 400 generic drugs for $9.99 and a 10% discount at the store-based clinics. In September, Rite-Aid began a national prescription card offering hundreds of generic drugs at $8.99 for a 30-day supply or at $15.99 for a 90-day supply, plus discounts on branded drugs and Rite-Aid products.

For the Publix plan please see our item dated 8/20/07 below.

(5/13/08)- The explosive growth in the number of walk-in health clinics is about to come to a screeching halt. As of May the number of this type of clinic has grown to 963, which is over7 times as many as the 125 that existed just three years ago. In recent months retail clinic operators based in New York, Nevada, Indiana and Alabama have closed their doors to 69 clinics that operated in 15 states.

Now the biggest retail health-clinic store operator, CVS Caremark Corp., says it is scaling back expansion plans for its MinuteClinic brand. The company, which operates more than 500 MinuteClinics says its plan to scale back expansion, is part of a change in strategy. It now plans to open about 100 new clinics instead of the previously announced 200 that it had planned to open.

CVS may also closed some MinuteClinic locations that are not in CVS outlets.

On the other hand Walgreen Co. says it still plans to more than double the number of its Take Care health clinics this year by adding about 240 locations between now and the end of the year. This would mean that Walgreen would have about as many clinics as is presently operated by CVS.

Walmart expects to open about 400 co-branded new store clinics in partnership with hospital systems by the year 2010, up from the 50 such clinics that now exist.

(3/22/08)-Look for your local Wal-Mart to become an increasing player in the health care delivery system in the United States. This will be the start of big name national retailers and pharmacy chains entering the health field in a unique way in a large way.

These operations will partner with local hospitals who may not have an ownership stake in the in-store clinic or split a stake in the facility. For companies like Wal-Mart, it gives the community within which it operates an improved image of the company by providing an accessibility to health care service. For the hospital, it provides a way to expand its access to care and extend its primary care network.

In Houston the H.E.B. grocery chain has split a stake with RediClinic and Memorial Hermann. On its web site, RediClinic describes itself as "high-quality, affordable healthcare that fits how we live today. No appointments, no waiting – and routine treatment and preventive care in about 15 minutes. RediClinic's staff provides convenient and affordable treatment for more than 25 common conditions, such as strep throat and ear infections. They also provide health screening tests, vaccinations, immunizations, and physicals". Memorial Hermann’s mission is "to improve the health of the people in the communities they serve. Memorial Hermann serves the greater Houston community through 14 hospitals and many specialty programs and services". The are finding ready partners with retail operators

Steve Case, who stepped down as AOL Time Warner chairman in 2003 and last year founded Revolution Health Group has investment in InterFit Health, driving the expansion of that company's RediClinic retail clinic division.

This type of retail clinic is expected to grow from about 500 clinics to 1500 by the end of 2008. One of the largest of these retail clinics is MinuteClinic, which in a recent survey (Sept. 2007) had 168 clinics in 24 states. On its web site it describes itself as: "MinuteClinic’s team of board-certified practitioners are trained to diagnose, treat and write prescriptions (when clinically appropriate) for a variety of common family illnesses to patients 18 months and older. MinuteClinic is in-network with most major insurers, so patients are responsible for either their copay or the price clearly listed on our treatments and services menu. For those who are uninsured or prefer to pay out-of-pocket, MinuteClinic accepts cash, checks and credit cards."

They are providing on-the-spot health service to those who do not have a primary care physician, or those who want quick emergency service for relatively minor ailments or those who have no insurance and are willing to pay low fees for service. MinuteClinic posts a price list on its web site for various treatments.

Staffing in these clinics usually consists of nurse practitioners or physician assistants, with physician supervision. While the AMA found these clinics "controversial", they decided that the clinics fit AMA policy that encourages "multiple entry points" into the health care system. The AMA has developed principles for in-store clinic operations that tries to ensure patient safety and continuity of care. The question is how well will these standards be monitored as well as whether it is ethical to "refer" patients to your own service. The latter is a concerned expressed by Susan Strate, MD, immediate past chair of the Texas Medical Association's Council on Socioeconomics who felt that the hospital partnerships will result in lowered private primary care physician visits with more patients going to hospital clinics for follow-up care. Pressure will then be put on hospital clinics to lower their waiting time for service and provide greater continuity of care, not using rotating residents as service providers. This may strain the resources of the medical center.

Another important issue is whether this type of service is fragmenting the health service delivery system, setting up a battle between private practice physicians and medical centers. Our future articles will address many of the issues expressed in this first installment.

(1/29/08)- In 2006, when Wal-Mart first announced it would be selling hundreds of generic prescription drugs for $4, the plan was aimed at people who did not have drug coverage plans. The company currently offers more than 350 generic prescriptions for $4. Other retailers were forced to match Wal-Mart's offer.

In a speech before 7,000 Wal-Mart store managers, Chief Executive Lee Scott indicated that the company was initiating a pilot program to help "select employers…manage how they process and pay prescription claims." For more on this topic please see our article Medicare and the Cost of Prescription Drugs - HMOs and Pharmacy Benefits Managers (PBMs) --Part III and also The New Wal-Mart Stores Inc Employee Health Care and Drug Coverage Plan

It seems therefore that Wal-Mart is putting its toes gently into the prescription benefits management (PBM) business.

(10/9/07)- Wal-Mart pharmacies announced that it was adding seven new drugs to the list of drugs it sells for $4. In addition, it added a new $9 pricing for two popular birth control pills. The new drugs added to its list of pharmaceuticals is aimed at younger individuals, thus expanding the program away from the original drugs which was more or less aimed at older individuals.

The two birth control pills-known by the brand names of Ortho Cyclen and Ortho Tri-Cyclem- account for 20% of oral contraception prescriptions in this country. A fertility drug, clomiphene, will be added to the list of drugs available also.

Included among the drugs added to the $4 pricing list were methylphenidae, a drug used for attention deficit and heperactivity disorder. This action by Wal-Mart caused Target to react by announcing it would do the same for its list of pharmaceuticals that it would be selling at sharply reduced prices

Two of the other drugs added to Wal-Mart's list were the generic versions of the heart medication Coreg, and the nail-fungus drug Lamsil, both of which came off patent protection recently.

Two of the nation's other largest prescription drug retailers, Walgreens and CVS, have not announced any changes in their lists to match Wal-Mart's action.

(8/31/07)- Wal-Mart has opened on-site independently owned medical clinics in 76 of its stores in the last two years and plans to have 2000 on site clinics in stores in the next 5 years.

(8/20/07)- Coverage of the August 6, 2007 press conference at the Cape Coral Midpoint Center Publix chain of 684 pharmacies in a five-state area indicated that Publix was initiating a free prescription program covering seven oral antibiotics. These antibiotics are intended for bacterial infections. The seven antibiotics are:

  1. Amoxicillin
  2. Cephaleoxacin
  3. Sulfamethoxazole/Trimethoprim (SMZ-TMP)
  4. Ciprofloxacin
  5. Penicillin VK
  6. Ampicillin
  7. Erthromycine

These are prescription drugs, so a medical doctor needs to write a prescription in order to obtain the free medication. The offer has no expiration date. The medication is for a14 day supply.

This Publix program covers people with or without medical insurance as well as patients on Medicare or other government-funded health care assistance. It should prove a great help to those who do not have drug coverage.

Charlie Jenkins, Publix supermarkets chief executive officer, announced the program to the public. Newspapers had full page ads introducing the program. This program joins the Kmart program that offers a 90-day supply of about 300 generic drugs for $15 per month and Wal-Marts $4 prescription program covering 314 drugs. (Thirty-five percent of the prescription drugs filled at Wal-Mart involve this $4 plan and 30% are filled for customers who have no insurance according to Deisha Galbrerth, Wal-Mart communications manager.)

We wonder if these programs will see a dramatic increase in the number of prescription written.

While there is no question that this is a marketing lure, it will be made up by drawing more people into the store. It will prove valuable to those who don’t fill their prescriptions because of the cost.


Harold Rubin, MS, ABD, CRC, Guest Lecturer
updated January 15, 2012

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