Wednesday, June 09, 2010

Dear Pharmacy Benefit Managers, There Is Now An Oligopoly On Both Sides of Your Contract. Prepare To Reap What You Have Sown.

I've known this day was coming for years. I wish I would have written about it earlier so you would all know how wise I am.

I did used to joke about it with District Managers though. As the years went by and the competitors became fewer, I would regularly say things like "When are we going to be be big enough that we can start telling the insurance companies what we are willing to let them pay us?"

The answer, if you're Walgreens, was yesterday:

Walgreen Co., the nation's largest drugstore chain, landed a punch on CVS Caremark Corp. when it said on Monday that it won'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 prod patients with chronic conditions to use either CVS stores or its Caremark mail-order pharmacy. Walgreen also cited CVS Caremark's "unpredictable" reimbursement rates and lack of information when patients transfer to other plans. Working with CVS, it said, is "no longer in the best interests" of customers, pharmacists and shareholders.

Never before can I remember a drug chain growing a pair and standing up to an entire Pharmacy Benefits Manager like this. There have been squabbles over individual contracts from time to time, and occasional gamesmanship when it came to a state Medicaid plan now and then, but it takes way bigger cajones to take on corporation number 18 in the Fortune 500 than it does to pick on a state government these days.This is huge. This has the potential to inconvenience middle class people, and possibly a few who are affluent.

Granted, this particular PBM is owned by Walgreen's main retail rival, which gives the Pharmacy America Trusts an extra incentive to go after them, but still, this is a step up from picking on the poor people. A big fight is brewing between two of the two-and-a-half major drug chains left in this country. Who do we as a profession root for?

Injuries, mostly. One of these corporations has a pilot program that has turned pharmacists into cashiers in lab coats and the other has de-professionalized its operations to the point where they can evidently hum along just fine with someone in charge only pretending to be a pharmacist. Wasn't it Rocky II that had that cheeseball ending where both Rocky and Apollo Creed knock each other out and are simultaneously struggling to get up before the final bell? Something like that would be ideal.

But something like that will most likely not happen. Walgreens and CVS will huff and puff over the next few weeks or months. They will arch up their backs and growl like two tomcats in the alley at three o'clock in the morning, and in the end, they will reach some sort of agreement that will spare the middle class any inconvenience. After all, as far as I know even with the poor people it never got to the point where the trigger was actually pulled on them.

But, the precedent has been set. In the post Revco, Super-X, Phar-Mor, Eckerd, Duane Reade, Reliable, People's Drug, Brooks, Drug Emporium, and Longs world, Walgreen's has woken up and realized it can threaten any PBM with an immediate loss of 12% of the locations where that PBM's members can have prescriptions filled. The people at Medco must be shitting their pants right about now. And while the prospect of Medco shitting its pants is a happy one, I do hope Walgreen's takes a few head punches first. I plan to sit back and watch this one like a white guy at a California prison riot.

20 comments:

Cody said...

Honestly I can't see this going any other way than former Walgreen customers getting pissed and going to CVS as instructed by their insurance, but we shall see.

Keith said...

I have been waiting on this to happen for years. I have always wondered why these chains would not take on the PBM's. I have to hand it to Walgreen's for sticking it to CVS/Caremark....those sorry bastards. Now, all we need is another chain to join the battle. Lets see an all out fight. Punch it to them! Kick the hell out of them! Whoooppeee! I love it. I am all beside myself. :)

The Redheaded Pharmacist said...

If you remember DM, it was pretty recently that Walgreens took on Washington State's Medicaid program as well. The reimbursement was so terrible from the State of Washington that Walgreens said no! I guess these big chains have figured out that they are finally big enough to use their muscle and negotiate something reasonable for a change.
Here is what I don't understand: why don't independents collectively bargain the same way? As a stand alone single community pharmacy an independent owner doesn't have a chance against these big PBMs but collectively the independent pharmacies in the U.S. could have barganing power even greater than that of a company like Walgreens!
I think this is just a sign of the times. PBMs have gone way too far and now it is at a point where it just isn't possible for even the big players in the industry to make money given these current terrible contracts. And on top of that companies like CVS Caremark "direct" people to either CVS or Caremark mail order for lack of a better word. Not to regulators: this is why you shouldn't allow mergers like CVS Caremark to happen in the first place. Anyone that thinks CVS Caremark is a good idea as a single corporate entity needs to look up the phrase "conflicts of interest."

pillroller said...

well praise allah and pass the ammunition. It's about time these infidels were taught a lesson
It's gonna be like watching Iran and Iraq duke it out , but wait what about the evil empire, I mean wally world, will they grow a pair or just wuss out and try and grab market share?

Anonymous said...

The general public will never know what's even going on. They will simply find that they can no longer get their meds at Walgreens so they will go to (local competitor, probably Walmart) and that will be that. Walgreens will lose this one I'm guessing. People just don't care about the pharmacy they go to as long as it's convenient.

Từ Thanh Giác said...

Middle class! Do we still have one?

DrugMonkey, Master of Pharmacy said...

Readhead,

The short answer to your question is anti-trust law. One business, no matter how big, is free to do whatever it wants. Two or more businesses, no matter how small, collaborating on any price issue puts them on the wrong side of The Sherman Act.

Update: So as things stood yesterday, Walgreen's said they weren't going to renew any Caremark contracts as they expire. Today Caremark says "screw you, we're kicking you out of our network in 30 days"

Here's the story.

Nothing like the smell of a good catfight in the morning.....

Tonina said...

How lovely. Given that I'm stuck with a godawful Caremark-run prescription plan, I guess I'm thankful I use Rite Aid....

@Anonymous 12:38PM: I'm only one person, but I care what pharmacy I use! I've used the same place for the past seven or eight years because of the service the pharmacy staff gives me.

Pharmacy Mike said...

Tonina,

If your employer decides to use CVS Caremark as it's PBM for next year, what will you do?

Will you opt not to use your employers insurance plan and instead purchase prescription drug coverage on your own simply to use the pharmacy you've always used?

Of course not... You'll whine and complain and maybe even call customer service to give someone with no power whatsoever a piece of your mind. However, in the end, you'll go to whatever pharmacy your insurance company will allow you to use... because they control you.

This idea that our "free market" health care system gives us freedom of choice when it comes to health care is deeply flawed. For the most part, we get health insurance from our employers. We pretty much take whatever options they give us because it's a whole lot cheaper to use company benefits than to pay for health insurance on our own. Therefore, since we don't really get to choose our insurance, we're at the whim of these insurance companies to use whatever providers they prefer.

I really don't think Walgreens can win this battle. There's a CVS right across the street from every Walgreens. If Walgreens says no to CVS Caremark, CVS will welcome all those former Walgreens customers with open arms... and probably coupons.

I just don't see how that partnership can even be legal. They basically set the rules so they can't lose. I mean, what stops them from saying that all meds have to be filled at a CVS? If they can mandate that maintenance meds be filled either via mail or at a CVS, why can't they mandate the same for other meds? Where do you draw the line?

In merging with Caremark, CVS pretty much cut out the middle man. They set up the drug prices they want. Employers or patients pay them in order to have that prescription coverage. Then the patients pay them again to fill the prescriptions. When Caremark reimburses CVS, it's pretty much the company paying itself, so they never have to worry about reimbursement rates because they always win regardless.

Why not just have CVS doctors? Oh wait... That's right... They have Minute Clinics. I'm sure that even though there's nothing stopping patients from going elsewhere, I'm sure a very large percentage of those Minute Clinic scripts get filled at CVS Pharmacies.

So... they have all angles covered (providers, PBMs, pharmacies). How is this legal again?

The Shy Intern said...

I'm rooting for Walgreens.

There are 2 CVS's in my neck of the woods, and neither one has a pharmacy department.

PS The Walgreens in Times Square is awesome.

misbehavis said...

I just happen to live in an area of the country where CVS pharmacies are few and far between. Walgreens are everywhere because a few years back they bought the local regional pharmacy chain. I work for WAG and can't wait for the "what am I supposed to do?" from Caremark customers. They will have to pass umpteen Walgreens and may even have to cross state lines on their way to the nearest CVS. They will not understand that it is not my fault.

Just a Job RPh said...

NO is the most poweful word in the pharmacist's dictionary and WAG just used it - Its about fucking time... This will work as long as another chain joins WAGs... Hmm Come On RAD, do something smart (for once.)
Think about the pacific northwest, no CVS, just WAG and RAD, if they both fly the bird to CVS we might just have a revolution. The lynch pin for the pacific northwest, all the welfare that's been farmed out to Caremark.
Next week, After WAGs and RAD take CVS down a peg or two, CVS and WAG might drop their pants and moon medco.
Imagine all the great things the profession could do if it made real money.

Tonina said...

Er, Pharmacy Mike, I'm not quite sure what I said to earn that rather long-winded rant. However, let me clarify my earlier response:

I agree that the whole situation seems unbelievably coercive. I'm already stuck going to CVS for "maintenance" medication fills; I manage to get the others I use done at the pharmacy I've used for eight years. If my employer elected to force me to use CVS for everything, there would be little I could do, other than send angry emails to HR and angrier emails to my representatives in the national legislature. Both groups of people might trouble themselves to laugh before they deleted my missives. I'm not indepdendantly wealthy, so I definitely couldn't afford to keep using my preferred pharmacy if I were no longer permitted to do so by my plan.

However, right now I still have a choice, thankfully, and I choose to use the pharmacy I started using when I moved to this area. It's not in the most convenient locale for me, given that it's across town, but it gives me by far the best service. For the time being, I'll be thankful I have the option, send emails advocating for a legislative smackdown on CVS to my legislators (who I'm sure will care ever so deeply about my views), and keep my fingers crossed. It would be a lot more convenient for me to simply switch all my business to CVS, which is closer to my home and already gets part of my business, but I'll be damned if I'll do so unless I have no choice.

Anonymous said...

We did the math and went over the reports at work and my store will be losing about 6 scripts per day. Also, any of our customers who are basically forced to transfer their prescriptions are more limited now, as there are no CVS stores in the area.

Anonymous said...

blah blah blah... CVS and Walgreen's "accidentally" let photoshoped images of their genitalia to be leaked on the internet and now your mouth is watering... mmmm shiny....

Anonymous said...

Let's not forget about Walgreen Health Initiatives. Apparently there is a good 7% of WHI members that either go thru CVS pharmacies or CVS mail-order facilities for their rx's and this whole thing affects them as well. Their network will no longer include CVS Caremark.

Misbehavis, the Caremark patients are no longer eligible for rx benies at WAG pharmacies, but other pharmacies will still be in their network. Grocery pharmacies etc. So at least you can point your angry customers in the direction of some other random pharmacy.

I've been told that the reason Wal-mart pharmacies can cope with lousy-no insurance is because they're operation is quite the contrary to Walgreens, CVS or any other "drug-retail" chain. For Wal-mart, Target, and grocery stores, the pharmacy is a convenience gimmick to get customers to come in and spend money. Wal-Mart reels ppl in with $4 prescriptions, eats the money they loose on the rest of the cost of the drug, and gain it all back plus profit from sales in the rest of their store. Walgreen and CVS get 75% of their sales from the pharmacy and not from all the self service bull-crap that they sell in the rest of the store, although they've been adopting the same strategies and evolving to gain more from merch in the store.

Honestly, I'm incredibly surprised it took this long for one company to decide not to renew the others contract. Saw it coming a long time ago. I have to give a good old Nelson Muntz, "HAHA!" to Walgreens for taking it up the rear from CVS Caremark for so long.

Anonymous said...

Misbehavis you must live in DE. Where not only are there very few CVS's , there are few ANYTHING other than WAG. Those people will be real fun to deal with, especially since they have cut our tech help now too. Oh how I love WAG! And the fucking fake phone calls....they really think all their employees are complete idiots--and I guess we are, since we just keep taking it.
I would think corporations would start learning from BP's mistake--when you start cutting too much it can come back to bite you in the ass big time! It is only a matter of time until there is another newsworthy misfill case.
I am sooo looking forward to flu shots, and I am sure we'll getting more tech hours cut just as they start telling us how we are going to give flu shots all day everyday!

Anonymous said...

Rite Aids official internal response to the CVS/WAG fight. (minus any typos and editing of some filler this is word for word)

“With the potential removal of Walgreens from the CVS/Caremark network, we have a tremendous opportunity, both on the pharmacy and front end, to win these customers over to Rite Aid. As health care professionals, we should gladly accept these patients and take the initiative to ensure they get continuation of care they deserve. We can help these new or returning patients by making transferring their prescriptions easy and seamless. Yada yada bullshit wellness+ propaganda here……..The best reason that Walgreens CVS/Caremark insured patients have for transferring their prescriptions to Rite Aid is YOU. You are part of the Rite Aid pharmacy team, a group of caring professionals, who provide outstanding service to our patients every day. Taking care of these new customers will help to win them over and bring them back!

Sofia said...

Cvs/caremark will get an antitrust lawsuit eventually. Wags states only 7% of patients would be lost, but that's a pretty big chunk and too much to lose. Cvs is truly the worst. I haven't seen pharmacists so deprofessionalized in my life.

Anonymous said...

This is just fanfreakingtastic. I live in the DE area and work at WAG. We're already getting people flipping out on us because this is somehow our fault and the closest CVS is like 40 minutes away. I'm a tech...I don't get paid enough to deal with this level of stupid.