Walgreens, CVS Feud Over Pharmacies

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Walgreens (Stock Quote: WAG) and CVS Caremark (Stock Quote: CVS) have been trading barbs via press releases recently, showing that big business resorts to low blows too.  

Walgreens drew first blood when it announced that it would not participate as a prescription drug supplier for customers in CVS’s new drug benefit plans. CVS is a drug benefits provider who happens to own 7,000 of its own drugstores. Walgreens felt that the latest round of drug benefits plans were designed to drum up business for CVS pharmacies, but do little to serve Walgreens’ interests.

“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 R. Crawford, Walgreens executive vice president of pharmacy said in the initial press release.

Walgreens maintains that some of CVS’s new prescription plans, such as Maintenance Choice, require that people fill their prescription at a CVS pharmacy or through their mail-in service, creating, in essence, a monopoly for its competitor. Of course, what complicates matters for CVS is that Walgreens isn’t the only organization taking note of CVS’s activities. According to The New York Times, CVS is currently under investigation by the Federal Trade Commission for alleged anti-trust violations. Attorneys General in 24 states are conducting similar investigations. While CVS confirms that these investigations are underway, no one is confirming where they originated.

While Walgreens definitely took their gripe to a different level, they were (at least kind of) trying to stay friends. Unwilling to pick up the new benefit plans, the drugstore chain was willing to honor CVS’s pre-existing ones. CVS Caremark promptly rejected the olive branch by ending the relationship completely. CVS announced that Walgreens would be removed from its network effective 30 days from yesterday.

“We've seen Walgreens use this approach in the past, targeting employers, health insurers, government entities and other plan sponsors,”  Tom Ryan, Chairman and Chief Executive Officer of CVS Caremark said, really driving his point home in the press release. “We believe this approach is totally contrary to the needs of our clients who are all struggling to keep pharmacy health care affordable in today's challenging environment." (Translation: It’s not me, it’s you.)

Ryan added that Walgreens customers could very easily go elsewhere. Apparently, according to him, when you subtract Walgreens’ from CVS Caremark’s current network, the percentage of members who have access to a providing pharmacy only decreases by .2 %. (CVS Caremark has 64,000 pharmacies in their network; Walgreens owns 7,522 stores nationwide.)

Of course, Walgreens’ asserts that their stores are favored by consumers since they are open 24 hours, have convenient drug drive-thrus and “offer a fully integrated online pharmacy to offer patients unmatched access to pharmacy care.” Additionally, according to The New York Times, certain companies enrolled in CVS Caremark plans have 20% to 30% of their employers filling prescriptions at Walgreens, so, while this overly complicated battle may not be the end of the world, it is certainly disruptive.

Oddly, this very public catfight is reminiscent of the one that took place between ABC and Cablevision or Fox and Viacom. However, in those instances, people only lost access to their favorite TV programs, not potentially life-saving prescription drugs.

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