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CVS and Walgreens feud, and patients are caught in the middle

 
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They are the nation’s two largest drugstore chains. They fill billions of dollars’ worth of prescriptions for millions of people every month. And they are fighting.

The dispute is over whether it is appropriate for CVS Caremark to be both a provider of prescription drug benefit plans and an operator of the drugstores that fill those prescriptions.

On Monday, Walgreens announced it would no longer fill prescriptions for customers in new CVS Caremark benefit plans. On Wednesday, CVS fought back, saying its plan would no longer allow customers to fill their prescriptions at Walgreens.

CVS operates more than 7,000 drugstores; Walgreens operates about 7,500. The number of people affected by their feud is huge.

From the New York Times:

“It’s a real big game of chicken, and I don’t know who’s going to win this one,” said Edward A. Kaplan, a benefits expert at the Segal Company, a consultant to big employers.

“Mr. Kaplan said he was working with employers to determine how many of their workers might be affected if they were forced to stop using Walgreens under their plans.

“Smaller drugstore operators had already raised antitrust concerns against CVS Caremark, citing potential conflicts caused by its dual role as a pharmacy chain and a drug plan administrator. The National Community Pharmacists Association, which represents independent drugstores, said the Federal Trade Commission was investigating its accusations of anti-competitive practices by CVS Caremark.

“The commission confirmed the investigation but declined to comment on the nature of the inquiry.

“Attorneys general in 24 states are conducting a similar investigation, according to CVS Caremark.

“In a statement, CVS Caremark said Wednesday it remained “confident that our business practices and service offerings are being conducted in compliance with antitrust laws.”

“While CVS Caremark said that the vast majority of customers could easily find a nearby pharmacy other than Walgreens, Mr. Kaplan and other benefits consultants said the standoff could be disruptive.

“In certain companies, they say, as many as 20 to 30 percent of employees enrolled in plans administered by CVS Caremark are filling their prescriptions at Walgreen. For those corporations, “it is significant,” said David Dross, an executive for the consultant Mercer who advises companies on pharmacy benefits.”

CNN Money says that stocks of both companies fell Wednesday, with CVS down about 1.5% and Walgreen Co. down about 3%.

CVS Caremark said that its termination of Walgreens as a covered provider of prescriptions would end in 30 days, and also that it will terminate Walgreens in its Medicare retail pharmacy network as of Jan. 1.

From CNN Money:

Consequently, some CVS Caremark plan members may not have their prescriptions honored at a Walgreens pharmacy after the 30-day period.
In that situation, plan members can still choose to go to Walgreens for their drugs, but would have to pay the full cash price for their prescriptions, according to CVS spokeswoman Christine Cramer.

"The prescription would not be eligible for the discounts negotiated between the plan and the PBM," she said in a statement e-mailed to CNNMoney.

“For other CVS Caremark members, depending on their plan designs, they may be able to fill prescriptions at Walgreens pharmacies, but "out of network" benefit rules would apply next month.

“That means members would have to submit a paper claim to Caremark for a portion of the prescription costs paid by the member to Walgreens. Cramer said CVS Caremark typically processes such paper claims for a fee.

“Walgreens spokesman Michael Polzin said CVS' actions were "disappointing" and would impact consumers.

"Walgreens has more than 50% of the nation's 24-hour and drive-thru pharmacies," he said. "Right now, you may be 2 miles from a Walgreens, but because of this action, you may have to drive 20 miles to another pharmacy to get prescriptions filled."

“For its part, CVS maintains that without Walgreens, its pharmacy network includes about 57,000 pharmacies across the country, including other national and regional retail chains, supermarket-based pharmacies and independent pharmacies.

"More than 92% of Caremark members have access to a participating pharmacy within a 5-mile radius of where they live, either with or without Walgreens in the network," said Cramer.

There is certainly some truth to both sides. But once again, it seems that the consumer – the patient, -- is the one caught in the middle.

The New York Times story:
http://www.nytimes.com/2010/06/10/business/10drug.html?src=busln

The CNN Money story:
http://money.cnn.com/2010/06/09/news/companies/walgreens_cvs_pbm_battle/

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