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  • emt86011 emt86011 Sep 5, 2012 8:59 PM Flag

    WAG to Remain out of Tricare Pharmacy Network - announced 9/5/12

    Walgreen to Remain Out of Tricare Pharmacy Network

    The U.S. Department of Defense's Tricare health plan has decided it won't let its nearly 10 million beneficiaries who get drug coverage through Express Scripts Holding Co. (ESRX) resume getting prescriptions filled at Walgreen Co. (WAG) outlets.

    "Walgreen will remain designated as a non-network pharmacy provider for Tricare beneficiaries," the health plan wrote in a prepared statement, issued on a website for beneficiaries. Tricare said its beneficiaries would still have access to more than 57,000 pharmacies without Walgreen.

    The decision represents a setback for Walgreen as the drugstore chain tries to gain customers it lost starting Jan. 1, when it broke ties with Express Scripts. Walgreen and Express Scripts recently mended fences, but entities that hire Express Scripts to manage pharmacy benefits will have to specifically add Walgreen drugstores to their network before members can get prescriptions covered there.

    Express Scripts spokesman Brian Henry told Dow Jones Newswires by maintaining the pharmacy network that is in place, Tricare beneficiaries could see slowing growth in retail pharmacy costs by maintaining the current retail pharmacy network. He said on average, beneficiaries live within 1.5 miles from one in-network pharmacy.

    A Walgreen representative wasn't immediately available to comment on Tricare's statement.

    Tricare's decision highlights the heightened interest among employers and health plans to opt for so-called "narrow networks," as clients look for savings by aiming to balance between drugstore options and prices for health-plan sponsors. Industry observers and executives say more clients in the 2013 pharmacy-benefits manager selling season are reviewing limited-pharmacy network options.

    St. Louis-based Express Scripts became the largest pharmacy-benefit manager, or PBM, when it bought Medco Health Solutions in April. Tricare represented about 20% of Express Scripts revenue before the Medco acquisition and remains the company's second-biggest client after WellPoint Inc. (WLP). In July, WellPoint said its members would regain access to Walgreen's pharmacies in mid-September.

    PBMs use their buying clout to cut deals with drug makers, and they also negotiate reimbursement rates with pharmacies. The impasse with Walgreen meant legacy Express Scripts members had to find other pharmacies starting Jan. 1, but they may regain access to Walgreen stores starting Sept. 15 under the new agreement.

    This will depend on whether their health plans want Walgreen back, but some may not, analysts and consultants have said.

    If Express Scripts clients add Walgreen to their networks, the nation's largest drugstore chain can then compete to lure back the clients' individual members who left to fill prescriptions elsewhere, such as CVS Caremark Corp. (CVS) stores.

    Express Scripts hasn't publicly forecasted how many clients will add Walgreen back to their networks, although Express Scripts Chief Executive George Paz indicated it could go either way.

    The decision "is up to a client," Mr. Paz said on Express Scripts' last earnings call. "If a client wants to see savings beyond, they can choose a more limited network. For those clients that want the broader networks, they have that option."

    Walgreen's shares were down 0.4% to $35.75 in after-hours trading, while Express Scripts gained 0.1% to $62.90.

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