The failure of Walgreens and Express Scripts to reach contract renewal terms and the subsequent exclusion of the drug chain from the pharmacy benefits management company’s network raise a number of issues central to the delivery of health care.


Jeffrey Woldt, Walgreens, Express Scripts, pharmacy benefits management, PBMs,
























































































































































































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Inside This Issue - Opinion

Health care incentives too often misaligned

January 23rd, 2012

The failure of Walgreens and Express Scripts to reach contract renewal terms and the subsequent exclusion of the drug chain from the pharmacy benefits management company’s network raise a number of issues central to the delivery of health care.

First and foremost is the ability of Walgreens — or any other community pharmacy operator — to make money filling prescriptions. The terms offered by Express Scripts involved below-market rates and would have introduced an element of unpredictability for Walgreens, according to the retailer’s management, putting increased pressure on profitability in a part of the business where, over the years, PBMs and other payers have succeeded in bringing about significant reductions in margins.

Express Scripts’ position is more surprising since it comes at a time when community pharmacy’s role in health care is expanding, with practitioners becoming more engaged in such things as medication therapy management, immunizations and diagnostic testing.

The PBM’s executives counter that an important part of Express Scripts’ job is to hold down the cost of prescription drug coverage for clients. They have a point, but not when that impinges on the ability of the patients whose drug coverage the company handles to benefit from a strong, long-term relationship with the pharmacist of their choice. By forcing Walgreens out of its network, Express Scripts has made it difficult for many individuals to continue to receive pharmacy care from a provider that they have relied on and trusted for years.

That said, the dispute highlights a more fundamental problem — the misalignment of incentives in the health care system. Walgreens wants to build ties with patients that ensure they receive a high level of service over a period of many years, asserting it’s the best way to maximize the efficacy of pharmacy care and have the greatest impact on limiting total health care costs.

Because pharmacy benefits contracts are renewed on an annual basis, Express Scripts’ perspective is somewhat different. Like other PBMs, much of its attention is devoted to obtaining prescription drug coverage at the lowest possible cost. As long as health care providers and benefits managers utilize different time frames to assess patient outcomes and define value, further conflict is inevitable.

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