Inside This Issue - Opinion
Rx customer loyalty will be put to the test
August 6th, 2012
The cloud of uncertainty that had hung over Walgreen Co. throughout the year has been removed by the resolution of its standoff with Express Scripts Inc. (ESI), but reverberations from the dispute will continue to be felt for some time.
The drug chain and pharmacy benefits management company last month agreed to a multiyear agreement under which the former will resume filling prescriptions for patients covered by ESI as of September 15. Walgreens has not participated in the PBM’s network since January 1, after it rejected a contract renewal proposal that included what were characterized as below-market reimbursement rates and other onerous provisions. Because terms of the new agreement were not disclosed, it isn’t certain which of the companies came out ahead. Walgreens’ sales and earnings have suffered considerably as a result of the battle with ESI, a situation highlighted with every monthly sales report. But, with the PBM selling season for 2013 heating up, Express Scripts no doubt faced a barrage of questions from employers and other third-party payers that understand the value of ensuring the people they cover have access to the pharmacy services provided by the nation’s largest drug chain. With pressure on both sides mounting, it’s not surprising some sort of accommodation — which Walgreens president and chief executive officer Greg Wasson, says, “work[s] for both parties and is consistent with our company’s principles” — was reached.
The next challenge for Walgreens is to win back ESI patients, who, by the middle of September, will have had eight and a half months to get used to dealing with another pharmacy operator. CVS Caremark, Rite Aid and other retailers that attracted new customers in the wake of the Walgreens-ESI impasse will not relinquish them without a fight.
While commenting earlier this year on the business his company gained, Larry Merlo, president and chief executive officer of CVS Caremark, asserted that it is difficult to convince patients to switch pharmacies but, once they do, many of them tend to stick. Following news of the Walgreens-ESI deal, CVS Caremark announced that in the fourth quarter of this year it expects to retain 50% of the sales that derived from the protracted fight involving its chief rival.
The coming battle among retail pharmacy operators will be all about patient loyalty.