Walgreens drops CVS Caremark plans over thorny issue of Rx payment rates
In a dramatic impasse over the issue of prescription reimbursement rates, Walgreen Co. officials said today the chain will withdraw as a pharmacy provider from four prescription drug membership plans managed by rival CVS Caremark Corp.
Walgreens characterized the move as a reluctant and gradual response to “many months of talks over unreasonably low and below-market payment rates by CVS Caremark” for the four plans. Trent Taylor, president of the company’s Walgreens Health Services managed care division, expressed a desire “to continue talks with CVS Caremark so that we can once again serve patients under these plans.”
Patients affected include members of prescription benefit plans managed by CVS Caremark for ArcelorMittal, Johnson Controls, Inc., Progressive Casualty Insurance Co. and Wisconsin Education Association Trust. Most of the affected members live in Illinois, Indiana, Michigan, Ohio and Wisconsin.
“This is not where we wanted negotiations to lead,” said Taylor. “We’re sorry that our pharmacy patients and CVS Caremark’s clients are caught in the middle, and we’ll do all we can to ensure a smooth transition for our patients to another pharmacy. Meanwhile, we’ll continue to work on resolving this issue with CVS Caremark.”
Reached for comment, CVS offered a different view of the severed relationship. “CVS Caremark’s first priority has been, and continues to be, the well being of our clients/plan participants and access to their prescription benefit,” CVS spokeswoman Carolyn Castel told Drug Store News. “While we generally do not comment on client/retail network negotiations, we can say that we have repeatedly reached out to Walgreens to resolve the matter and regret that they have chosen to terminate their participation in the retail networks of the four clients targeted in the Midwest.”
The impasse over reimbursement rates comes as something of a surprise, given the connection between Caremark and its corporate parent. When CVS announced its plan to acquire the big pharmacy benefit manager last fall, some industry-watchers predicted the merger could lead to a more favorable climate for the often-thorny relationship between pharmacy retailers and PBMs. Some, however, warned that ownership of one of the nation’s largest PBMs by one of the two leading drug chains could shift the balance of power in favor of CVS alone, rather than for the chain pharmacy industry as a whole.
“Leaving a benefits plan is an extraordinary step for us, but it demonstrates how extraordinarily low our payments were from CVS Caremark,” Taylor asserted. “We can’t continue accepting reimbursement rates that are drastically below market, while offering patients needed special services such as 24-hour pharmacy access and drive-thru pharmacies.”
Walgreens recently received a new and improved rate from CVS Caremark for another plan it manages that also had been paying below market, but a company statement said CVS Caremark declined to provide the same solution for these four other plans.
“In an effort to be as open and transparent as possible in negotiations, we even offered to open our books directly to the employer groups and show them how much our pharmacies are paid by CVS Caremark,” said Taylor. “Unfortunately, CVS Caremark wouldn’t allow us to do that.”
Walgreens spokesman Michael Polzin said the decision to drop the plans “won’t have any material impact” on the company’s bottom line, despite the potential loss of those plan members as pharmacy customers. In total, he said, they represent “less than one percent” of the company’s revenue.
With Walgreens’ total sales now well in excess of $50 billion annually, it’s unclear how much top-line revenue could be affected. One percent of those sales equates to more than $500 million, although that figure also takes into account front-end revenues that may or may not be affected by the loss of the four plans at the prescription counter.
At press time, sources at CVS could not be reached for comment.
IMPAX announces limited resumption of sales of oxycodone
STAMFORD, Conn. IMPAX Laboratories and its distributor DAVA Pharmaceuticals will resume sales of its oxycodone hydrochloride extended-release tablets in a limited capacity starting today.
This is in response to an agreement the companies signed with Purdue Pharma, who manufactures the brand version, Oxycontin, which is used for the management of moderate to severe pain when a continuous around-the-clock analgesic is needed for an extended period of time. The agreement said that IMPAX acknowledged that Purdue’s patents for Oxycontin were valid, enforceable and infringed on by their generic version. Purdue in return, allowed the companies to continue selling the product on the market until June 14, and to resume the distribution at a future date for a limited period of time.
The sales of the generic are expected to continue until around Jan. 28, 2008, or until the company’s sales quota under the license agreement with Purdue has been reached.
Isis grants Excaliard license for development of antisense drugs
CARLSBAD and ENCINITAS, Calif. Isis and Excaliard Pharmaceuticals have entered into an agreement to discover and develop antisense drugs for the local treatment of fibrotic diseases, including scarring. Isis has granted Excaliard an exclusive worldwide license for the development and commercialization of certain antisense drugs.
Under the agreement, Excaliard made an upfront payment in the form of equity and paid $1 million cash to Isis for the licensing of a particular gene target. Isis will also be eligible to receive development milestones and royalties on antisense drugs developed by Excaliard.
“Isis has made superb progress in the development of second-generation antisense drugs over the last few years, as evidenced by its clinical pipeline and current collaborations with companies such as Bristol-Myers Squibb, Eli Lilly and Ortho-McNeil, among others,” said Excaliard co-founder J. Gordon Foulkes, acting chief executive officer for Excaliard and managing director of RiverVest Venture Partners. “Having access to Isis’ antisense technology and expertise provides a great opportunity for Excaliard.”