CVS, Walgreen drama heating up

CVS Caremark Corp. said Wednesday it will end rival Walgreen Co.'s participation in its retail pharmacy network starting in a month, the Associated Press reported.

The move would mean that people whose prescription drug benefits are handled by Caremark would not be able to be reimbursed for prescriptions filled at Walgreen pharmacies. Walgreen said it expects most of its 7,500 stores to be out of Caremark's commercial network in 30 days. Some Walgreen stores won't be cut off as quickly because of state laws or client contracts.

Caremark also said it will end Walgreen's participation in its Medicare Part D retail pharmacy network on Jan. 1. Caremark is one of the largest pharmacy benefits management networks. It negotiates contracts with employers and handles the drug benefit part of their health plans, paying pharmacies to fill prescriptions. It saves money by negotiating volume discounts.

Walgreen wants to be paid more for filling prescriptions, while Caremark makes money by reducing costs for plan members and sponsors. The companies had been in negotiations for months, although CVS now says Walgreen refused to negotiate in good faith.

Walgreen CEO Greg Wasson said in an interview that the company decided it did not make sense to continue doing business with Caremark. Walgreen said Monday that was because Walgreen wants better prices and objects to policies that drive customers to CVS stores. Walgreen said it would honor any current contracts, however, so customers would have felt few effects until 2012.

CVS Caremark said that move was a transparent attempt to raise reimbursement rates. It said consumer access to pharmacies won't be much changed even without Walgreen.

Walgreen said the move confirms its view that doing business with Caremark was not in its best interest. It said it is confident its business will continue to grow as it participates in PBM networks and provides other services directly to employers.