Inside This Issue - Opinion
Rx should close ranks behind Walgreens
January 16th, 2012
by David Pinto
Much has been written about Walgreens’ struggle to flourish in the aftermath of the drug chain’s decision to discontinue its relationship with Express Scripts, one of America’s most important pharmacy benefit managers.
The world’s largest drug store chain has been questioned, criticized, condemned, vilified, written off and second-guessed for having the temerity to disagree with the terms mandated for it in order to remain part of the Express Scripts network.
Indeed, the debate in some circles goes so far as to explore the possibility that Walgreens is in danger of losing not only business, which it is clearly willing to do in ending its Express Scripts relationship, but its industry-leading position as a dispenser of prescription drugs. The implication in some quarters is that Express Scripts is a far more important prescription drug component than is Walgreens, indeed so important that the drug chain’s stature without the PBM’s business is in doubt.
Truth be told, Walgreens' cause is the chain drug industry's cause.
It’s time to stop this nonsense. Rather than being subject to criticism for its decision, Walgreens should be hailed and congratulated for is willingness to stand up to a PBM whose idea of doing business apparently is to minimize any opportunity for a retailer to turn even a marginal profit while insuring that it remains solidly profitable.
Indeed, it would be far safer for Walgreens to continue its current relationship with Express Scripts, to comply with the PBM’s terms, to allow itself to be dictated to, to pocket the $5 billion in revenue it receives for dispensing the PBM members’ prescriptions and, whatever the profit in so doing, insure that its sales remain healthy.
But Walgreens’ leaders believe, rightly, that there’s more to doing business than the maintenance of short-term earnings. There’s long-term profitability as a community pharmacy practitioner — and the integrity of standing up for something more important than the momentary satisfaction of doing business.
Truth be told, Walgreens’ cause is the chain drug industry’s cause, and the retailer’s leaders should be commended for taking a stand when other industry figures have chosen to sit on the sidelines and allow Express Scripts to dictate the terms of doing business.
The reality of things is that Walgreens is taking a calculated, well-reasoned, short-term risk in severing relations with Express Scripts. While demonstrating a willingness to lose some $5 billion in initial-year pharmacy volume, the retailer is in reality betting that its 7,800 locations will ultimately prove more of a consumer inducement than the inconvenient alternative of switching drug stores.
Should this in the end prove to be an error in judgment, Walgreens will nonetheless have permanently ridden itself of the burden of doing business with a PBM that insists on maintaining its own profit structure while squeezing the already low margins it allows pharmacy providers for filling Express Scripts members’ prescriptions. Moreover, in the end Walgreens will recoup the lost business — while potential Express Scripts customers going forward will have to consider, when choosing a PBM, whether there aren’t more viable alternatives.
Indeed, the real issue here is not Walgreens’ aggressive stance but the lack of aggressiveness community pharmacy has continually demonstrated, both here and in the past, in the face of the eroding profit margins that PBMs have brought with them. For too many years America’s community pharmacies, though acknowledged, praised and continually admired as the American consumer’s first choice in insuring and promoting health and wellness, have been squeezed mercilessly by the PBM industry.
It becomes increasingly apparent that retail pharmacy suffers from an absence of belief in itself. Only Walgreens, with this bold action, has demonstrated the confidence and self-assurance to say no, and to say it at a time when saying no, while potentially harmful in the short term, will go a long way toward insuring the retailer’s, and the industry’s, long-term viability.
Whoever wins this battle, Express Scripts will certainly suffer in the long term for the self-serving way it has chosen to handle this situation. Walgreens, like it or not, is integral to its business. Should it lose that business, Caremark will overnight become the more appealing option when employers evaluate PBMs.
Moreover, if Walgreens does indeed remain viable without Express Scripts, as it will certainly do, how long before another community pharmacy practitioner challenges the PBM, already weakened by Walgreens’ departure?
As a final thought, this might be the perfect time for the industry to close ranks behind Walgreens. In the end, community pharmacy is more important than any single practitioner. Those with a stake in the profession should applaud Walgreens for taking a dramatic step to ensure that a viable, profitable chain drug industry is still around to dispense prescription medications long after Express Scripts has ceased to be a significant factor in the pharmacy benefit manager community.