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Answering the Express Scripts challenge

Walgreens just took another leap forward in its drive to become America’s “first choice for health and daily living” and “a centerpiece in improving patients’ overall health.”

On May 7, the pharmacy giant announced it had completed its $225 million buyout of BioScrip’s community specialty pharmacies and centralized specialty and mail-service pharmacy businesses. The deal includes a national network with 30 BioScrip locations in 16 states and the District of Columbia, heavily focused on HIV, oncology and transplant patients.

Company leaders said the addition of BioScrip’s big specialty pharmacy network fits the “Well at Walgreens” strategy and marketing theme by bringing “additional specialty pharmacy products and services closer to patients” and advancing the potential for what community pharmacy can bring to the nation’s frayed healthcare network. It also “creates a strong network of support for our core drug store business to provide specialty pharmacy solutions to our patients,” said Kermit Crawford, Walgreens president of pharmacy, health and wellness.

Those benefits come none too soon. Beginning in January, Walgreens saw a hefty chunk of its prescription business bleed away following last year’s bitter contract dispute with pharmacy benefit management giant Express Scripts. With relations between the two companies severed over the issue of prescription reimbursement levels, millions of ESI members have taken their business to Walgreens’ competitors.

The company’s recent monthly sales reports clearly reflect the loss of those customers. Walgreens saw its total sales drop 3.7% in April, compared with April 2011, despite a larger store base, with scripts filled at comparable stores down 7.8% from prior-year levels and even front-end sales decreasing 0.5% from the same period last year. With ESI members accounting for 12.6% of Walgreens’ total prescriptions dispensed in April 2011, customer traffic for the combined March/April period was down 2.3%, compared with last year. One bright spot: average customer basket size was up 1.8%.

(See the full report here.)

Walgreens’ answer to critics who opposed its line-in-the-sand refusal to knuckle under to ESI’s pharmacy reimbursement terms has been to take its lumps in short-term declines in store revenues, while charging full-speed ahead with its long-term strategy of becoming the nation’s go-to resource for a broad spectrum of health-and-wellness services. With its increasing push into specialty and mail-order pharmacy via BioScrip and other acquisitions, its growing network of pharmacies and wellness clinics at employer worksites, more than 350 in-store Take Care health clinics, and an expanding menu of pharmacy services like immunizations, medication adherence programs and health screenings, the company wants to become “more than a drug store,” Walgreens president and CEO Greg Wasson said.

“Becoming ‘My Walgreens’ in every community across America is a lofty goal,” he told shareholders. “But with our expansive network of stores, expanding healthcare services and commitment to creating a satisfying customer experience, we can own the strategic territory of ‘well’…in every community we serve.”

Are Wasson and Walgreens on the right track? Will the drug store giant’s bold vision to become the nation’s top retail health and wellness destination be enough to offset the loss of its ESI customers and the constant pressure on pharmacy margins exerted by other PBMs, not to mention Medicare and Medicaid? Let us know what you think.

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