The Art of Negotiaion

CVS Caremark Announces Plan To Remove Walgreens From PBM Pharmacy Network and Transition Pharmacy Care To Participating Providers


Walgreens’ Demands Would Have Increased Pharmacy Costs For Payors and Plan Members

WOONSOCKET, R.I., June 9 /PRNewswire-FirstCall/ — CVS Caremark Corporation (NYSE: CVS) today announced that, while it has worked diligently to come to terms with Walgreens on an agreement that would allow Walgreens to continue as a member of the CVS Caremark PBM pharmacy network, it has no choice but to terminate Walgreens’ participation in its retail pharmacy networks effective 30 days from today, or as otherwise may be required by applicable law or contract requirements.  In addition, CVS Caremark will terminate Walgreens’ participation in its Medicare Part D retail pharmacy networks effective January 1, 2011.  CVS Caremark said that Walgreens’ most recent actions have violated the terms of its existing agreements and that Walgreens has failed to respond to efforts by CVS Caremark to continue business negotiations.    

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CVS Caremark has been negotiating in good faith with Walgreens over the past several months with the objective of reaching an agreement that would appropriately balance providing consumer access and managing pharmacy costs for CVS Caremark’s PBM clients and their members.  While Walgreens already receives comparable reimbursement rates to those of  other large national retail chains, including CVS/pharmacy, Walgreens has continued to seek higher reimbursement rates and announced on June 7, 2010 that it would not participate in CVS Caremark PBM networks going forward for members covered under new or renewal plans.  In order to minimize patient disruption and provide network stability, CVS Caremark’s agreements with Walgreens and other retail pharmacies do not permit network participation on a selective basis. 

Per Lofberg, President of CVS Caremark’s pharmacy benefit management business, said, “Walgreens’ announcement was nothing more than a transparent attempt to try to raise the pharmacy reimbursement rates it receives from CVS Caremark.  We’ve seen Walgreens use this approach in the past, targeting employers, health insurers, government entities and other plan sponsors.  We believe this approach is totally contrary to the needs of our clients who are all struggling to keep pharmacy health care affordable in today’s challenging environment.”  

Tom Ryan, Chairman and Chief Executive Officer of CVS Caremark, commented, “As the nation’s largest pharmacy services company, CVS Caremark is committed to being responsive to our clients needs and offering them innovative health solutions that reduce costs, improve health care outcomes and provide broad access and choice to consumers.  Our network of participating pharmacies is currently the largest ever maintained by our PBM business, with more than 64,000 participants, only 7,000 of which are Walgreens stores.”

In fact, when Walgreens is included in the CVS Caremark pharmacy network 85.9% of members on a national basis have access to a network pharmacy within a 3 mile radius of where they live.  When Walgreens is excluded from the network that number changes negligibly to 85.7%.

“We regret any inconvenience this change may have on plan members who currently fill their prescriptions at Walgreens but are confident that through our remaining valued network partners, we will continue to provide excellent geographic coverage for our clients and their members across the country,” Ryan added.  “We will continue to provide convenient and affordable pharmacy care to members, and we are committed to a smooth transition of affected members to other pharmacy providers in our networks.”     

About the Company:

CVS Caremark is the largest pharmacy health care provider in the United States. Through our integrated offerings across the entire spectrum of pharmacy care, we are uniquely positioned to provide greater access to engage plan members in behaviors that improve their health, and to lower overall health care costs for health plans, plan sponsors and their members. CVS Caremark is a market leader in mail order pharmacy, retail pharmacy, specialty pharmacy, and retail clinics, and is a leading provider of Medicare Part D Prescription Drug Plans. As one of the country’s largest pharmacy benefits managers (PBMs), we provide access to a network of more than 64,000 pharmacies, including over 7,000 CVS/pharmacy® stores that provide unparalleled service and capabilities. Our clinical expertise includes one of the industry’s most comprehensive disease management programs. General information about CVS Caremark is available through the Company’s website at

Forward-looking statements:

This press release contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company strongly recommends that you become familiar with the specific risks and uncertainties outlined under the Risk Factors section in our Annual Report on Form 10-K for the year ended December 31, 2009 and under the caption “Cautionary Statement Concerning Forward Looking Statements” in our Quarterly Report on Form 10Q for the quarter ended March 31, 2010.

Editor’s Note: Both parties are posturing for position in a public manner. We have seen this type of negotiation tactic in the past and the ending is usually within 30 days – both will issue a joint press release announcing their undying friendship for each other.