Posted on Saturday, 12th June 2010 by James Martin

CVS and Walgreen (WAG: Charts, News, Offers) have always been fierce competitors, each trying to attract consumers with low prices, sales, and promotions. But along with providing customers a place to purchase necessities such as toothpaste and shampoo, these stores also provide a pharmacy for customers to fill their prescriptions. And in the same way that many people choose a doctor’s office based on if they accept their insurance, the same decision is often made regarding pharmacies. This week, however, both Walgreen and CVS have taken steps that will make the process a little more complicated for customers, as each company seems focused solely on what is best for them.

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At the beginning of the week, Walgreen Co. made an announcement that they would no longer cover new patients who belong to CVS’s pharmacy benefits management (PBM) network. As of Monday, however, Walgreen remained willing to continue their relationship with any existing customer on the PBM network. Walgreen stated the reason for their change in policy was because the reimbursement rate offered by CVS to the pharmacy was unfair, and Walgreen believed CVS was trying to push customers to CVS locations. Other independent pharmacies have complained about rates as well, and also about the fact that CVS requires customers on certain plans to purchase their prescriptions only at CVS locations (however, customers are given the option to choose their own plan). The Federal Trade Commission is already looking into complaints about CVS’ pricing decisions.

A few days after Walgreen’s announcement, however, CVS struck back. Frustrated with Walgreen’s decision, CVS Caremark Corp. decided to completely remove Walgreen from its pharmacy network. Taking effect in just 30 days, any customer on the PBM network will no longer be able to get their prescriptions filled at a Walgreens pharmacy, unless they are willing to pay for the prescription cost out-of-pocket.

This decision will certainly affect Walgreen, as it has been reported that around 7% of Walgreen’s annual sales income comes from this partnership with PBN. But since Walgreen is the largest drugstore company in the United States, with about 7,500 store locations, this has the potential to impact a lot of customers as well. However, CVS has stated that even removing Walgreens locations, there are still 57,000 store locations across the United States that belong to the PBN network, including 7,000 CVS locations and many other supermarkets and independent pharmacies. A spokeswoman for CVS has stated that even after this change, “more than 92% of Caremark members have access to a participating pharmacy within a 5-mile radius of where they live.” So thankfully for most people, this feud will only result in a minor inconvenience; however there will still be some customers who do not live close to another pharmacy, and these individuals may be the most injured in this battle.

CVS Commentary:

  • CVS to buy up independent pharmacies – One way CVS is hoping to dominate the market is by snatching up more independent pharmacies.
  • Kodak Is Bringing Facebook to CVS – Kodak (EK: Charts, News, Offers) is bringing a new tool to CVS locations which will allow you to print pictures directly from your Facebook account.
  • CVS Caremark abuses warrant through FTC investigation and remedies – Some background information on the reason why the FTC is looking into CVS’s practices.

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