Friday, June 18, 2010

CVS-WAG: Doomsday Averted

BREAKING NEWS: CVS Caremark and Walgreens Announce New PBM Network Pharmacy Agreement

Both sides had good reasons to resolve this situation quickly. CVS Caremark needed to minimize damage to its PBM business, while Walgreen faced an enormous revenue hit from the loss of Caremark. Everyone also recognized the enormous disruption for patients caused by a permanent split.

The announcement is filled with PR fluff, but it looks like a bigger win for CVS Caremark since Maintenance Choice remains in place. It's definitely a short-term positive for Walgreen because they avoid a devastating $7 billion revenue loss. Longer term, Walgreen's perceived bargaining power in the drug channel has been reduced. However, CVS Caremark's has also raised questions for payers about its ability to manage the retail network.

So, what have the participants in this drama learned? Probably nothing, but I'll submit the following for your consideration:

1. Don't bring a knife to a gun fight. (Walgreens)
2. Don't cut off your nose to spite your face. (CVS Caremark)

Thanks to everyone who followed the brouhaha on Drug Channels! Blog traffic hit a new record over the past two weeks.


  1. AnonymousJune 18, 2010

    LOL! Love the lessons learned!

  2. Well what did this accomplish for either? "Maintenance Choice", which is the most UNFAIR policy in the pharmacy world is still here? Adam do you know how CVS paid off Walgreens? I guess the battle goes back to the FTC on CVS's unfair practices! My Dad always taught me, " do not open your mouth if you couldn't back it up" I GUESS THIS IS WHAT WALGREENS' did!

  3. AnonymousJune 18, 2010

    Lessons learned? How about " Independents - back to the business of becoming as irrelevant as before."

  4. An ounce of publicity whether good or bad is worth a ton of revenue. Both have won on that front. I am sitting here wondering what if any consessions if any were made to keep Walgreens in the network?

  5. Brett,

    The quick resolution suggests that CVS Caremark saw some risk with payers. OW, they could have let Walgreens twist in the wind on Tuesday's earnings call and then settled. July 10 would have created a lot of negative news stories for CVS Caremark about access and market power if confused patients couldn't get scripts filled.


  6. AnonymousJune 18, 2010

    I am wondering what it cost $$$$ walgreens in new drugs coming off patents, lipitor and other to make the deal go forward.

    Cvs, The winner in this battle....

  7. AnonymousJune 18, 2010

    Does Walgreens get reimbursed more than other chains because of this agreement? Or did Walgreens go to CVS and ask to pretend this never happened?

  8. AnonymousJune 19, 2010

    well, CVS was molded, like clay, by Walgreens. CVS is having trouble because of all their criminal behaviors. CVS is being sued by 25 states, under investigation, commit frauds & insurance scams, ect.ect.. Walgreens sent them a message. Crime does pay at 1st but always catches up later.

  9. AnonymousJune 19, 2010

    My anonymous friend above, in this country corporate crime pays all the time, even when it catches up later.. the trick is to grab as many clients and cash before you get caught!! The penalty, unfortunately, is too mild and worth the risk because you still come out ahead!! Until the penalty becomes something along the lines of getting completely shut down, or equal to the company's declared profits for the past 3-5 years, nobody will care and all corporations will continue to cheat and break the rules until they get caught.

  10. AnonymousJune 19, 2010

    CVS just recently merged in '07 with Caremark. CVS's operatiions are being challenged on numerous fronts. It's not just WAG. It's qusetionable for CVS to just keep the status quo. There's currently 25 states sueing CVS for antitrust voliations.