Thursday, September 11, 2014

Inside Express Scripts’ Narrow Network Strategy—and How It Beat Walgreens

Last month, AIS Health held a fascinating webinar: Health Plan/Employer Strategies for Implementing Narrow Pharmacy Networks. (A CD and on-demand recording are available for purchase.)

The webinar featured a Milliman consultant, a Medicaid managed care health plan director, and the director of Network Solutions at Express Scripts, Andy Becker.

Becker explained Express Scripts' pharmacy network strategy, noting that 15% to 20% of the PBM’s claim volume now goes through a narrow network. He also revealed some previously-undisclosed insights into how Express Scripts outfoxed Walgreens during their 2012 imbroglio.

I highly recommend this webinar to anyone interested in the PBM/pharmacy/patient dynamics behind narrow networks. Excerpts below.

Narrower pharmacy networks—either preferred or limited models—have become an accepted means for payers to seek drug spending savings. Narrow network models encourage or require consumers to use designated pharmacies or channels, instead of allowing consumers to choose from an open network containing almost all pharmacies. These networks now dominate Medicare Part D and are slowly penetrating commercial health plans. For more detailed analysis, see Chapter 8 of 2013–14 Economic Report on Retail, Mail, and Specialty Pharmacies and my Pharmaceutical Executive article Pharmacy Benefit Networks: The Big Squeeze.

In the webinar, Becker describes Express Scripts’ three standard network designs:
  • National Plus Network, a broad network with about 68,000 nationwide pharmacies
  • National Network, which excludes Walgreens
  • Express Advantage Network, a preferred network with only about 32,000 pharmacies
Here's a summary slide from the webinar:

[Click to Enlarge]

In the Express Advantage Network, the consumer retains the option of using any pharmacy in the broader network. However, the consumer’s out-of-pocket expenses are $10 higher at a non-preferred pharmacy. Preferred network pharmacies include Rite Aid, mass merchants (Costco, Kmart, Target, Walmart), and supermarket chains (Albertsons, Giant Eagle, Kroger, Publix, Safeway, Supervalu, Winn Dixie). Non-preferred pharmacy chains include CVS, Walgreens, Medicine Shoppe, and Hy-Vee. (NOTE: These are the preferred and non-preferred pharmacies listed on the AIS webinar slides.)

The webinar also includes a fascinating review of the 2012 Express Scripts-Walgreens dispute, including a review of Express Scripts' major patient communication actions. Becker presents compelling evidence of why consumers didn’t mind losing access to Walgreens:
  • 83% of patients that were using Walgreens had another Express Scripts contracted pharmacy less than one mile away from that particular Walgreens
  • 98% of patients were within three miles of another Express Scripts contracted pharmacy
  • Only 10% of patients were exclusively using Walgreens pharmacies.
Here’s how Becker describes what happened to the 10% of Walgreens-only patients:
“[O]ut of those 10% people that were exclusively using Walgreens, about 3% of them actually ended up calling into the Express Scripts Call Center. The rest of them were able to manage through the website, or could just literally drive across the street in some cases and find another pharmacy. And out of those 3% that did have to call in and find additional support, half of them were able to get through our automated voice response system and get their questions answered that way and didn’t even need to speak to a live agent. The other half did have to speak to a live agent and that live agent was able to give them the necessary tools and information to find an additional pharmacy close by that was convenient for them.”
Given these data, it’s no surprise that Walgreens never released any data on recaptured prescriptions. I estimate that Walgreens ultimately regained only about half of the prescriptions from its Express Scripts dispute.

Fun stuff. Check it out.


  1. As a former Walgreens Pharmacy Manager, I can state that in my local area, the recapture rate for the ESI debacle was somewhere around 30-35%. In other areas with tougher competition, the figure was even worse. Overall, on the National stage, the figure might close in on 50%, but that is rather optimistic in my opinion... The long-term damage to growth figures in many geographic areas could be considered catastrophic since Walgreens is considering store closings in New England.

  2. I have always thought it stupid for there to be a Walgreens right next to or across the street from a CVS, but it's as common as dirt, at least in the Midwest.

    This just shows the idiocy more starkly.