Finally, The Dog Wagged The Tail. Is Walgreens The Rotweiler Of Our Industry?
After more than 20 years of having the Tail Wag The Dog, finally, The Dog Wagged The Tail. I trust that the new agreement that Walgreens negotiated with ESI is satisfactory to the country’s largest pharmacy retailer. 7600+ pharmacies. Probably more than 20,000 pharmacists are affected.
In the beginning, the dog wagged the tail. We were not convinced that PBMs would benefit pharmacy. We did not want to wait for our money. In the late 1960s, there were two companies that administered prescription claims. PCS and PAID Prescriptions. We filled out forms in triplicate, mailed the bottom two copies and got our money a few weeks later. The patient paid the copay at the time of service. We relented and the industry went along with this idea because the money was very good. We were paid FULL 100% AWP + $3.60. This was in frikkin’ 1969. The pharmacy industry was a big dog and the tail was a stubby little thing.
Fast forward. What kind of gross profit do we get on a net cost $100.00 Rx? What the hell happened? Could it be that smart, good merchant pharmacists working for the chains were told to go stay in the pharmacy and behave? Were we told to not make waves? I know that we were told by smug MBA-types, “It is going to be okay. We know what we are doing.” They came in not knowing a thing and they fucked up our industry all by themselves. As the slide accelerated, they ran faster, chasing each other.
Walgreens got a multi-year contract with ExpressScripts. Way to go. Some football guy (Vince Lombardi?) said, “When the going gets tough the tough get going?”.
It is now time for the Poodle Dogs to get it going. CVS has their own tail. Rite-Aid is in such a downward spiral that it is chasing its own tail. There has to be somebody else out there who is willing to “Wag the Tail”. Otherwise the Tail will keep on Wagging the dog. Step up Poodle Dogs, let’s see what you got. Taking a good look, I’d say that you have some snap, especially if you get cornered.
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JP.. you are jumping to the conclusion that WAGS won the negotiation… did you forget that after WAGS told ESI to take a hike..they merged with MEDCO.. Were they getting ready to loose another 10%-20% of their business as their Medco contracts get cancelled?
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There may still be an elephant on the horizon.. that will be in the room in another year or two.
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The first is ACO’s (Accountable Care Organizations) – think Kaiser format.. IMO.. we are headed back to another experimentation with capitation reimbursement.. we know how that worked the last time this was tried…especially in the pharmacy arena. The majority of these ACO will be centralized around hospital – that is why they are buying up physician practices as fast as they can.
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The second… ESI would appear to be in a acquisition mode.. and Rite Aid is – and has been – “on the bubble” Their stock has been officially labeled as a “penny stock” for 5+ yrs.. why they have not been delisted.. is a good question.
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the transition or evolution of our healthcare system is still a work in progress and is not anywhere near from being over.
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Not “Jumping to a conclusion”, Steve. Just concluding that the result was “satisfactory” to WAG. The PBMs are the enemy, man and we all better get on the fuckin’ wagon and push. The contract is secret, I am sure. Better for us to spin it to our advantage. Maybe one of the poodles will snarl a bit.” ESI would not have agreed to anything because this makes them look vulnerable.
I don’t think Walgreens necessarily got a good contract; I believe it was more that they would sink if they lost Medco on top of ESI.
The biggest Walgreens in my area went from 2,000+ to 800 on a GOOD week after losing ESI and now many Medco accounts for this month. I knew at some point they were going to have to give in, and I am quite frankly surprised that this game went on this long.
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In my area, there are very few ESI cardholders. There is a major Coast Guard Base. Tricare administered by ESI. They are kids. No chronic conditions. They will be back right away. WAG is the closest. Medco is going to maintain separate contracts. This merger was all about violating anti-trust regulations and restraint of trade. I do not know how it was okayed. There will be eyes watching. They have to stay squeaky clean. For the long haul, WAG will get a free pass with Medco.
JP the dog analogy is GREAT! You must have stayed awake all night developing this story. It is pure GENIUS!
Just love those pics of the dogs.
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Peon, you will always be my “Glass Half Full” partner. I appreciate it.
That poodle has a better haircut then I do
I would love to here some insider numbers on that deal. It wouldn’t surprise me if it’s a worse deal than the original. Walgreens had no power in that move. Not with every other chain ready to put a knife in their back. Did they think ESI customers had a choice in insurance carrier? They certainely had a choice in pharmacy. They walked next door. Maybe in a couple years a move like this will work. Depending on how this healthcare reform shakes out.
@JP… you forget that insurance companies – and Medco and ESI ARE LICENSED INSURANCE COMPANIES are exempt from Sherman Antitrust by McCarren-Ferguson Act (1938?). What is ILLEGAL in the rest of the business world is perfectly permissible for insurance companies.
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restraint of trade and anti-trust violation are of no concern to them..
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My money is on when those Medco contracts come due for renewal.. they will be renewed under ESI contract and terms…and they will thumb their nose at pharmacy..
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When all of these companies de-mutalized in the 90′s and became public held for-profit companies .. this exemption should have been repealed.
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No one mentions this.. BECAUSE?? all the deep pocket and lobbyist that they would be fighting???
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IMO.. the BIG BOYS will continue to evolve their convenient store format to help keep the stores open .. & profitable …in hopes that they will survive all the “carnage” and eventually be in a place where they will be on a more level playing field…
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We have nothing more than MBA’s at the PBM’s seeing if they can “out spreadsheet” the MBA’s at the pharmacy corporation.
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I believe that the PBMs are fiscal intermediaries. The are paid by the insurance companies per capita. Right?
JP to see this as anything but a massive fail for Walgreens is at best naive and at worst stupidity. Wags got hammered on this and has lost 100′s of millions of dollars and thosands of customers they will never get back. Wags accepted the deal because of the Medco merger. Wags could not afford to lose another 25% of its scripts. I would bet the contract Wags signed was the same or worse than the one they turned down. The tail did’t just wag the dog on this one. The tail got up found a friend and bitch slapped the hell out of the dog.
I’m going to have to agree with Peon RE: the dogs. Very “remarkable” in the sense that I wanted to make a remark like I am now: HAH!
We need more finely tuned social/political commentary directed specifically at pharmacy’s issues perhaps in the form of cartoons. JP should draw a cartoon of a Master of the Universe (an attorney friend of mine calls them …) with huge shoulder-padded suit jackets that are too big for them who is telling a pharmacist they need to get more done for less, all the while keeping the pharmacist from taking care of an increasingly lengthening line. We could be smarter and more tongue in cheek about what we’re about.
Oh, the lawyer I know calls MBA business people with no other qualifications “Skillless overachievers”. Spot on.
@JP.. I know that a few years ago.. I saw something that Medco was a “licensed insurance company” in all 50 states… at first they were fiscal intermediaries…but that was they were a pure paper shuffler…which they are not any more. I tried looking for it today… and couldn’t find it. We don’t know if some of these drug programs that they manage if they are at financial risk.. if so..I would think that they would have to be a licensed insurance entity.