Drugstore chain Walgreen Co. said Monday it will end its relationship with competitor CVS Caremark's pharmacy benefits management business because of complaints about prices and policies intended to bring customers to CVS stores.
The decision does not affect current Caremark plans, but if Walgreen stands by its decision, it won't handle any Caremark-managed prescriptions in about three years. Walgreen said it will not participate in plans that are awarded to Caremark or contracts renewed with Caremark starting Monday.
Walgreen is the largest U.S. drugstore chain in terms of locations and revenue, slightly ahead of CVS Caremark. It runs more than 7,500 stores in every state, along with Puerto Rico and Washington, D.C.
The company said it is giving up billions of dollars in revenue with the move. The company said it gets about 7 percent of its annual sales from Caremark plans. That was about $4.5 billion in fiscal 2009.
Walgreen, which is based in Deerfield, Ill., said it does not get enough information from Caremark about new prescription drug plans and contracts. That makes it hard for Walgreen to decide if it makes financial sense for it to participate in the plan.
Walgreen singled out the Maintenance Choice program for criticism. Maintenance Choice is a major program through which Caremark beneficiaries can pick up 90-day prescriptions at CVS pharmacies or get them delivered through the mail. The program is for patients with chronic illnesses who need regular supplies of medications.
Walgreen said Maintenance Choice "disrupts networks by requiring patients with chronic conditions in many plans to use CVS pharmacies or Caremark mail service facilities for their prescriptions." It also said Caremark's approach to Walgreen within the CVS Caremark retail network has "fundamentally changed" in the three years since the CVS-Caremark merger.
"Unfortunately, as a result of CVS Caremark's pharmacy benefit management practices toward Walgreens, it no longer makes good business sense for Walgreens to be part of their network for new and renewed plans," Walgreen CEO Greg Wasson said in a statement from the company.
Walgreen cited the "growing unpredictability" of CVS Caremark's reimbursement rates and said payments for certain drugs don't reflect the market.
Representatives of Woonsocket, R.I.-based CVS Caremark did not respond immediately to a call seeking comment from The Associated Press.
Shares of CVS sank $3.09, or 9.1 percent, to $30.70 in Monday morning trading. Walgreen shares fell 50 cents to $30.34.
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