Pharmacy Industry News: Health Plans Steer Members Away From Walgreen’s Drugstores
Health Plans Steer Members Away From Walgreen’s Drugstores
As Walgreen Co. (WAG) gets closer to leaving Express Scripts Inc.’s (ESRX) pharmacy-benefit network on Jan. 1, big health plans are steering members toward other drugstores to make sure their medication is still covered.
These efforts highlight the potential fallout Walgreen faces in its contract-renewal dispute with Express Scripts, which manages drug benefits for health insurers and employers. Express Scripts represents about 90 million prescriptions and $5.3 billion in annual Walgreen revenue, and while Walgreen doesn’t expect to lose it all, the shift in traffic to competing drugstores could be substantial.
WellPoint Inc. (WLP) and the U.S. military’s Tricare health plan–which combined represent roughly half of Express Scripts’ revenue–are among the big clients alerting their members.
“Unless an agreement is reached between Express Scripts and Walgreens, members will no longer be able to receive coverage for their prescription medications from Walgreens pharmacies,” WellPoint warned in an online post.
The insurer, Express Script’s biggest client, has sent letters about the change to pharmacy members who used Walgreen recently, plus all members on Medicare plans, a spokeswoman said. WellPoint has also reached out through automated and live phone calls, plus inserts in open-enrollment packages.
Tricare has been working with Express Scripts since August to alert beneficiaries to the potential Walgreen network loss. These efforts include phone calls to members on specialty drugs, direct mailings and outreach to providers, a Tricare spokesman said. The military health plan is also following up with members whose prescriptions are still filled at Walgreen; the drugstore’s current contract with Express Scripts runs through this year.
Walgreen has tried hard to keep the Tricare business, which includes nearly 6 million beneficiaries and is Express Script’s second-biggest client. Walgreen has an online petition for Tricare members to voice their desire to maintain Walgreen access; the drugstore recently said it had collected more than 250,000 signatures.
Walgreen, which last month indicated little customer disruption, declined to offer updated comments on where things stand or potential changes ahead of its quarterly earnings report next week.
The drugstore, which posted net sales above $72 billion in the fiscal year ended Aug. 31, has said long-term fall-out from accepting Express Scripts’s terms would be worse than the short-term impact of losing business. Walgreen could win back some prescriptions if Express Scripts clients eventually depart for pharmacy-benefit managers that provide Walgreen access.
While Walgreen is the biggest U.S. pharmacy chain with 7,700 outlets, there are tens of thousands of other pharmacies in Express Scripts’s network. Tricare said about 99% of beneficiaries will have an alternative pharmacy within five miles, meeting or exceeding access standards in the health plan’s contract with Express Scripts.
Elsewhere, Blue Cross Blue Shield of Massachusetts said it has notified members they will have to switch from Walgreen pharmacies before Jan. 1. The largest private health plan in Massachusetts, with nearly 3 million members, said it is confident it will retain good pharmacy access.
Arise Health Plan, a Wisconsin non-profit that covers the Green Bay Packers, has also advised members to move their prescriptions, Chief Operating officer Mark Minsloff said. Express Scripts–which has online tools to find other drugstores–has assured Arise all members who have used Walgreen have another option within four miles, Minsloff said.
Likewise, WellPoint has done its own analysis and believes that, on average, members will have another in-network pharmacy within a half mile, spokeswoman Lori McLaughlin said. The insurer didn’t have an estimate for how many members are affected.
The Walgreen loss may still be straining WellPoint’s relationship with Express Scripts, which earlier this week disclosed a contract dispute with the insurer. Express Scripts and WellPoint wouldn’t disclose details, but some analysts believe the Walgreen issue could be involved.
Walgreen shares have tumbled about 24% since the Express Scripts dispute went public in June. Analysts at William Blair believe losing Express Scripts-related traffic could cost Walgreen $3.1 billion in sales this fiscal year and $5.2 billion the next year.
That would benefit companies like CVS Caremark Corp. (CVS) and Rite Aid Corp. (RAD), the second- and third-largest drugstore chains, respectively. “We’re certainly in a position to capitalize,” CVS Chief Executive Larry Merlo said in a recent interview.
Walgreen, which has retained a handful of Express Scripts clients with contracts that allow them to maintain Walgreen access, has said it expects to achieve 97% to 99% of its fiscal 2011 prescription volume in the current year. Express Scripts, meanwhile, has said it expects 95% or more of its volume to move forward without Walgreen.
Web of business news: 25 top picks from reader clicks
The end of a year generally affords journalists time to decompress, reflect and then pontificate about the year gone by and what we thought were the most significant stories of the year.
This year, the laggards at Crain’s Detroit Business thought we would compile a list of the top stories and blogs between Jan. 1 and Dec. 1, 2011, as selected by you, based on your mouse clicks or BlackBerry button pushes on our various emails and our website, crainsdetroit.com.
1. Feb. 11: “Deal to sell Pistons has been reached, source says”
If private equity player Tom Gores didn’t appreciate the pleasure and pain of delayed gratification before this year, he probably does now. It took nearly four months from when this story ran until Gores actually closed on the purchase of the Detroit Pistons and its umbrella corporation, Palace Sports & Entertainment Inc.
And Gores barely had begun making his presence known through personnel moves when a labor dispute between the National Basketball Association and its players shut down the league and delayed the opening of the NBA’s regular season more than two months.
2. Feb. 7: “The Eminem Chrysler ad, and what Detroiters think”
After years of saying nice things about Detroit (remember Emily Gail?), singing “Hello, Detroit” (Sammy Davis Jr.) and promoting that “It’s a Great Time in Detroit” — to say nothing of the untold numbers of earnest and determined campaigns featuring the word “renaissance” — all it took was two minutes of Eminem’s driving a Chrysler 200 sedan to the thrum of his 2002 hit “Lose Yourself” to give the city some viral marketing props.
Chrysler Group LLC’s Super Bowl commercial, which also featured a gospel choir, became a YouTube sensation and the beginning of a noted ad campaign and slogan of the year: “Imported From Detroit.”
3. Dec. 15, 2009: “American Jewelry and Loan pawn shop featured on TruTV”
Now this one’s a puzzler. We wrote exactly one Web story about American Jewelry and Loan this year — and it wasn’t this one. How did this story from 2009 — about the store’s becoming the star of the TruTV series “Hardcore Pawn” — attract more than 6,700 page views? (Another great moment in search engine optimization, perhaps?)
“Hardcore Pawn” features father and son Les and Seth Gold along with sister Ashley Broad as they run their busy Detroit pawn shop. They’re probably busier these days: On Aug. 25, we reported that American Jewelry and Loan planned to open a pawn shop in Pontiac.
4. Sept. 4: “Attract, retain, repeat — What’s cool in 2011: Hiring, helping workers build careers”
Apparently, the next best thing to working at a cool place is reading about a cool place to work. (OK, maybe a distant second.) This year’s iteration of Crain’s Cool Place to Work awards program was cheerier than its predecessor in 2009, when the recession felt like a depression.
Many employees who nominated their workplaces this year noted that their employers worked hard to avoid major cuts in pay and benefits during the worst years. Better yet, quite a few said one of the coolest things about the company they work for is that it is growing and hiring. And, yes, there was at least one mention of a foosball table.
5. Feb. 17: “Snyder budget: The era of the tax credit is over”
Early this year, having “Rick Snyder” in a headline guaranteed an attentive online audience, as he began to sketch out and then act on his agenda for Michigan. In this Feb. 17 Web report about Snyder’s budget presentation, the governor made plain what we all know today: The way the state offers business tax incentives is gonna change.
Snyder proposed replacing the Michigan Business Tax with a 6 percent flat corporate income tax for “C” corporations. He also wanted to end or change tax credits for brownfield redevelopment, the Michigan Economic Growth Authority program, energy and film incentives, among others.
And then, with the Legislature’s approval, he did just that.
6. Aug. 2: “Canton pharmacy owner, 25 others accused of billing fraud involving painkillers”
Stories about fraud in health care were popular this year, none more so than Chad Halcom’s Web report that Canton Township pharmacist and businessman Babubhai “Bob” Patel allegedly oversaw a statewide health care fraud in which he distributed painkillers valued at more than $57 million and fraudulently billed Medicare, Medicaid and private insurance carriers.
All told, 25 people were charged along with Patel. Federal prosecutors allege that Patel provided kickbacks, bribes and “other inducements” for physicians to write prescriptions for patients with Medicare, Medicaid or private insurance coverage to be presented at a Patel pharmacy for billing — he owns 26 across the state. He remains in jail until trial.
7. Feb. 11: “Regulators shut down Peoples State Bank; First Michigan buys assets”
Troy-based Talmer Bank and Trust is the state’s fastest-growing, having come a long way from 2009 when it was the 136th-largest bank and known as First Michigan Bank. One reason for that growth is that it has scooped up struggling rivals, such as Community Central Bank Corp. and, as this story reported, Madison Heights-based Peoples State Bank.
In August 2010, federal regulators ordered Peoples to either find investors willing to buy enough stock to get the bank adequately capitalized or find a buyer. About six months later, it found Talmer.
Peoples was founded in Hamtramck more than a century ago and built its business serving generations of Polish immigrants as they migrated here for work in the auto plants or to run the bakeries, restaurants and butcher shops that served those factory workers.
8. April 3: “Whole Foods Market browses in Midtown”
After weeks of hearing murmurings, on April 3, Crain’s restaurant writer Nathan Skid reported online that Austin, Texas-based Whole Foods Market Inc. was shopping for a location in the Midtown area of Detroit. Amid his carefully chosen words, Detroit Mayor Dave Bing said of a Whole Foods deal, “It’s not a question of “if’ but “when.’ ”
In this story, Whole Foods would not confirm any interest in Detroit. But today, the company is poised to sprout up at John R and Mack Avenue.
9. Feb. 4: “Matt Prentice explains what did in his company — Sudden move of No. VI Chophouse”
Not that we really needed website analytics to tell us that our readers like to eat or that they like to eat at Matt Prentice restaurants. But when Nate Skid listened to Prentice talk about the reasons behind the demise of the restaurant group bearing his name, thousands wanted a place at that table.
All it took to bring down his empire, Prentice said, was the unexpected relocation of his top-performing restaurant, the No. VI Chophouse, out of the Hotel Baronette in Novi. He also filed for personal bankruptcy in March. But in the Dec. 12 issue, Crain’s reported that a series of business decisions appears to have revived the Prentice restaurants and even the Matt Prentice Restaurant Group name.
10. March 16: “University of Michigan moves up law school rankings; MSU, Wayne make list for first time”
Next time you tell a lawyer joke, keep in mind that enough of them live here to help a Web story about law school rankings crack our top 10.
In U.S. News and World Report’s 2011 Best Law Schools List, the University of Michigan Law School was No. 7 out of 190 accredited U.S. law schools, compared with a consistent No. 9 in 2008-2010. The Michigan State University College of Law and Wayne State University Law School both made the list for the first time — at Nos. 95 and 121, respectively — because of changes in the magazine’s list format.
11. Feb. 16: “Grow Blue: UM’s first chief marketing officer’s goal is to ‘sell out Crisler’ ”
It’s hard to fathom that the University of Michigan’s athletic program needs its own chief marketing officer, given all the residents of Southeast Michigan who refer to UM teams as “we.” But that’s what the university got in December 2010 when it hired Hunter Lochmann away from the New York Knicks of the National Basketball Association.
In this Page 1 story, Lochmann said his top priority was to fill Crisler Arena, home of the basketball Wolverines: “That’s a personal agenda,” he told Crain’s Bill Shea. “I’ve got to get to the bottom of why that doesn’t happen. I want to get into the data on why people don’t come to the games.” Maybe it helps now that the men’s team, for the first time in years, has been nationally ranked.
12. March 17: “Dan Gilbert: Quicken’s triumph in overtime trial ‘a victory for right over wrong’ ”
Among the many articles of faith woven into the vast tapestry of Crain’s office banter, one stands above all others, invulnerable to the ebbs and flows of the capricious news cycle.
And that is this: People will read anything about Dan Gilbert. They would read his horoscope. His dry cleaning bill. Dan Gilbert Haiku, written good or very bad, would attract eyeballs.
If the Newsmaker of the Year were based on page views, Dan would be the man. When Bill Shea blogged this month about Gilbert’s dissing of the Detroit Lions on Twitter, more than 2,500 people clicked to read more.
In this Web story, Gilbert celebrated his victory and that of Quicken Loans Inc. in a federal lawsuit involving Quicken’s policy to not pay overtime to loan officers who also earn commissions. Gilbert called the jury’s decision “a victory for right over wrong” — hence the headline.
This we exaggerate? Keep reading.
13. Oct. 12: “As hedge fund buys the farms, prices rise — but what happens come the downturn?”
So this is how viral marketing works, eh? The Crain’s Michigan Business weekly Wednesday email reported on a hedge fund that was buying up farmland and, in the process, raising land prices and a few eyebrows. Freelance writer Howard Lovy sent a link of his story to Glenn Reynolds, creator of the Instapundit blog.
With more than 4,100 page views to date, we needn’t add that Instapundit is widely followed.
14. Jan. 12: “More red flags up at Borders”
For years, bookworms throughout Southeast Michigan would speak of exploring the canyons of literature that made up the original Borders bookstore in downtown Ann Arbor, evoking memories of a sort reserved for such iconic regional brands as Vernors, Kmart, Highland Appliance … hmm.
This Jan. 12 Web story by Crain’s Daniel Duggan reported, among other things, that Chapter 11 was an option for Borders Group Inc., which had grown from a single, revered outlet into a chain of more than 600 book and music stores that had been unable to transition into the digital age. Asked about the possibility of bankruptcy, analyst Jim McTevia neither hemmed nor hawed: “Yes.” And even Chapter 11 wasn’t sufficient. In September, Borders was liquidated.
15. Feb. 2: “5 Questions With … sports executive and team investor Andy Appleby”
No other story this year generated as many reader comments as Bill Shea’s Q&A blog with Andy Appleby, chairman and CEO of the marketing and management firm General Sports and Entertainment LLC — and, it turns out, an owner of an English professional soccer team with a substantial fan base.
And passionate? Well, when comments to a story suggest new lyrics for “Over There” (Hint: “The Yanks are coming, the Yanks are coming”), that’s a pretty reliable sign of real, live, visceral, unspellchecked British football passion.
Appleby’s observation during the interview that British soccer fans “take it very seriously” could be a contender for “Understatement of 2011,” if we had a category for that.
Now if we could just get Dan Gilbert to buy an English professional soccer team so we could write about it …
16. Feb. 23: “Taking stand in overtime class-action case, Dan Gilbert defends Quicken culture, explains his e-mails”
… Like we wrote about him here. In this story, Gilbert defended Quicken Loans’ corporate culture and business model during the jury trial involving his company’s overtime policy.
At one point, the exchanges between Gilbert and the attorney for the former Quicken loan officers who were seeking overtime drew a warning from U.S. District Judge Steven Murphy.
Testimony also featured a Gilbert email telling Quicken employees to have a nice Thanksgiving but adding: “How many mortgages will you sell at your Thanksgiving dinner?” Gilbert explained in court: “That was kind of tongue-in-cheek. The rates had come down, and we had some great products, so there was some truth to it.”
17. May 29: “Energy drink king behind $100 million fund: Bhargava sets up tech park for new firms”
Just how big is 5-Hour Energy? Big enough that its creator, Manoj Bhargava, could start a $100 million fund to invest in emerging businesses in the state.
The Stage 2 Innovations Fund was co-founded by Bhargava — CEO of Living Essentials LLC, maker of the popular energy drink — and former Chrysler Group LLC CEO Tom LaSorda. The fund looks to capitalize two to six companies that are about 12-18 months away from commercializing a patented, major new technology. A company should have the potential to reach $100 million to $200 million in net income within a few years, LaSorda and investment fund CEO Simon Boag said in this Page 1 story by Daniel Duggan and Dustin Walsh.
18. April 27: “Snyder reveals details of plan to reform K-12 education system”
Throughout the year, Gov. Rick Snyder has delivered a series of policy addresses that have come to be known as “special messages.” This Web story by Dustin Walsh reported on Snyder’s plan for fixing what he called a “broken” educational system.
Among proposals that have since become law: A pool of funds to award additional per-pupil money to districts that meet financial best-practice measures and changes in the tenure system that make it easier to fire bad teachers.
19. May 27: “New hotel plan emerges for the David Whitney building”
You know downtown Detroit is hot when someone is thinking about opening a hotel. Daniel Duggan reported that the new hotel was being planned as part of a mixed-use development for the historic David Whitney Building.
The building was purchased in March by Whitney Partners LLC, an evenly split joint venture between The Roxbury Group in Detroit and the Farmington Hills-based hotel investment firm Trans Inns Management Inc.
In a Dec. 12 Web story, Duggan reported that Starwood Hotels & Resorts Worldwide Inc. would bring its Aloft hotel brand to the Whitney space.
20. Aug. 28: “Lawyers flee Fieger over workload rule — Ethics concerns cited, disputed”
Now how in the world did a story about Geoffrey Fieger attract so many readers? In the Aug. 28 issue, Crain’s Chad Halcom reported on the turnover at Fieger, Fieger, Kenney, Giroux & Danzig PC — a result of what former Fieger colleagues claim were unreasonable workload requirements.
In a memo, Fieger proposed withholding paychecks from attorneys who didn’t maintain a minimum of 30 pending lawsuits or imposing a $25,000 fine on attorneys who didn’t try at least three cases a year.
The attorneys who left the firm said the penalties created “an ethical minefield where attorneys’ own financial interests could be at conflict with their professional responsibility to clients.” Fieger’s response, in part: “I’m not interested in having people come here to retire on a paycheck from me.”
21. Nathan Skid’s blog, March 29: “The reincarnation of Joe Muer’s”
Two Joes who aren’t average by any means helped return a fabled name to Detroit’s restaurant scene. Joe Vicari, CEO of Warren-based Andiamo Restaurant Group, opened a reincarnation of Joe Muer Seafood in the former Seldom Blues space inside the Renaissance Center. Crain’s restaurant writer Nathan Skid first reported the deal in this March blog.
Vicari purchased the original Muer recipes and licensing agreements and signed on Joe Muer as a consultant for the restaurant, which opened in September to a brisk business.
22. March 3: “Magna plant fire in Howell slows OEM production”
How delicate is the auto industry’s supply chain?
Consider the concern after a fire gutted the Howell plant of Canadian auto supplier Magna International Inc.
The Magna Atreum interiors plant supplied door panels, interior trim and instrument panels to the three Detroit automakers, Mazda Motor Corp. and Nissan North America Inc. Within 24 hours of the fire, some assembly plants slowed production while others shut down.
Yet within six days, 450 employees in Howell were operating the plant at 80 percent of capacity.
23. May 5. “Pinnacle Race Course gives up 2011 horse-racing license”
In the era of the casino, Michigan’s horse racing industry has been hobbled. One local example of the plight of the ponies was Pinnacle Race Course’s announcement that it was surrendering its racing license for 2011.
Pinnacle closed in November 2010, planned to reopen in January 2011, then July. The Huron Township track also said it planned to file an application for 2012 live and simulcast racing permits. Seven months after this Web story was posted, it had not done so.
24. March 7: “Carbone resigns as Beaumont Hospitals’ COO after 9 months on job”
After hiring K. Bobbi Carbone, M.D., as William Beaumont Hospitals’ COO in 2010, CEO Gene Michalski said, “Having a physician as our COO will also enhance our partnership with physicians both in patient care and in business operations.”
Less than nine months later, Carbone resigned for undisclosed reasons. She settled an employment contract dispute with Beaumont for an undisclosed sum and now works in Abu Dhabi in the United Arab Emirates as an executive at a 12-hospital health care company. Sam Flanders, M.D., is Beaumont’s interim COO.
25. Jan. 3: “A&P bankruptcy creates new headache for subleasing tenants”
Call it the ghost of Farmer Jack. When the Great Atlantic & Pacific Tea Co. closed the Southeast Michigan supermarket chain in 2007, it had store leases extending to 2020 in some locations. It was able to sublease some of the space to other chains, while other space was left vacant.
In this story in the Jan. 3 issue, Daniel Duggan reported that A&P, as part of its Chapter 11 bankruptcy, filed a motion to terminate leases at the 20 locations where the space was leased to a subtenant. The move would require the businesses and landlords involved to renegotiate leases and decide which will lose roughly $350,000 per year on a typical lease — money previously paid by A&P. The grocery chain expects to emerge from bankruptcy early next year.