Kroger threatened to exit Express Scripts’ network if the pharmacy benefits manager didn’t agree to a “fairer and fairer” contract.
Kroger said it has tried – to no avail – to negotiate a more favorable price with Cigna’s Express Scripts subsidiary dozens of times over the past eight months, the company said in a press release. According to the supermarket company, Express Scripts’ proposal is “far from” the industry standard.
Kroger is the nation’s sixth-largest pharmacy chain and operates 2,200 pharmacies and 220 clinics, most of which are located inside its grocery stores.
Express Scripts, meanwhile, said Kroger’s proposal would lead to higher drug costs for patients.
Kroger provides pharmacy services to 17 million patients and more than 90% of its customers will not be affected if the Express Scripts deal ends, according to the grocer.
The sheer size of Express Scripts makes the contract deposit higher for Kroger than for PBM. According to Antonio Ciaccia, CEO of drug pricing research firm 46brooklyn Research and president of 3 Axis Advisors, Express Scripts helps Kroger reach millions of customers. The grocery chain may ask for a price increase as a way to alleviate staff shortages that have plagued the industry, he said.
The direct consequences of Kroger leaving its network will be modest for Express Scripts. Less than 1.5% of Express Scripts’ 108.2 million customers fill their prescriptions at Kroger. The removal from Kroger would cost Express Scripts less than 1% of the 1.6 billion orders PBM expects to process by 2023, Credit Suisse analyst AJ Rice wrote in a report. study Monday.
However, if the grocery chain terminates its agreement with Express Scripts, CVS Health and Walgreens could benefit, Rice wrote. That’s what happened in 2012 when Walgreens publicly left the Express Scripts network. At the time, CVS and Rite Aid advertised that they would continue to deliver prescriptions placed through Express Scripts and capture significant market share.
“In this case, Walgreens saw a significant drop in the same store’s script volume before eventually rejoining Express Script’s network. Net-net, we consider this part of ongoing negotiations between the two companies with limited implications for Cigna,” Rice wrote.
Termination of a contract with Kroger could cause access problems for patients, especially for those receiving health insurance through the military benefit program Tricare.
Starting October 24, about 15,000 community pharmacies will no longer sell prescription drugs to Tricare service members and families after the government failed to reach an agreement with Express Scripts. An Express Scripts spokesperson wrote in an email.
“Kroger’s timing is intriguing with everything that happens with Tricare. It suggests that perhaps Express Scripts is turning the dial a bit,” said Antonio Ciaccia, CEO of drug pricing research firm 46brooklyn Research and president of 3 Axis Advisors.
PBMs may require less pay for pharmacists to dispense drugs, Ciaccia said. If Express Scripts loses a significant number of pharmacies, employers, state Medicaid programs, and other government agencies could cut contracts with PBMs due to concerns about the ability of pharmacies to fill prescriptions. policyholders at their convenience, Ciaccia said.
More than three-quarters of independent retail pharmacies say they have struggled with labor shortages in the past six months, and 90% are looking to hire pharmacy technicians, according to an August survey of more than 300 Independent pharmacy owner and manager of the National Association of Community Pharmacists.
Major retail pharmacies are responding to the staffing crisis by offering big bonuses and reduced working hours. Walgreens is reportedly offering a pharmacist sign-in bonus of up to $75,000. Rite Aid has temporarily closed most of its pharmacies an hour earlier than usual to ease staff stress and help suppliers keep up with their work. CVS hired more than 10,000 pharmacy technicians in 2020 and plans to hire thousands more.
“From Kroger’s perspective, it wouldn’t surprise me if these pressures we are feeling and seeing in other pharmacy chains are also being reflected in the dispute with Express Scripts,” Ciaccia said. we will not be able to continue to overcome our HR challenges if we are faced with increasingly unsustainable rates. “
In May, Kroger reportedly stopped accepting GoodRx prescription discounts at its facilities. This represents 25% of GoodRx’s prescription business and caused the digital health company to cut its quarterly guidance by $30 million. GoodRx said the issue was resolved during its August second-quarter earnings call, though it did not provide details.
