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Walgreens and CVS strike new deal, avoiding split

NEW YORK — CVS Caremark and Walgreens have settled a dispute that threatened to change where millions of Americans can fill prescriptions.

The companies, which said Friday they have agreed on a multi-year deal but did not disclose its terms, were battling over the amounts Caremark reimburses Walgreens for filling prescriptions for Caremark patients.

Shares of both companies rose Friday.

Walgreens and CVS do billions of dollars in business together each year, as Walgreens is the largest U.S. drugstore operator and CVS Caremark is the third largest prescription benefits manager. It handled drug benefits for about 53 million people last year. At the same time, the CVS drugstore chain is Walgreens' top competitor.

Last week, the companies said they would end their relationship and Walgreens would stop accepting Caremark insurance.

Walgreens, based in Deerfield, Ill., with more than 7,500 stores across the country, wanted Caremark to pay it more for filling prescriptions, and it wanted Caremark to drop policies encouraging members to fill prescriptions at CVS' 7,000 stores.

Individual plans vary, so even before the recent dispute, some Caremark plans didn't cover prescriptions filled at Walgreens stores, and they still won't.

Caremark said last week that Walgreens was demanding unreasonable rates that would drive up health care costs for both Caremark patients and benefit sponsors like employers. It said it would stop letting its patients fill prescriptions at Walgreens on July 9, although some Walgreens stores would have stayed in the Caremark network longer.

Millions of prescriptions and billions of dollars in sales hung in the balance: Most people whose prescriptions are managed by Caremark would have had to go to CVS or grocery stores like Kroger or Safeway if they wanted coverage for their drug costs. Thousands of stores participate in Caremark plans, and CVS Caremark said shoppers would suffer little to no inconvenience without Walgreens.

Walgreens said one in 10 prescriptions it fills is managed by Caremark. Those prescriptions brought in more than $4.5 billion over the last year, or 7 percent of Walgreens' total revenue. Roughly two-thirds of Walgreens' revenue comes from filling prescriptions.

CVS Caremark negotiates contracts with employers to insure workers' drug benefits, and pays pharmacies to fill prescriptions. It makes money by negotiating volume discounts and pocketing some of those savings.

Analysts said Caremark risked losing contracts with health plan sponsors who wanted their network to include the nation's largest drugstore chain. Some said Caremark also could have lost business to rivals Medco Health Solutions and Express Scripts as a result of the dispute.

On June 7, Walgreens announced it wanted to bring a gradual end to its relationship with CVS Caremark, based in Woonsocket, R.I. Two days later, CVS Caremark upped the ante by saying it wanted to break up in a month.

Kermit Crawford, executive vice president of pharmacy for Walgreens, said in a statement that he is pleased at the new pact. He said it "assures choice and convenience for the many consumers who look to us for quality pharmacy care."

Per Lofberg, president of the CVS pharmacy benefit management business, also said in a statement that he was glad.

"We are pleased to have reached a mutually agreeable solution together with Walgreens that is consistent with our top priority to provide convenient access to affordable high-quality pharmacy health care," Lofberg said.

Shares of CVS rose 59 cents, or 1.9 percent, to close Friday at $32.43, after picking up 5.2 percent earlier in the day.

Walgreens shares closed up 82 cents, or 2.8 percent, at $30.09 after rising as high as 7.2 percent.

dea allows firm to sell painkillers

The federal government is backing off and allowing a Michigan-based drug wholesaler to distribute some prescription painkillers. The Harvard Drug Group says it's still banned from distributing oxycodone but can sell less-potent painkillers such as hydrocodone. The Drug Enforcement Administration announced a broad suspension this week and said Harvard Drug should have known some customers in Florida were trafficking in painkillers. The company supplies doctors and pharmacies. DEA spokesman Rich Isaacson declined to specifically say why the government changed its position Friday. He says the changes still will keep the public safe. Harvard Drug says it notifies the DEA about suspicious orders and has cut off customers it doesn't trust.

Walgreens and CVS strike new deal, avoiding split 06/18/10 [Last modified: Friday, June 18, 2010 10:01pm]
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