Express Scripts sues Walgreen in contract dispute

September 14, 2011 - 5:40 PM

NEW YORK (AP) — Pharmacy benefits manager Express Scripts Inc. said Wednesday that it is suing Walgreen Co., arguing the drugstore chain is trying to lure away its customers.

The lawsuit alleges that Walgreen is telling Express Scripts plan members, and especially Medicare Part D beneficiaries, that they will not be able to fill their prescriptions at Walgreen pharmacies unless they leave Express Scripts and switch to a new pharmacy benefits management plan. Express Scripts said this violates the contract between the two companies.

Express Scripts administers prescription drug benefits for health plan sponsors and members, and it pays drugstores like Walgreen to fill prescriptions. Walgreen has said it will stop doing business with Express Scripts Jan. 1 because the prescription drug manager is not paying it enough. The drugstore chain has said it will lose $5.3 billion in revenue as a result, but that it would rather do that than conduct business on unacceptable terms.

In the lawsuit, Express Scripts said Walgreen is trying to get Express Scripts members to switch to new plans so it can keep their business and continue being paid to fill their prescriptions.

The St. Louis company has asked a court stop Walgreen from encouraging members to switch plans, saying it would hurt its business. Starting Oct. 15, Medicare Part D beneficiaries can enroll in a plan or leave their current plan and choose a new one. That "open enrollment" period ends Dec. 7.

Walgreen, of Deerfield, Ill., is the largest drugstore chain in the U.S. with more than 7,700 locations. It has said it gets about $5.3 billion in annual revenue from Express Scripts, and Express Scripts said it gives Walgreen access to about 60 million people, including about 2.5 million people who get their prescriptions through Medicare Part D.

Walgreen did not immediately respond to requests for comment.

The current contract between the companies lasts for three years, expiring in 2012. In June, Walgreen announced that it would stop doing business with Express Scripts at that time because Express Scripts wanted to cut its payments to unacceptably low levels and wanted too much control over other terms of the contract. On Sept. 6, Walgreen said negotiations are stalled and that it has begun informing clients that it won't participate in Express Scripts' networks after the contract ends.

Express Scripts said that, as part of the contract between the companies, Walgreen agreed it would not encourage members to leave Express Scripts plans or promote one Medicare Part D plan over another. The lawsuit alleges that Walgreen has done just that by sending letters to Express Scripts clients urging them to choose a plan with "Walgreens' coverage," including specific plans they could choose. It also said Walgreen has instructed employees to steer Express Scripts members away from Express Scripts.

During the dispute with Express Scripts, Walgreen launched a website called www.ichoosewalgreens.com . The site says Express Scripts clients will probably not be able to fill their prescriptions at Walgreen stores because the chain will probably not be part of Express Scripts' networks starting Jan. 1. It says that "If you'd like to ensure that you can continue to be able to fill your prescriptions at Walgreens and Duane Reade drug stores with uninterrupted service, you will need to select a different plan that includes Walgreens."

The lawsuit was filed Sept. 7 in the U.S. District Court for the Northern District of Illinois, Eastern Division.

Shares of Express Scripts declined $1.14, or 2.6 percent, to $42.79 in Thursday trading. Walgreen stock rose 72 cents, or 2 percent, to $36.65.