Here’s a Halloween scare for the pharmacy industry.Last Friday, Catalyst RX (NASDAQ:CHSI) placed a full-page Wall Street Journal ad touting the value of having Walgreens (NYSE:WAG) in its pharmacy network. Catalyst simultaneously released a case study explaining the “value of Walgreens to a large client.” Download the case study here.
One spooky disclosure: Walgreens receives lower average reimbursement rates vs. other pharmacies. The case study attributes the gap to superior generic utilization.
Catalyst is clearly trying to give goosebumps to plan sponsors looking at Walgreens’ still-unresolved dispute with Express Scripts (NASDAQ:ESRX). But the data will surely spark more shrieking about the economics of preferred vs. open networks.
The chart below caught my eye in the case study. As you can see, Walgreens reportedly has an aggregate Average Wholesale Price (AWP) discount that is 3.8% greater than other pharmacies. (Bigger discount = lower reimbursement)
Note that the chart does *not* say Walgreens has negotiated bigger discounts for a given prescription. Instead, the brand/generic mix appears to be driving the difference, although we can’t really say more from the reported information. Hmmm.Catalyst’s embrace of Walgreens is not surprising. As I note in ESRX-MHS: Wholesalers, Other PBMs, and Walgreens, mid-market PBMs such as CatalystRx or SXC’s InformedRx (NASDAQ:SXCI) will benefit if Express Scripts is successful in its merger with Medco Health Solutions (NYSE:MHS). Plus, in March, Catalyst RX acquired Walgreens Health Initiatives (WHI), Walgreen’s PBM subsidiary. See SOLD! Thoughts on the Catalyst-Walgreen Deal.
Catalyst is clearly positioning itself against Express Scripts, which reportedly is still far from an agreement to keep Walgreens in its network. As the Journal reported last week in Express Scripts CEO: Walgreen Pact 'Less Likely':
“An agreement would be "better for everyone," Express Scripts Chief Executive George Paz said during a conference call. But "it looks less and less likely that's going to occur," he said. Express Scripts said it expects more than 95% of clients' prescription volume will move forward into 2012 without Walgreen in the network.”So, trick or treat for plan sponsors?
