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UPMC, Highmark to drop access to Walgreen

| Tuesday, Dec. 13, 2011

Walgreen Co. is about to lose part of its pharmacy business in the Pittsburgh region.

The Deerfield, Ill.-based company, the largest operator of drugstores nationwide, will no longer be available at in-network rates for members of UPMC Health Plan starting Jan. 1. UPMC Health Plan is the No. 2 health insurer in the region, with about 1.5 million members, most of whom have pharmacy benefits.

And Highmark Inc., the region's largest health insurer, on Jan. 1 will begin a two-year transition of its 2.5 million members with pharmacy access to a new network that does not include Walgreen or Target Corp. pharmacies, the insurer said on Monday.

"The main driver is we saw that there was a lot of redundancy in our retail network," said Gary Golebiewski, Highmark's director of pharmacy operations. "We were able to determine that we could eliminate a couple of large players and maintain the same level of access."

There are about 35 Walgreen stores and about a dozen Target stores with pharmacies in the region.

Highmark's pharmacy network allows access to about 61,000 retail pharmacies across the country, Golebiewski said. By dropping Walgreen and Target, Highmark's network will drop to about 52,000 pharmacies after two years.

With fewer chains in the network, Highmark was able to "negotiate more aggressive discounts with the pharmacies that remained in the network," he said.

About 100,000 Highmark small-group members at about 7,700 companies will be moved into the new network on Jan. 1, Golebiewski said. The remaining medium- and large-employer groups will have a choice of two networks, one that includes Walgreen and Target and one that doesn't, through 2013. Starting in 2014, Highmark's pharmacy network will not include Walgreen and Target.

The change does not affect people with Medicare plans through Highmark, Golebiewski said.

Highmark chose the two pharmacy chains because they are relatively new to the market and are not used by large numbers of its members, he said. In Western Pennsylvania, about 7 percent of Highmark's members have filled a prescription at a Walgreen pharmacy and about 2 percent have used Target.

Meanwhile, UPMC Health Plan members won't have in-network access to Walgreen starting Jan. 1 because of a contract stalemate between the drugstore chain and pharmacy benefits manager Express Scripts Inc., based in St. Louis, over payment rates for filling prescriptions.

UPMC Health Plan contracts with Express Scripts to manage its pharmacy program. If a new contract between Walgreen and Express Scripts is not reached, then purchases at Walgreen pharmacies won't be covered at in-network rates for UPMC Health Plan members, UPMC spokesman Paul Wood said. They will continue to have network access at other chains, including Rite Aid, CVS and Giant Eagle, Wood said.

Walgreen does not know how much business it might lose by being out-of-network for UPMC Health Plan, spokesman Michael Polzin said.

"We believe the long-term ramifications of accepting Express Scripts below market rate would be much worse than any short-term impact" from losing customers such as UPMC Health Plan, Polzin said.

Last week, Walgreen said sales in November were up 4.2 percent to $6.09 billion. But it said its impending split with Express Scripts reduced revenue at stores open for at least a year by 1.1 percent.

Polzin declined to speculate on what the loss of Highmark's customers would mean to Walgreen's business, saying that large employers covered by Highmark would continue to have a choice of pharmacy networks that include Walgreen until the end of 2013.

A Target spokeswoman said its pharmacies would be available to Highmark members through a network until it is eliminated at the end of 2013.

Express Scripts is pursuing a $29.1 billion acquisition of Medco Health Solutions Inc., a rival pharmacy benefits manager in New Jersey. The deal, which requires approval from the Federal Trade Commission, has drawn criticism from lawmakers and trade groups who say the combined company would have too much power over prices in the prescription drug market.

Highmark's pharmacy network is managed by Medco.

Additional Information:

Highmark's pharmacy changes

What: Health insurer Highmark Inc. is moving non-Medicare pharmacy customers to a new network that does not include Walgreen Co. and Target Corp. pharmacies.

Why: Highmark says the move will save customers money on prescription drugs without reducing access to pharmacy services.

Who: Of Highmark's 2.5 million members with pharmacy access, about 7 percent have filled prescriptions at Walgreen and about 2 percent used Target.

When: Starting Jan. 1, about 100,000 members in Highmark's small-group plans will lose in-network access to the two retailers. Other employer groups will transition over the next two years. By the end of 2013, Highmark's pharmacy network will not include Walgreen or Target pharmacies.

Where: After the changes, Highmark's pharmacy network will offer access to about 52,000 pharmacies across the country, down from 61,000.

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