Express Scripts Gets $2.4 Billion Maryland Deal Despite Walgreen Issue
February 10 2012 - 3:56PM
Dow Jones News
Maryland's Board of Public Works has awarded Express Scripts
Inc. (ESRX) a five-year, $2.4 billion contract to provide pharmacy
benefits and prescription coverage for state workers and retirees,
despite concerns about those people losing access to Walgreen Co.
(WAG) pharmacies.
The decision marks a win for Express Scripts, which secured a
large deal despite its fractured relationship with the nation's
biggest drugstore chain. Walgreen dropped out of Express Scripts's
network on Jan. 1 because the two sides couldn't agree on contract
terms, sending Express Scripts-covered members to other
pharmacies.
The pharmacy-benefit manager in May will replace Catalyst Rx, a
unit of Catalyst Health Solutions Inc. (CHSI), as the PBM serving
Maryland workers, retirees and dependents. Express Scripts was
picked based on estimates it can save the state more than $100
million over the next five years.
Still, Wednesday's decision by the three-member Public Works
board was not without controversy. Board member Peter Franchot,
also the state comptroller, raised concerns about the disruption
for people forced to switch from Walgreen, which has 58 pharmacies
in Maryland.
He voted against the contract award while also raising concerns
about taking away business from a local firm--Catalyst is based in
Rockville, Md.--in favor of St. Louis-based Express Scripts.
But the other board members, State Treasurer Nancy Kopp and Gov.
Martin O'Malley, voted to give Express Scripts the business.
The contract-award process has dragged more than a year, and has
been fiercely contested, according to The Baltimore Sun, which
reported on the matter Thursday. Catalyst was unsuccessful in an
appeal process, the newspaper reported.
David Blair, Catalyst's chief executive, called the Walgreen
issue the "most troubling" in the contract dispute, but not because
of concerns about access. Instead, he argued bids weren't evaluated
fairly because once Express Scripts lost Walgreen, it gained an
ability to secure steeper discounts from other pharmacies that
stand to gain more Express Scripts business.
"Obviously we are very perplexed with this procurement process,"
Blair said, speaking during Wednesday's Public Works meeting, which
was recorded.
Express Scripts has long argued that the people it covers
maintain broad access to pharmacies even without Walgreen outlets
in the network. The company in a statement said it looks forward to
serving the state and saving Maryland taxpayers money.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
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