The nation’s largest drugstore chain is reaping some surprising dividends from an unusual source–a pharmacy benefits firm that employers typically turn to for help in cutting their pharmaceutical costs.
Even more surprising–Walgreen Co. owns the firm.
Many drugstore owners and pharmacists dislike pharmacy benefit companies because they can result in fewer trips to the pharmacist–and potentially lower sales.
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Pharmacy benefit managers, or PBMs, work as middlemen between drugmakers and employers when it comes to buying drugs. PBMs buy drugs in bulk and negotiate deals with drugmakers in hopes of saving employers money on medicines for their workers. PBMs also encourage patients to order drugs through the mail.
As employers and government health insurance programs increasingly turn to PBMs to save money on their soaring pharmaceutical bills, drugstore owners have often found themselves at odds with the PBM industry.
At Deerfield-based Walgreens, however, its PBM has become an integral part of the company’s Walgreens Health Initiatives business, which last year surpassed $1 billion in annual sales.
Walgreens started the PBM in 1995 as a way to tap into an increasingly popular business as developments in managed care encouraged employers and insurers to look to PBMs to control pharmacy costs.
These days, Walgreens Chief Executive David Bernauer describes the PBM and other company health initiatives as the “little engine that could.”
“Savvy insurance companies, employers and other providers who are looking for quality care for their members are signing up faster than ever,” Bernauer told shareholders at the company’s annual meeting last week. The PBM’s profits are gaining momentum, he said.
Bernauer said the PBM was important to serve Walgreens’ customers’ diverse needs, but that the company didn’t intend to compete with the giant pharmacy benefit management firms. “We’re not looking to be the biggest PBM, but the best PBM,” Bernauer told reporters after the annual meeting. He said the PBM was something Walgreens at least wanted to “keep familiar with.”
Walgreens wouldn’t disclose specific total revenues of its PBM, but Walgreens Health Initiatives represented about 3 percent of the company’s $28.7 billion in 2002 sales.
Healthy debate: The state’s largest health insurance company terminated its membership with the Illinois Association of Health Plans, main lobbyist for managed-care plans here, effective Jan. 1.
Blue Cross and Blue Shield of Illinois left the health plan association, citing differences in lobbying styles and techniques. “While we will continue to work closely with the other health plans, it made sense at this point to have an individual presence as well,” Illinois Blues spokesman Robert Kieckhefer said.
Illinois Association of Health Plans executive director Elena Butkus wouldn’t discuss specifics of the fallout, but she called the Illinois Blues decision “an outright grab for legislative control of the insurance market.”