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October 03, 2016 12:00 AM

CVS pushed out of Tricare pharmacy network

Shelby Livingston
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    In a blow to CVS Health Corp., pharmacy benefit manager Express Scripts Holding Co. announced it has ousted the provider from the pharmacy network it manages for Tricare, the U.S. Defense Department's health benefits program with 9.4 million beneficiaries.

    Instead, Walgreen Boosts Alliance, which has been working to ease regulatory concerns over its pending Rite Aid Corp. acquisition, will join the Tricare pharmacy network when CVS leaves Dec. 1, Express Scripts said Monday. The nation's largest PBM advised Tricare members filling prescriptions at CVS stores, including those inside Target Corp., to switch to a new in-network pharmacy by December or pay full price for prescription drugs. St. Louis-based Express Scripts, which has served the Defense Department since 2003, signed a seven-year contract in April 2014 to administer Tricare's pharmacy benefit program.

    “We always seek ways to help clients, including the Department of Defense, lower drug costs while maintaining access to pharmacy care their beneficiaries need and deserve. Our new agreement with Walgreens secures competitive rates while offering quality, convenient pharmacy choices nationwide,” an Express Scripts spokeswoman said in a statement Monday when asked for details behind the switch.

    Woonsocket, R.I.-based CVS did not immediately respond to requests for a comment.

    While losing out on the Tricare pharmacy network is not a “disaster” for CVS, it's “definitely not good news for them” and will cause a “material headwind” for the company, said Vishnu Lekraj, Chicago-based healthcare analyst with Morningstar.

    Deerfield, Illinois-based Walgreens has been aggressively moving into the pharmacy networks of several plans, including many Medicare Part D plans, by taking profit concessions to do so, Lekraj said.

    CVS posted revenue of $43.73 billion in the second quarter of 2016. It reported revenue of $153.29 billion for 2015, up 10% from the year before. Net income rose 12.8% to $5.24 billion in 2015 compared with the year before. CVS has more than 9,600 retail pharmacies.

    Walgreens' revenue rose to $30.18 billion from $26.57 billion in its fiscal second quarter this year. The company's 2015 total sales grew 35.4% to $103.44 billion, while net earnings more than doubled to $4.28 billion compared with the year before. Walgreens operates 8,173 stores.

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