NEW YORK (AP) — The military health insurance plan Tricare says Walgreen Co.'s drugstore chain, the largest in the U.S., will not be part of the network where plan members can get their prescriptions filled.
Tricare did not give a reason for its decision, which was posted in an announcement on its website. It said its network currently includes more than 57,000 pharmacies. Tricare members can have prescriptions filled at Walgreen stores, but because it won't be part of the network, their out-of-pocket costs will be greater and they will need to pay for the full prescription upfront and then submit a claim to Tricare for partial reimbursement.
Tricare provides health insurance for active and retired military members and their families. Walgreen has said Tricare has about 6 million members.
Tricare's prescriptions are managed by Express Scripts Holding Co., the largest pharmacy benefits management company in the U.S. When a contract between Walgreen and Express Scripts expired on Dec. 31, Walgreen stopped filling prescriptions for Tricare members and most of Express Scripts' other clients. The companies spent more than a year publicly arguing about the rates Express Scripts pays to drugstores like Walgreen and other issues.
Walgreen and Express Scripts reached a new deal in July and Walgreen will rejoin the Express Scripts network Sept. 15. That gives Express Scripts clients the choice of whether to add Walgreen back into their networks.
Walgreen is based in Deerfield, Ill., and it had 7,929 stores as of Aug. 31.
Tricare is one of Express Scripts' biggest clients, so its choice to go with a smaller pharmacy network is good news for Express Scripts, said Jefferies & Co. analyst Brian Tanquilut. Tanquilut said the decision is a "strong validation" for Express Scripts' plan to try to convince its members to pick smaller, cheaper pharmacy networks. While larger pharmacy networks give plan members more options, the provider of the health plan can save money by offering a narrow network that only includes the stores that will fill prescriptions for the lowest prices.
Tanquilut rates Express Scripts shares "Buy." The stock rose 97 cents to $63.82 morning trading.
Jefferies analyst Scott Mushkin said Walgreen filled about 16 million prescriptions for Tricare members every year. That's a significant chunk of the 90 million prescriptions it filled for Express Scripts on a yearly basis. Mushkin said Tricare's decision shows that Walgreen won't get back all the prescriptions it lost.
"The situation with Tricare may not be isolated and we are unsure at this juncture just how many of Express Scripts' clients, outside of WellPoint, participated in savings from Walgreens leaving and will have to make the decision whether to 'opt-in' to the network at a higher cost," he wrote.
WellPoint Inc. is a health insurer, and it has agreed to add Walgreen back to its pharmacy networks.
Walgreen also reported its August sales on Thursday. Its total sales and sales at stores open at least a year dropped compared with last year because of the dispute with Express Scripts.
Shares of Walgreen lost 53 cents to $35.35 in morning trading.