Prescription for change: Customers and their insurance providers are caught in the middle of the feud between Walgreens and Express Scripts.

When Faith Earley was released from the hospital a few weeks ago with prescription in hand, her local pharmacy was closed, and the only 24-hour alternative was Walgreens.

Earley, a substitute teacher from DeQuincy, says her husband drove 35 minutes to have her prescription filled, only to be told that Walgreens no longer accepted her insurance.

Several days later, she received a letter from Blue Cross and Blue Shield of Louisiana, informing her of the contract battle between Walgreens and Express Scripts, the pharmacy benefit manager for many Blue Cross and HMO Louisiana customers, who also received the letter.

Earley vented her frustration in a post on Blue Cross’ Facebook page.

“I am monumentally disappointed to find that you were unable to come to an agreement with Walgreens concerning my prescription plan,” she complained. “I am very aggravated that I was not notified of this sooner.”

While Blue Cross wasn’t directly involved in the failed negotiations its independent contractor had with Walgreens, the Baton Rouge-based health care insurer is just one of the entities feeling the fallout.

Across Louisiana, about 512,000 fully insured members of Blue Cross and HMO Louisiana have benefits administered by Express Scripts.

The company issued a statement clarifying that the dispute is between Express Scripts and Walgreens, but noted that it had “partnered with Express Scripts for their ability to negotiate these national contracts on our behalf to help us keep costs down and prescriptions affordable.”

Even so, some BCBSLA customers took to Facebook to voice their unhappiness.

“I am so mad with you BC/BS!” wrote Michelle Moskovitz-Kaufman of New Orleans. “Shame on you for the inconvenience you have caused.” Wrote Terri Smith: “Walgreens was one of the easiest parts of managing my family’s health care.”

Walgreens, the largest U.S. drugstore chain, has been at odds with Express Scripts since June, when the companies said they could not agree on a new contract setting reimbursement rates that took effect Jan. 1. Now, after failed attempts at coming to terms, Walgreens no longer fills prescriptions for Express Scripts members unless they choose to pay another way.

At issue is the rising cost of prescriptions. Walgreens wanted to hold flat the amount it is reimbursed for filling prescriptions.

“We’ve always been willing to remain in the Express Scripts network, but it has to be at a rate which is fair for the value we provide,” Kermit Crawford, president of Walgreens pharmacy, health and wellness services, told The Associated Press. “The ball is in their court. We are actually not waiting to hear from them. We’ve made the decision to move on.”

But Express Scripts contends the rates Walgreens charges to fill prescriptions are 20% higher than other pharmacies in its network, and the companies also disagreed over identifying generic drugs.

The conflict “is really about the cost of health care,” Express Scripts CFO Jeff Hall told a JPMorgan health care conference last month. “We think eventually they will realize that their position is wrong.”

Walgreens fills one out of every five prescriptions in the nation, which amounted to about 819 million last year. The company has said it expects to keep about 10 million of the 88 million prescriptions it fills for Express Scripts.

Some 56,000 other pharmacies do still accept Express Scripts, and many of those Walgreens competitors are hoping to cash in on the controversy. A number of pharmacies, like the CVS at Coursey and South Sherwood Forest boulevards—are proclaiming this message on banners and in advertisements: “We accept Express Scripts.”

Walgreens is fighting back. The company took the “drugstore war” to Twitter, encouraging the use of the hashtag #ILoveWalgreens. The company paid the social network to promote the tweet, making it show up in the feeds of all Twitter users, even those who don’t follow the pharmacy online. Express Scripts tweeted back a list of “facts” about its failed negotiations with the pharmacy chain.

Walgreens also began offering a January discount on its Prescription Savings Club card memberships. Nearly 125,000 customers signed up during the first week. Also, some insurers reportedly have switched pharmacy benefits providers or tweaked their Express Scripts contracts to allow them to deal with Walgreens directly.

But muddying the waters even further is Express Scripts’ pending merger with Medco Health Solutions, the nation’s largest pharmacy benefit manager. The deal is awaiting regulatory approval.

Together, the companies control a rather sizeable chunk of the insurance market, managing benefits for more than 115 million people and handling one of every three prescriptions filled in the United States. The merged entity also would become the largest player in domestic markets for supplying mail-order drugs to patients with chronic conditions and costly specialty drugs for conditions such as HIV, hemophilia and rheumatoid arthritis. Walgreens currently accepts Medco, but it isn’t known yet how a merger with Express Scripts would impact Walgreens’ negotiating position.

A report published by the American Journal of Health-System Pharmacy projects costs for medications will continue to rise in 2012 by as much as 7%. A variety of factors are to blame, according to the authors, including drugs in development, the introduction of new drugs in the marketplace and the continuing problem of drug shortages.

From 2009 to 2010, total U.S. drug expenditures increased by 2.7%, with total spending rising from $299.2 billion to $307.5 billion.

Express Scripts is billing its merger with Medco as an opportunity to reduce the nation’s health care costs by giving the combined company more leverage to negotiate better prices with drugstores and pharmaceutical companies.

“A combined Express Scripts and Medco will be well positioned to protect American families from the rising cost of prescription medicines,” company CEO George Paz told legislators at a House subcommittee hearing last fall.

But regulators still are trying to determine whether reducing the number of major competitors from three to two would also leave customers—particularly large employers—with too few choices and limited bargaining power. A recent analysis by Morgan Stanley Research indicates the 50 largest companies in the United States rely heavily on the services of Medco, Express Scripts and the third major benefit manager, CVS Caremark. But there are 40 benefit managers in the market, including companies such as UnitedHealth Group.

A coalition of consumer groups has urged antitrust regulators to stop the deal, arguing that it won’t prevent pharmacy benefit managers from passing on higher prices or giving patients poor service.

Blue Cross and Blue Shield of Louisiana has expressed “every confidence” in Express Scripts to negotiate arrangements “that are in the best interest of our customers and their pharmacy benefits.”

“It’s a fact that health care costs continue to rise,” the company said in a statement. “We hope that Walgreens will remember this fact, fall in line with its competitors and work with Express Scripts to provide consumers quality service at an affordable price. We have taken every opportunity to support Express Scripts and their efforts in coming to a resolution that is in the best interest of our members.”

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