Featured Health Business Daily Story, April 27, 2017

Prime Closes Deal to Partner With Walgreens on New Entity

Reprinted from DRUG BENEFIT NEWS, biweekly news and proven cost management strategies for health plans, PBMs, pharma companies and employers. Subscribe today!

By Angela Maas, Managing Editor
April 7, 2017Volume 18Issue 7

Walgreens Boots Alliance, Inc. finalized its deal with Prime Therapeutics LLC to form a new company on April 3. The offering brings together the companies’ central specialty pharmacy and mail service businesses in an effort to coordinate health care, boost patient outcomes and provide cost efficiencies.

The firms unveiled their plans — which do not involve Prime’s PBM business — in late August but had to wait for regulatory approval (DBN 9/9/16, p. 4). Known as AllianceRx Walgreens Prime, the company has approximately 3,000 employees and is headquartered in Orlando, Fla. Joel Wright, former divisional vice president for Walgreens specialty solutions, is the CEO. Walgreens and Prime will transition their central specialty pharmacy and mail service customers to the new firm, and they estimate that the integration will be complete by early next year.

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“As you can imagine uniting these pharmacy operations is a big undertaking,” say Wright and Prime President and CEO Jim DuCharme. “It involves integration of Prime’s front-end and dispensing systems for home delivery and specialty medicines with Walgreens systems, but doing so will enable greater efficiencies and capability offerings to our clients and members. In the coming months we will launch the new brand. Careful coordination of members’ medications will occur starting with all the necessary notifications — through member materials, Web portals and call centers — so members receive the customer support they need to make the transition seamless. For Prime’s clients, we are equally attentive to their needs in a way that complements their strategies.”

Deal Comes After Prime Signed New Contracts

The transaction follows two recent Prime contract wins. On March 13, the PBM said it will administer the pharmacy benefits for Regence BlueCross BlueShield health plans in Idaho, Oregon, Utah and Washington starting Jan. 1, 2018. Those plans serve about 1 million commercial and individual market members, and more than 100,000 Medicare members. Then on March 31, Prime said it had signed a three-year agreement to manage the specialty pharmacy benefit for the Blue Cross and Blue Shield Association’s Federal Employee Program, which includes 5.4 million employees, retirees and their family members and is the largest offering in the Federal Employees Health Benefits Program (see brief, p. 8). That deal also is effective Jan. 1.

Asked how much of a factor the new company was in these new deals, Wright and DuCharme say that “Regence told us they chose Prime for its overall strong reputation and capabilities as a PBM — specifically its track record of providing quality pharmacy benefits and excellent customer service. Regence also had previous experience with Walgreens services so they were familiar. For FEP, the alliance between Walgreens and Prime very likely played a role as Prime or Walgreens could not have secured the FEP contract alone. Together we were able to offer specialty scale and efficiencies that helped them make a favorable decision toward awarding Prime the contract. This new model we’ve created together is significantly different and disruptive than what previously existed in the market, and clients are taking notice [and] making a change. The joint venture strengthens our model for all our current and potential clients.”

Prime has 14 Blues plan owner clients and serves 20 total Blues plans with about 22 million members. The company “operates three pharmacies, two that [fulfill] traditional medicines and one specialty pharmacy,” according to DuCharme and Wright.

Walgreens Is Core Participant in Network

Through the latest deal, Walgreens also became the core participant in Prime’s preferred national network as of Jan. 1, 2017. DuCharme said in a statement that “the retail pharmacy network agreement component of our alliance is yielding considerable savings for our plans and their members, as fully 50 percent of Prime’s members have transitioned into a network anchored by Walgreens.” He and Wright explain that “clients can receive deeper discounts when they limit the number of pharmacies in their networks. However, having an anchor pharmacy with approximately 8,000 retail locations provides members with extensive access yet better pricing.”

Through the retail network, AllianceRx Walgreens Prime is offering the 90DayMyWay program, which allows members to either pick up 90-day prescriptions for maintenance medications at a Walgreens store or have them shipped to their home “for the same co-pay/cost,” say DuCharme and Wright, who clarify that the program is for “traditional medicines only, not specialty” drugs. In an April 3 research note, Evercore ISI analyst Ross Muken notes that “the launch of the 90DayMyWay program will allow for more robust competition vs. CVS’s Maintenance Choice program given members’ ability to choose between retail and mail prescription delivery.”

In addition, members can pick up specialty drugs at retail locations. Walgreens pharmacists also can provide consultations to members initiating a drug, help with specific conditions and offer reminders on preventive health care services. “In the future, we plan for member consultations with pharmacists to be more personalized and tailored in some way for Prime/Blue Cross and Blue Shield members,” DuCharme and Wright tell AIS Health. “The AllianceRx Walgreens Prime’s integration of mail and specialty lines of business, combined with the retail network alliance, will be able to streamline customer experience for members and pharmacists between channels (i.e., Walgreens retail, mail, and specialty).”

Also beneficial is Prime’s ability to look at not only the pharmacy benefit but also the medical benefit. “With more than 50% of all specialty medicines managed under the medical benefit, having the full view of both medical and pharmacy spending enables the big picture of each individual member’s health needs,” they assert.

“This agreement aligns pharmacy, PBM and health plans in a new model aimed at coordinating member care [and] improving outcomes, and designed to deliver cost-of-care opportunities,” they explain. “Through the alliance, Prime members will ultimately have access to additional limited-distribution drugs, disease-specific specialized locations and specialty-enabled retail pharmacies (where available). All these things will help to positively impact drug spend and be very competitive in the space.”

According to Muken, AllianceRx Walgreens Prime will have approximately $20 billion “in run-rate annual specialty spend,” although DuCharme and Wright say they haven’t “seen that number before, so we can’t verify its accuracy or comment.” Assuming the number is accurate, this would make the new company “a close 3rd player to Express Scripts (~$22.5 Bn in dispensed specialty revenue in 2016) and CVS Health (~$32 Bn). This improved scale should improve the attractiveness of Prime’s PBM offerings by allowing it to channel specialty scripts to its captive pharmacy as well as be in a favorable position regarding negotiating of access to limited distribution drugs and reimbursement.”

“With prescription drug prices rising at unsustainable rates, the pharmacy and PBM industry can no longer do business as it’s been done in the past,” maintain DuCharme and Wright. “Our industry needs to adapt. Prime, Walgreens and now AllianceRx Walgreens Prime are responding by transforming the industry so that the result will be relief for plan sponsors and members, and ultimately lead to more affordable drugs that members need to feel better and live well.”

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