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baltimoresun.com

State considers new pharmacy plan without Walgreens

Chain protests award to benefits firm that cut it from network

By Michael Dresser, The Baltimore Sun

9:15 PM EST, January 25, 2012

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State employees, retirees and their dependents could no longer fill their prescriptions at Walgreens under a contract being considered by Maryland's Board of Public Works.

The panel agreed Wednesday to defer action on the $2.4 billion five-year contract after Comptroller Peter Franchot protested that the O'Malley administration did not provide notice of its intent to award the pact until Friday.

Despite state budget department concerns about the delay, Gov. Martin O'Malley and Treasurer Nancy K. Kopp agreed to give Franchot two weeks to review the proposed deal before the three-member board takes a vote.

Walgreens, the nation's largest drugstore chain, is protesting the proposed award to Express Scripts of St. Louis. In a letter to the board, Walgreens said those covered by the state employee pharmaceutical benefits plan — about 200,000 people — would be inconvenienced because they wouldn't be able to use its 58 pharmacies across the state.

The contract to provide pharmacy benefits to state workers is currently held by a Maryland-based firm, Catalyst Rx of Rockville. It includes Walgreens among the pharmacies on its provider list. Express Scripts — which offered the state a lower price than Catalyst — does not.

Patrick Moran, director of AFSCME Maryland, said that while the public employee union is concerned about the outcome, it is staying out of the fray.

"It raises a concern if this is now going to limit the opportunities or places where people are going to get their scrips," Moran said. But he said AFSCME has no evidence that one company would be better than the other.

The dispute that came to Annapolis is part of a national struggle between Express Scripts and Walgreens over the cost of prescription drug services. Walgreens left the Express Scripts network Jan. 1 after the two companies failed to come to terms on how much the benefits manager would pay for drugs.

Walgreens said that when it bid for the state contract, Express Scripts listed Walgreens among its participating pharmacies. But the dispute between the companies led to Walgreens' departure from the Express Scripts network amid mutual recriminations.

Jeffrey Berkowitz, senior vice president of Walgreens, called the elimination "a significant, after-the-fact reduction in the employee pharmacy benefits that the state has contracted to receive." But Brian Henry, a spokesman for Express Scripts, said its network includes such chains as CVS, Giant Food, Safeway, Target and Costco.

"We feel the access is broad and exactly what the state has requested," Henry said.

According to the state budget department, Express Scripts was rated lower than the incumbent manager, Catalyst Rx, for its technical proposal, but came out on top because it offered a better deal financially. The department estimates the price difference over five years will save the state $102 million.

Walgreens has counterattacked with a national campaign to keep its business. The Chicago Tribune reported this month that Walgreens has been prodding corporate clients to drop Express Scripts in favor of other benefit managers.

Express Scripts, meanwhile has accused Walgreens of resisting its effort to bring down health care costs for its clients.

Even as he agreed to the deferral, O'Malley complained that the contract award has become the subject of endless delays and high-powered lobbying because of the dollars involved.

Last March, the department tried to award the contract to Express Scripts over a protest by Catalyst, which asked for time to take its case to the contract appeals board.

On Jan. 11, the appeals board denied the petition by Catalyst, which maintained the contract was unfairly awarded. In a 76-page opinion, the board found multiple flaws in the procurement process conducted by the budget department. However, the board found that defects in the bidding did not meet the "arbitrary and capricious" standard necessary to overturn an award.

The dispute with Walgreens arose after the bid protest was filed and did not factor into its decision. But the drugstore chain weighed in after its dispute with Express Scripts came to a head late last year.

michael.dresser@baltsun.com