Anthem's War on Pharmacy

As most of you probably know, January 1, 2012 will mark a big change in the world of pharmacy.  No, I'm not talking about Obamacare, but Anthem.  Starting next year, the insurance giant will be locking Walgreens out from their list of covered providers.  Now some of you might be wondering "why is this a big deal?"  The answer is the reasoning behind this decision, and how it will impact the pharmacy business.


Anthem is a mammoth company.  It includes all of the Anthem, Wellpoint, Express Scripts and DoD/Tricare plans.  This amounts to millions of Americans who use this company for their prescription insurance.  As of 2012, Anthem will not be reimbursing at a rate to make it profitable for a pharmacy to fill their members' prescriptions.  Here's how it works.  ABC Pharmacy buys Drug X and stocks it on the shelf.  When the patient presents an RX for Drug X, the insurance company pays the pharmacy a negotiated price- usually 95% AWP (Average Wholesale Price) plus a dispensing fee.  The dispensing fee is usually less than $3 and is paid to cover the pharmacy's overhead cost-  salaries, cost of paper, cost of amber vials, etc.  So contrary to what you might believe, when you pay $50 for your Crestor, Pharmacy ABC makes an average of $0.50 to $1.00 in profit.  That's right, $1.00.


What Anthem is doing, is refusing to pay pharmacies what it costs to stock prescription drugs.  I believe that Walgreens did the right thing in telling Anthem to take a hike.  But Walmart, CVS and others did not.  And that will ultimately be bad for business and for the patients.  Places like Walmart don't make their money from their pharmacies; profits come from the front store.  Walmart, Kroger and Meijer are willing to take a loss on an RX in order to get you into the store because they know you will buy stuff.

Now rest assured that the rest of insurance industry is watching.  And if there is not a backlash, there is a real chance these other companies will follow suit.  Imagine if Humana, Medco, EnvisionRx and Caremark all follow Anthem's lead.  And what will happen next?  They will continually drop their reimbursement rates  because they know Walmart has the capital to absorb the loss.  Can you imagine Walmart as the pharmacy we will all have to use?  Have you ever heard someone say how much they love their Walmart pharmacy?  I know I haven't.  And as for independents, you can count on them becoming extinct at an even faster rate than they are now.

It is my belief that CVS and the other chains did the profession of pharmacy a great disservice by agreeing to Anthem's terms of service.  Instead they should have stood together with Walgreens and forced the insurance conglomerate to pay us for the service we provide.  This decision could very well have long and far reaching consequences in the not too distant future.