October 1, 2014 / 12:51 PM / 5 years ago

Walgreen to sell drugs under Express Scripts 2015 Medicare plans

(Reuters) - Express Scripts Holding Co, the largest U.S. pharmacy benefit manager, said Walgreen Co would sell prescription drugs under its two Medicare Part D plans for 2015.

Beneficiaries of Express Scripts’ Medicare Value or Choice plans for 2015 can get Tier 1 generic drugs free or for as little as $1, respectively, if they buy from pharmacies in its preferred network, such as Walgreen.

The Medicare Part D program, which is provided only through private insurance companies, gives subsidies on prescription drugs to the elderly and disabled.

Pharmacy benefit managers administer drug benefits for employers and health plans and run large mail order pharmacies.

Drug retailers such as Walgreen have contracts with health insurers and benefit managers to sell certain drugs at fixed prices.

“This is relatively small. I think it shows an improving relationship between the two sides, but economically or financially, I don’t think this is a big delta,” ISI Group analyst Ross Muken told Reuters.

Walgreen, the largest U.S. drugstore operator, lost billions of dollars in annual sales in 2012 after a fallout with Express Scripts over contract terms at the end of 2011.

The companies resolved the dispute in July 2012 and signed a multi-year agreement, making Walgreen a part of Express Scripts’ preferred pharmacy network.

Walgreen reported its biggest jump in quarterly sales in three years on Tuesday, driven by a 9.3 percent rise in prescription sales in the fourth quarter.

The company ended the year with a record 856 million filled prescriptions, including 211 million in the quarter ended Aug. 31, but said its pharmacy profit margin fell due to lower reimbursements and generic drug price inflation.

Reimbursement rates for Medicare Part D drug plans would likely keep falling due to growing competition to win these contracts, the company said on a post-earnings conference call.

Muken said the deal was not likely to add materially to the number of prescriptions filled at Walgreen.

Express Scripts said enrollments for its 2015 plans would start on Oct. 15 and end on Dec. 7. Coverage for the plan year will start on Jan. 1.

Walgreen’s shares were down 0.6 percent at $58.86 in afternoon trading on the New York Stock Exchange. Express Scripts shares were down 0.7 percent at $70.09 on the Nasdaq.

Additional reporting by Yashaswini Swamynathan in Bangalore; Editing by Simon Jennings and Kirti Pandey

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