Dive Brief:
Kroger pharmacies are once again back in Express Scripts’ network, two years after the grocer kicked the massive pharmacy benefit manager to the curb over its allegedly unsustainable pricing model.
Kroger Health, the grocer’s healthcare subsidiary, said on Wednesday it had reached a new agreement with the Cigna-owned PBM that allows customers in Express Scripts’ Medicare prescription drug and Tricare plans for military members to fill prescriptions at Kroger pharmacies.
The new agreement also allows Express Scripts’ commercial and Medicaid clients to add Kroger pharmacies to their networks, according to the announcement. Express Scripts customers can also receive healthcare at Kroger clinics, which offer low-acuity services like vaccinations and preventive care.
Dive Insight:
Kroger notified Express Scripts in 2022 that it planned to terminate their pharmacy provider agreement for commercial customers after “dozens” of attempts to negotiate a “more equitable and fair contract,” according to the grocery chain. According to Kroger, Express Scripts was proposing terms that would have caused its pharmacies to fill prescriptions below costs in order to preserve its profits.
For its part, Express Scripts argued Kroger was refusing to agree to “standard terms and conditions, including market competitive rates,” according to a notice to clients at the time.
Kroger pharmacies officially left Express Scripts’ network in January 2023.
It was a big loss for Kroger. By some metrics, Express Scripts is the largest PBM in the country, overseeing the drug benefits of upwards of 100 million people — though, the drug middleman said only a small percentage of its members were receiving prescriptions at Kroger pharmacies.
Still, the contract loss impacted Kroger’s finances. In the second quarter of 2023, for example, the grocer said sales growth would have been almost three times as strong if it hadn’t kicked Express Scripts to the curb.
The desire to boost its pharmacy revenue may have brought Kroger back to the negotiating table. Express Scripts, like other major PBMs, has also made recent changes to its products the company says will make its business practices more transparent and accountable to its clients.
However, it’s not clear what differentiates the new contract between Kroger and Express Scripts. When asked for more details, an Express Scripts spokesperson directed Healthcare Dive to a general statement on the PBM’s website. A spokesperson for Kroger declined to comment.
It’s not uncommon for pharmacies to find themselves in standoffs with pharmacy benefit managers over what they view as unsustainable rates. Though large national chains like Kroger have significantly more leverage than small independent pharmacies to negotiate with PBMs, major pharmacies have been forced out of network before.
Walgreens, for example, went out of network with Express Scripts more than a decade ago after contract negotiations deadlocked. The move reportedly cost the drugstore an estimated $4 billion in annual revenue.
PBMs, middlemen between drug companies, payers and pharmacies in the pharmaceutical supply chain, are a frequent source of blame for unaffordable drug costs in the U.S. The Federal Trade Commission is currently suing Express Scripts, CVS’ Caremark and UnitedHealth’s Optum Rx — the “Big Three” PBMs which jointly control 80% of prescriptions — for artificially inflating the cost of insulin.
Antitrust regulators and state attorneys general have also accused the companies of leveraging their market power to force unaffiliated pharmacies to accept unfavorable contracts, while steering patients to their own retail, mail-order and specialty pharmacies.
Express Scripts and Caremark are both currently facing lawsuits from independent pharmacies over their contracting practices.
Kroger’s dispute with Express Scripts was also cited in a lawsuit from the state of Ohio against PBMs in 2023.
