TRICARE adds Walgreens to pharmacy network, displacing CVS

WASHINGTON - The nation's military covered under TRICARE were given new marching orders effective Dec. 1 as Walgreens joined TRICARE's retail pharmacy network, displacing CVS Health as a preferred pharmacy in the Express Scripts-managed network.



That move could displace as many as 16 million of CVS Health's most profitable prescriptions, many of which Walgreens will be endeavoring to capture.



TRICARE serves 9.5 million patients all told, including Active Duty Service members, National Guard and Reserve members, retirees, their families, survivors and certain former spouses worldwide. TRICARE’s 2015 net spending was $9.2 billion, of which $3.1 billion (34%) came from retail pharmacy spending, according to Drug Channels Institute.

"The DoD TRICARE action begins on Dec. 1, but they have already notified members, and we expect to begin seeing these prescriptions migrate out of our stores," Larry Merlo, president and CEO CVS Health, told analysts in a Nov. 8 conference call. ""We have always said that our last script is our most profitable one given our ability to leverage our fixed costs with incremental volume. And unfortunately, this means that the scripts we lose will tend to be our most profitable scripts."



"As the year progresses we'll be able to get a better feel on our ability to both get customers back into Walgreens and hold onto them," Alex Gourlay, co-COO Walgreens Boots Alliance, shared with analysts in the company's most recent conference call. But capturing TRICARE beneficiaries won't be automatic, Gourlay cautioned, even though many preferred networks are pretty narrow, the TRICARE network is actually quite broad and includes most pharmacies in the U.S., he said.



When Express Scripts first announced the change, it noted the new network will have more than 57,000 locations nationwide. The addition of Walgreens into the network means that 98% of TRICARE beneficiaries will still have a network pharmacy within 5 miles of their home.