Greg Wasson is not afraid to draw a “line in the sand” when it comes to access and choice in health care.
A defining moment for Wasson as the head of Walgreens came last month when he told his main competitor, CVS Caremark, that Walgreens would no longer participate in its pharmacy benefit management network for new or renewed plans.
CVS Caremark quickly retaliated by cutting out Walgreens completely from its network.
That decision represented 7% of Walgreens total company sales. In fiscal 2009, Walgreens turned in a record $63.3 billion in net sales, up 7.3%.
The decision risked market share losses as other retailers tried to capitalize on the dispute by announcing they would gladly accept CVS Caremark patients not being serviced by the Deerfield, Ill., drug store chain.
Issues in the dispute, according to Walgreens, were plans designed to drive Caremark PBM members to CVS pharmacies or Caremark mail-service facilities to obtain their prescription drugs over Walgreens; lack of information on prescription plan transfers and changes; and unpredictable reimbursement rates and payments for certain drugs that often didn’t reflect the market.
“This is about choice for all of our customers and when we lose one customer that comes into a Walgreens drug store, who receives a letter that they can no longer use their pharmacist who they’ve known for years and trusted for years, that’s one too many,” Wasson told analysts during an investor’s call explaining his decision. “It just no longer makes good business sense for us to participate in a PBM network that does not value us as a provider within their network.”
The decision also threatened a possible loss of CVS’ PBM business as 20% to 30% of the client base is up for renewal each year, and not allowing members access to one of the largest drug store chains in country with 7,500 store locations is hardly a selling point.
As quickly as the dispute arose, it was resolved quickly, within two weeks, with a multiyear agreement that Wasson said provided the framework needed to operate the business going forward. No other details about the agreement were revealed.
Andrew Wolf, an analyst with BB&T Capital Markets, Richmond, Va., gives credit to Wasson for “having the gumption to draw the line in the sand, which is very critical in this [drug store] industry.” He added it took the power of Walgreens to challenge CVS on its PBM practices, and no other retailer wielded enough power to do that.
Like his predecessors, Wasson has a pharmacy background, having joined the company in 1980 as a pharmacy intern. In the last 30 years, he followed a familiar career trajectory at Walgreens, moving up the ranks into executive positions. In 2007, he was named president and chief operating officer and last year he was named president and chief executive officer.
Wasson is responsible for executing the reengineering of the company that includes cost cutting of nearly $1 billion; a slowing of new stores; staking a claim in seasonal flu shots as part of an effort to transform its pharmacy; and rolling out a new customer-centric retailing program.
The retailer generates nearly $2 billion a year in free cash flow, and was able to leverage that to buy the 257-store Duane Reade chain in New York City this year.