Walgreens to Withdraw from Delaware Medicaid Program

DEERFIELD, Ill., June 04, 2009 - As a result of new and extreme reimbursement cuts in the Delaware Medicaid program, Walgreens (NYSE:WAG)(NASDAQ:WAG) today announced it will stop filling Medicaid prescriptions in all of its 66 Happy Harry’s, A Walgreens Pharmacy locations enrolled in Delaware Medicaid as of July 6. Walgreens is the largest pharmacy provider in Delaware, operating in communities both large and small.

Under this new Medicaid reimbursement rule that took effect on April 1 and is due to become part of the state’s new fiscal budget beginning July 1, Delaware is arbitrarily and unilaterally reducing the price it will pay for brand name medications. This will severely impact the ability of pharmacies to fill Medicaid prescriptions in the state.

With this new rule, Delaware now has one of the lowest payment rates in the country for brand name and generic medications.

Kermit Crawford, Walgreens senior vice president of pharmacy, said, “We have made the decision, after much thought and care, to end our involvement with the state Medicaid program. Quite simply, we can’t continue to participate in a program that, in some cases, pays us less than our cost to fill these prescriptions. By making it uneconomical for pharmacies to continue filling Medicaid prescriptions, the state’s new payments to pharmacies hurt the very patients that Medicaid is meant to serve.”

The state could easily eliminate its Medicaid pharmacy budget gap simply by focusing on its generic dispensing rate at all pharmacies in the state. Each percentage point improvement in the generic dispensing rate would save the state approximately $1.2 million annually. As a low-cost, quality alternative to brand name medications, generics are good for patients, the state and pharmacies.

In addition, Crawford noted that Walgreens, in conjunction with the National Association of Chain Drug Stores, had approached the state with a number of sound alternative strategies and programs that could help Delaware fill its Medicaid budget gap. Many of these alternatives were rejected, despite their successes in other states. None of these methods would adversely impact patient care, unlike the reimbursement cut.

“Delaware’s refusal to implement programs that we know can save millions of dollars and solve their budget difficulties while maintaining a high level of patient care is, quite frankly, baffling,” said Crawford. “We don’t understand why the state would pursue a path that is a lose-lose for the patients and health care service providers.”

Delaware’s pharmacy payment cuts also will have a negative effect on Medicaid recipients by limiting access to pharmacies, hurting those patients with the fewest options and who need the most assistance. Studies show that medications are effective at lowering overall health costs by keeping people healthy and preventing expensive hospital procedures, while comprising only about 10 percent of overall health care costs. With less access to pharmacies under this new program, it is likely that the state payment cuts will drive up other health care costs that represent the majority of health expenditures.

Crawford said, “We understand that Delaware is having difficulties balancing its budget, but we urge the Governor and his staff to reconsider this action and implement some of the very achievable cost savings measures that we have suggested. By doing this, the Governor can enhance patient care, rather than harm it. Other states have had great success with these measures. In the end, we need to keep the patient’s well-being top of mind. The new payment rates are misguided and hurt the people Medicaid was created to serve.”

Walgreens (www.walgreens.com) is the nation's largest drugstore chain with fiscal 2008 sales of $59 billion. The company operates 6,857 drugstores in 49 states, the District of Columbia and Puerto Rico. Walgreens provides the most convenient access to consumer goods and services and cost-effective pharmacy, health and wellness services in America through its retail drugstores, Walgreens Health Services division and Walgreens Health and Wellness division. Walgreens Health Services assists pharmacy patients and prescription drug and medical plans through Walgreens Health Initiatives Inc. (a pharmacy benefit manager), Walgreens Mail Service Inc., Walgreens Home Care Inc., Walgreens Specialty Pharmacy LLC and SeniorMed LLC (a pharmacy provider to long-term care facilities). Walgreens Health and Wellness division includes Take Care Health Systems, the largest and most comprehensive manager of worksite health and wellness centers and in-store convenient care clinics, with more than 700 locations throughout the country.

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