Bloomberg News

Express Scripts Sues Walgreen in Feud for Medicare Patients

September 15, 2011

(Updates share prices in 10th paragraph.)

Sept. 15 (Bloomberg) -- Express Scripts Inc. sued Walgreen Co. for what it called a “campaign to disparage” the pharmacy- benefits manager in an illegal attempt to wrest away customers.

Walgreen, the biggest U.S. drugstore chain, is using false advertising to encourage Medicare patients to leave Express Scripts in violation of a contract that expires Dec. 31, St. Louis-based Express Scripts said in a Sept. 7 complaint filed in federal court in Chicago. Express Scripts said it will suffer “irreparable damage” unless the court issues an injunction stopping Walgreen’s action.

Walgreen, of Deerfield, Illinois, said in June that it won’t participate in Express Scripts’ pharmacy network next year because negotiations had collapsed on renewing the contract worth more than $5 billion in annual drug sales. A website sponsored by Walgreen says Medicare recipients who remain with Express Scripts won’t be able to fill Part D prescriptions after Dec. 31.

“This is false and highly misleading because nothing will prohibit Walgreen from continuing to fill valid prescriptions for such members after Dec. 31, 2011, even if Walgreen is not a part of Express Scripts’ pharmacy network,” Express Scripts said in the complaint.

“Walgreen has crossed a line and is not negotiating in good faith,” Express Scripts spokesman Brian Henry said yesterday in an e-mail. “We will not let this stand.”

Request Granted

U.S. District Judge Marvin E. Aspen, at a hearing today in Chicago federal court, conditionally granted a request by Walgreen to suspend the proceedings while the combatants take their dispute to arbitration. Walgreen said in a Sept. 12 motion that its contract with Express Scripts requires arbitration for such claims.

“It is important to inform our patients and the public how this may impact their ability to fill prescriptions at Walgreen next year if Express Scripts serves as the pharmacy-benefit manager for their particular health care plans, and we regret that Express Scripts has resorted to litigation in an effort to stop us,” Michael Polzin, a spokesman for Walgreen, said yesterday in an e-mail. The company will fight the lawsuit, he said.

Appearing today, Express Scripts lawyer James Monafo pressed for a hearing on his client’s bid to block the drugstore chain from engaging in its advertising campaign. Walgreen attorney Peter Bensinger countered that arbitration is the proper forum for the dispute.

Two-Week Deadline

Aspen ordered the companies to bring the issue to an arbitrator’s attention “promptly,” telling their lawyers that if they fail to do so within two weeks, he will refer Express Scripts’ injunction request to a federal magistrate.

Express Scripts declined $1.29, or 3 percent, to $41.50 at 4 p.m. New York time in Nasdaq Stock Market trading. Walgreen gained 65 cents, or 1.8 percent, to $37.30 in New York Stock Exchange composite trading.

Pharmacy benefits managers act as middlemen among drugmakers, pharmacies and health-plan sponsors to negotiate prices and manage the use of drugs by patients. Express Scripts agreed in July to buy rival Medco Health Solutions Inc. to create the biggest pharmacy benefits manager in the U.S. The deal requires clearance from antitrust regulators.

The case is Express Scripts Inc. v. Walgreen Co., 11- cv-06223, U.S. District Court, Northern District of Illinois (Chicago).

--With assistance from Duane D. Stanford in Atlanta. Editors: Andrew Pollack, Andrew Dunn

To contact the reporters on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net; Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net


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