State of Delaware/Walgreen’s: Can This Marriage Be Saved?
It can and it should. In fact, there is no earthly reason why this war of words should have escalated this far.
First, allow the Beast Who Slumbers to stipulate that he does have a dog in this fight as he is close to several people who work for Walgreen’s. Not at the corporate level, but at the direct customer service level. All of these people were longtime employees when Alan Levin owned the company.
Stipulation aside, ‘bulo believes that what passes for a ‘negotiation’ between the State and Walgreen’s has been done in such an amateurish and confrontational manner that the greater harm is being ignored in the struggle. The biggest losers in this entire affair will be the Medicaid recipients, make no mistake about that.
With Walgreen’s out of the equation, there will not be sufficient places to service the Medicaid recipients. Rite-Aid is teetering on financial collapse, their stock can no longer be traded on the NYSE. They cannot afford to fill Medicaid prescriptions at a loss, not for long. CVS, the country’s largest drug store chain, only has two stores in Delaware (Rehoboth & Milton), with a third in Wilmington months away from opening. So you’re looking at a couple of supermarkets, Target, Walmart, Costco, a few small independents, and that’s it. First, there is no guarantee that these few outlets will be able to stock and subsequently fill Medicaid prescriptions when they’re losing money on each brand name prescription filled. Second, Walgreen’s fills about 65% of all Delaware Medicaid prescriptions. Where the bleep could recipients possibly go to fill that void? It simply ain’t gonna happen.
This is public policy malpractice, pure and simple. The Walgreen’s suits from Chicago clearly have/had no clue as to how to negotiate with Delaware officials, and they played their hand too hard. However, at least they were willing to continue negotiations.
The State, OTOH, really came up small here. What was the point of some press flak from DHSS writing a release saying “Walgreen’s Abandons Delaware’s Neediest Citizens”? What, exactly, did anyone hope to accomplish by doing that and by going out of their way to smear a company that employs thousands of Delawareans? Has anyone in state government stopped to consider what removing by far the Medicaid provider of public choice is going to do to the health and well-being of this population? Where are the people in the City of Wilmington, where there are proportionately more Medicaid recipients, going to go to get their needs met?
The Beast Who Slumbers will now ask a sensitive question, but one, IESHO, that needs to be asked. Is it possible, just possible, that DEDO Director Alan Levin is allowing his personal experience with Walgreen’s to help color the State’s response here? El Somnambulo has both great professional and personal regard for Alan Levin, he really does. Alan was just the kind of boss that everyone would love to have. He treated his employees fairly and really like family. But there is no denying that Alan must have felt shunted aside by Walgreen’s and that he was (to Walgreen’s great shame) reduced to the role of a front man for a business that didn’t share his vision. Alan employed virtually the same tough negotiating tactics when he negotiated with the State on the last Medicaid agreement. Walgreen’s, in essence, is being demonized for employing similar tactics this time around.
Bottom line: No one is well-served in this imbroglio. Ultimately the only people who will suffer significant hardship are the Medicaid recipients. ‘Bulo knows that Walgreen’s has tried to restart negotiations, but the State is not returning the calls.
It is long past time for the grownups to take over, restart negotiations in private, and leave the press flaks at home. It is time for both Walgreen’s and the State to remember that the well-being of Delaware’s neediest citizens hangs in the balance.
Tags: Delaware, State Government, Walgreen's
Rite-Aid is teetering on financial collapse, their stock can no longer be traded on the NYSE. They cannot afford to fill Medicaid prescriptions at a loss, not for long.
Which begs to mind an important question: What company can afford to fill Medicaid prescriptions at a loss? And why are companies being asked to?
We talk, and rightly so, about the profit-margins drug companies have built into their products. The Delaware/Walgreen’s problem has the state trying to force middlemen (the retailers) into losing their income, at what will surely be the expense of jobs. If only there were some way to make the drug manufacturers more receptive to providing lower cost drugs for medicaid patients…
(walks into Astra-Zeneca sign while daydreaming)
Oops! Where did that come from?
Great analysis.
However, I come back to what I put in my blog when I researched Walgreens’ actions elsewhere.
This company plays ferocious hardball everywhere. In Washington state. In San Francisco. In the Chicago suburbs, where it collaborated with a suburb to shove out an elderly woman from a house by eminent domain.
And, I’m sure that “press flak” wrote a tough press release because the Markell Administration wanted that person to write a tough press release! This was not unilateral.
Allan Loudell
WDEL Radio
Can we not look past the 2% penalty…err Gross Receipts Tax increase Katz proposed on any company (Walgreens) that turned away from the program? Really? A PUNITIVE tax? On Gross Receipts, so every facet of the store?
I was more for the state until that came up for consideration and it was then I realized both sides were screaming for their woobie (baby blanket).
The Medicaid providers have sent out a letter w/a list of pharmacies, statewide, and a ‘drop dead’ letter telling enrollees to have their perscriptions out of Walgreens by July 5.
‘bulo you are correct there is a pausity of pharmas in DE and especially in Wilmington.
If Medicaid could offer a chance at a profit for vendors Walgreens would be in the business but as Medicaid has drifted into government oblivion much to the chagrin of recipients and tax payers it makes no sense to participate.
There are almost 100 pharmacies will take Medicaid scripts and if the scripts are profitable there will be many pharmacies who will jump at the chance to fill the void left by Walgreens.
The public option will be just as bad as Medicaid.
Mike Protack
The author of the story is incorrect. Rite Aid stock never stopped being traded on the New York Stock Exchange.
Cheryl (#4) is correct, El Som. I had followed RAD for a while before my own financial woes (thanks negligent *itch who passed on the double yellow and hit spouse head-on) ultimately did in any chance for me to get them on the upswing. It didn’t stop me from following their follies, though.
Grasso/Grassman/Grass-for-brains (?), their former, crooked CEO really effed them with mucho expense (hidden by his cooked books, delicious with a bottle of red) beyond any revenue they could possibly ever make, even at CVS levels, which started their tailspin into single-dollar purgatory and resulted in their booting from the S&P500 and DOW several years ago.
Fast-forward to 2008, RAD, along with others, really fell hard in terms of stock price. This was ironic, because taking the turn-around RAD was making (compared to previous handful of years), it was very apparent RAD was coming back from Grass-for-brains CEO’s damage. Unfortunately, no one wanted to invest in this decent chance and the price fell, fell, fell. I believe it had fallen as low as the high-30’s (CENTS) in 2008 when everything else was woefully depressed. During that stock price swoon, they were given the obligatory threat of NYSE delisting if their share price did not make it back to $1.00 per share by such-and-such a date.
They had announced that at a future shareholders meeting that they would seek to authorize a reverse-split to prop up that price and meet NYSE requirements. I do believe they received the authorization to do so (not certain), but shortly after that meeting, they continued to show progress with recovery from the past and the buyers came back in, eventually pushing it comfortably back over $1 per share over the last few months, without the reverse split. They are now in compliance with NYSE. I am not sure if they are still planning the reverse-split or not. The disadvantage they have, though, with remaining in the $1-$2 range is that they won’t get fund managers to buy, as most of them have hard-set policies not to get in under $5.
Anywho, although they still show operating losses, don’t let that fool you. They could easily and happily take on DE’s Medicaid, especially if they felt the Walgreens fallout would get them new Rx customers not on medicaid. Their revenue can carry the load.
Hey Cheryl, don’t let facts get in the way of a good story. LOL.
Heck of a deal these pharmacies are passing up. Lose money on every transaction and plan on making up the difference in volume.
See, this is how single-payer health care is gonna work. Government is in the red? Just cut payments to providers. All those “successful” European governments who’ve managed to cut costs by negotiating payments with drug companies? Wouldn’t exist without the US drug market, which allows drug companies to actually profit from investing in research. Sweden, Canada, et al are riding on our coattails. When a government deals with a number of HC providers, it’s called a monopsony. Look it up.
“Wouldn’t exist without the US drug market, which allows drug companies to actually profit from investing in research.”
U.S. drug companies pay more in advertising than in R&D. The R&D money is spent at universities via federal dollars.
But don’t let the facts get in the way of a good story.