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GM cutting Walgreens as prescription provider

February 11, 2005

BY JEFFREY McCRACKEN
FREE PRESS BUSINESS WRITER

Calling the 4,700-store-chain "unreliable," General Motors Corp. and its prescription-drug management firm are pulling GM's business from Walgreens as of March 1.

The result: GM's 1.1 million employees, retirees and their spouses and dependents across Michigan and the country who rely on GM for health care won't be able to get their prescription drugs at Walgreens any longer.

The dispute pits two of the country's most influential health-care players against each other. GM, which spent $5.2 billion in cash on health care in 2004, including $1.5 billion on prescription drugs, is the country's largest private buyer of health care. Walgreens is the nation's largest drugstore chain.

Letters went out earlier this month to GM employees, retirees and other dependents from the company GM uses to manage its prescription-drug orders, a New Jersey-firm called Medco Health Services. The letter said Walgreens would no longer be part of the GM network and listed other drugstores that could be used, such as CVS and Rite-Aid.

GM and Medco said they made the decision because they were worried Walgreens could pull its business from GM, as it did last month with the State of Ohio. Walgreens stopped accepting prescriptions from Ohio government employees Jan. 1, citing its dislike of Ohio's mandatory mail program for some drugs.

GM, Ford, Chrysler and suppliers Visteon and Delphi implemented a mandatory mail-order program for maintenance drugs last year. Maintenance drugs are those that have to be taken for a long period of time, such as cholesterol-lowering drugs.

Walgreens has stated publicly it doesn't feel mandatory mail programs help the public, but said it was not going to end ties with GM.

The company has 150 stores in Michigan. Nationally, it has 4,717 stores. It had 2004 sales of $37.5 billion.

GM has 77,000 employees in Michigan and 165,000 retirees, numbers that don't include all of the spouses and dependents that also receive health care from GM.

One GM employee said he was angry because Walgreens had better service than other stores near his home in Holly.

"There are others nearby I can go to, but I worry other pharmacies might stop using GM. Plus the other ones were already slower, I thought, and now they will get flooded by the people who can't use Walgreens," said Dennis Sparks, a GM hourly worker for 27 years.

Sparks, who drives a forklift at the Pontiac Metal Fabricating plant, said he wishes GM made changes to its drug plan "to make things more convenient for me, not more inconvenient."

Medco said in essence, GM had to end its business with Walgreens before Walgreens ended its business with GM.

"If you are a GM, or any company, you need stability in your drug network. In this particular case, the decision was made, with GM, to remove Walgreens from the GM network," said Medco spokesman Jeff Simek.

"There are always a range of factors in making a decision like this, but it really is about reliability and stability.

"The situation in Ohio is what brought this to GM's attention. If they decided to stop serving GM, then you are exposed and would have to scramble to cover yourself," Simek said.

GM spokeswoman Sharon Baldwin deferred to Medco, but added, "We rely on Medco to make sure our enrollees have a stable pharmacy network to choose from." She said most GM-covered people would have to travel less than a mile to find another pharmacy.

GM-covered enrollees can still pick from about 40,000 drugstores nationwide.

Walgreens spokesman Michael Polzin acknowledged his firm dislikes mandatory mail programs but said it was not going to cut ties with GM because it had grandfathered the automaker in.

"We're going to fight for what's in the best interests of patient health care. Patients are best served when they have a choice of retail or mail," Polzin said. "I think it sounds like GM is getting bad information on this matter. We hope we can continue filling prescriptions with GM."

Last month, a reverse situation arose when the drugstore chain CVS Corp. decided to quit doing business with Asian automaker Toyota Motor Corp. and its 15,000 employees and dependents.

CVS also pulled its business from State of Ohio employees.

Contact JEFFREY McCRACKEN at 313-222-8763 or mccracken@freepress.com.