Walmart Resolves Dispute and Rejoins CVS Health's PBM Pharmacy Network

Recently, Walmart and CVS Health reached a new pharmacy benefit manager (PBM) network agreement, averting a conflict between the nation’s largest retailer and its largest pharmacy chain. Previously, contract negotiations between the two parties had stalled over drug pricing issues, with rumors circulating that they might completely “part ways.” VCBeat (WeChat official account: vcbeat) has compiled information from foreign media sources to outline the full context of this event.

On January 14, 2019, CVS Health stated to the media that Walmart had requested an increase in prescription drug reimbursement rates to secure higher profits. In response, Derica Rice, President of CVS Health’s Pharmacy Benefit Management (PBM) division, said, “At a time when everyone is striving to find ways to lower healthcare costs, the rates demanded by Walmart would ultimately lead to increased medication costs for our members. We are unwilling to pass these costs on to the intermediary (Walmart).”

On January 15, Walmart threatened to exit CVS Health’s pharmacy benefit management (PBM) network due to a failure to reach an agreement on drug pricing. PBMs ensure that users receive corresponding reimbursements after purchasing medications.

Walmart operates more than 4,700 pharmacies. If CVS Health’s PBM loses access to these pharmacies, it could lead some health plan sponsors to decline contracting with CVS Health and other pharmacy chains that own PBMs. As early as 2012, Walgreens Boots Alliance was permanently excluded from Walmart’s network due to a dispute over prescription drug pricing, and Walgreens quickly lost market share.

Currently, Walmart has nearly 5,000 pharmacies within CVS Health’s PBM network, bringing Walmart’s total network pharmacy count to 68,000. However, according to CVS Health’s data, only 5% of its customers specifically choose to fill their prescriptions at Walmart pharmacies. This suggests that even without Walmart, there would be no significant difference in network pharmacy utilization.

On January 16, CVS Health announced that Walmart had exited its pharmacy benefit management (PBM) network.

This dispute directly affected prescription drugs worth approximately $4 billion, resulting in more than 50 million CVS Health members with PBM coverage being unable to receive reimbursement for prescription drugs purchased at Walmart.

Decoupling from CVS is a risky move for Walmart, which could likely cause millions of customers to leave Walmart in favor of pharmacies backed by PBMs.

On January 18, CVS announced a three-year partnership agreement with Walmart; specific terms such as interest rates were not disclosed. CVS shares rose 2.5% in early trading that day.

Evercore ISI analyst Ross Muken expressed surprise that the impasse was resolved in just two days, underscoring CVS’s negotiating prowess.

Regarding this settlement, Derica Rice stated, “We are pleased to have reached a mutually satisfactory resolution with Walmart. As a pharmacy benefit manager (PBM), our primary mission is to help our members reduce prescription drug costs. In addition to enabling Walmart to remain part of CVS Health’s PBM network, this new agreement ensures that our members will have continued, stable access to mail-order pharmacy services.”

Sean Slovenski, Vice President of Health and Wellness at Walmart, stated, “We are pleased to have reached a fair and reasonable agreement with CVS, ensuring that CVS customers can continue to purchase medications at low prices, which also safeguards the interests of our own customers.”

CVS Health is a leading health innovation company in the United States, dedicated to helping people improve their health and serving over one million patients annually. With a community-based, locally focused approach, CVS Health enables consumers to access the care they need anytime, anywhere. The company operates more than 9,800 retail locations and approximately 1,100 walk-in medical clinics.

Walmart (NYSE: WMT) is a multinational retail corporation based in the United States, enabling people around the world to shop and spend anytime, anywhere. Walmart operates 8,500 stores across 15 countries globally and maintains over 11,200 storefronts on 55 e-commerce websites in 27 countries, serving nearly 265 million customers weekly. It ranked first among the world’s largest 500 companies as listed by Fortune magazine from 2014 to 2016.