Walgreen tries to stay in Express Scripts' Tricare (Reuters)

(Reuters) ? Walgreen Co on Monday offered to match or beat other pharmacies' costs in order to stay in Express Scripts Inc's program for U.S. military personnel and their families, as it tries to hold onto some of its business with the pharmacy benefits manager.

The largest U.S. drugstore chain said in June it would stop filling prescriptions for people covered by Express Scripts at the end of the year, after failing to agree on new contract terms. The impasse threatens to cost Walgreen about $5 billion in annual sales, or about seven percent of its business.

Walgreen and Express Scripts have been engaged in a public dispute over their contract since then. Express Scripts gained more prominence in July, when it announced a $29 billion plan to acquire rival Medco Health Solutions Inc.

Express Scripts sued Walgreen in September, alleging the drugstore's marketing materials about the issue were false. Express Scripts is seeking injunctive relief.

Now, Walgreen said it would give Express Scripts "an ironclad guarantee" to match or beat the average costs per adjusted prescription of every other pharmacy in its Department of Defense Tricare pharmacy program. Walgreen also stood by its earlier, rejected offer to contract separately with Express Scripts on just Tricare.

"We see this as an attempt by (Walgreen) to move the negotiations further into the public arena, and not a good faith effort to reach a larger agreement between the two companies," JP Morgan analyst Lisa Gill said in a research note.

DEFENSIVE PLAYS

The Tricare program serves U.S. service members, retirees and their families. Beneficiaries can fill prescriptions at military facility pharmacies, through a mail-order pharmacy, at retail network pharmacies and at non-network pharmacies, according to the plan's Website.

"As we've said all along, we would welcome (Walgreen) in our network but only at rates that are right for our clients," an Express Scripts spokesman said.

If Walgreen and Express Scripts were to reach an agreement that included lower rates than those proposed for Tricare, Tricare would have the option to switch to those rates, Walgreen added.

Along with its latest negotiating tactic, Walgreen last week reached a deal to keep filling prescriptions for Blue Cross Blue Shield of Kansas City patients, even if it is no longer in Express Scripts' network.

That pact shows that Walgreen has been able to hold onto some of the prescriptions it currently fills. However, it still stands to lose out on billions of dollars in revenue if it cannot come to terms with Express Scripts.

Walgreen had a stare-down last year with CVS Caremark Corp over prescription reimbursements that was similar to its dispute with Express Scripts. Walgreen had been ready to stop filling prescriptions for millions of CVS Caremark's drug plan members. The parties reached a deal after just 11 days.

Walgreen said that nearly 200,000 military beneficiaries have told it that they are concerned about not having access to its stores as part of the Express Scripts provider network.

While that number may seem large, it is just a fraction of those who may fill prescriptions in the program; Tricare offers coverage to 9.6 million beneficiaries.

Source: http://us.rd.yahoo.com/dailynews/rss/meds/*http%3A//news.yahoo.com/s/nm/20111017/hl_nm/us_walgreen

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