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Are prescriptions cheaper at Walmart or Walgreens?

We consistently find that drugs – particularly generic drugs – are far more expensive at CVS and Walgreens than at other pharmacies. The costs at Walmart, Costco, Winn-Dixie and Publix are consistently far lower, as are the costs of most independent pharmacies.

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Most health plans’ prescription coverage programs allow plan beneficiaries to purchase drugs at virtually all retail pharmacies in the United States, regardless of the prices charged by those pharmacies. But in a time of out-of-control drug costs, every health plan administrator should be questioning this approach and asking two critical questions:

How many retail pharmacies are needed in my plan’s pharmacy network to provide sufficient pharmacy access to my plan beneficiaries?

How much could my health plan save if some – or all – high cost pharmacies were eliminated from – or at least disfavored in – my plan’s retail pharmacy network?

And here’s a final, critically important question for all of us to ask: If more health plans started excluding – or disfavoring – the high-cost pharmacy chains, might we together force those chains to dramatically lower their prices?

Basic Facts About Retail Pharmacies & Their Costs

There are more than 67,000 retail pharmacies in the United States.

The two largest chains – CVS and Walgreens – respectively have more than 9,600 and 8,100 stores each. CVS has recently acquired Target, and Walgreens is likely to soon acquire Rite Aid, which will increase each chain’s size by several thousand more pharmacies. But notwithstanding the sizes of CVS and Walgreens, there are almost 53,000 other pharmacies in the U.S. available to provide drugs to your beneficiaries. Pharmacies’ costs vary enormously, including for health plans paying for drugs through PBMs or insurance companies.That’s because when PBMs and insurers enter into contracts with pharmacies, PBMs’ and insurers’ bargaining power differs depending on the pharmacy’s size: CVS and Walgreens are so large that they can – and do – demand high reimbursement rates. Certain other chain pharmacies – like Walmart, Costco, Winn-Dixie and Publix – could demand high reimbursements too, but don’t. As a result, those chains provide drugs at far lower costs than CVS or Walgreens. Also notable: Most independent pharmacies are without any leverage to demand anything from any PBM or insurer and therefore accept the reimbursement terms dictated by PBMs and insurers. The exception to this general rule: Independent pharmacies in isolated rural areas are needed to ensure sufficient access in the rural areas and can therefore insist on higher reimbursements. Given all the above facts, assuming your health plan has contracted to obtain retail pharmacy pass-through pricing, the cost that your health plan is paying for any particular drug will vary enormously, depending on the pharmacy where the drug is purchased.

How Much Do Pharmacies’ Costs Differ?

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Our consulting firm – and Coalition – regularly analyze the costs of different pharmacies for our clients. We consistently find that drugs – particularly generic drugs – are far more expensive at CVS and Walgreens than at other pharmacies. The costs at Walmart, Costco, Winn-Dixie and Publix are consistently far lower, as are the costs of most independent pharmacies. In fact, the average generic AWP discount provided by CVS and Walgreens is often in the low 70s (or worse). That’s often even true, when the PBM is Caremark, and the client’s contract with Caremark purportedly provides lower-costs from CVS pharmacies. In contrast, Walmart, Costco, Winn-Dixie and Publix often provide average generic discounts of AWP-79% (or better), as do many independents and other small chains. Note that this means that the cost of generic drugs, on average, are about 50% higher at CVS and Walgreens than at the lower-cost pharmacies! The above facts mean that there is always money to be saved, if health plans can ensure fewer prescriptions are filled at CVS and Walgreens. How much will actually be saved depends on many factors, including: the size of the health plan, the percentage of beneficiaries using the high-cost pharmacies, and how many beneficiaries change their purchasing venues. But regardless, a considerable sum of money will likely be saved if health plans take action to address the high costs charged by CVS and Walgreens.

Are CVS & Walgreens Needed To Provide Sufficient Access?

Our consulting firm – and Coalition – also conduct geo-access studies for our clients to determine the impact on beneficiaries’ pharmacy access if certain pharmacies are excluded from a client’s network. Either CVS – or Walgreens – can almost always be eliminated from a pharmacy network, and beneficiaries will still have remarkable access to a pharmacy within a short distance of their homes. More striking, both CVS and Walgreens can be excluded from pharmacy networks, and beneficiaries’ pharmacy access will still be very strong, assuming a health plans’ beneficiaries are located largely in metropolitan areas. For example, a recent analysis of one client’s data showed that more than 95% of beneficiaries in a metropolitan area (without subways) would have access to a pharmacy within 5 miles, even if all CVS and Walgreens pharmacies were excluded from the client’s pharmacy network:

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