Kroger: announced that we are terminating our Express Scripts agreement for commercial customers as of December 31

Apparently Express Scripts new business model is to reimburse pharmacy for filling prescriptions less than the cost of buying the medication from the wholesaler.  Express Scripts just signed a contract with DOD for Tricare and it has been reported that abt 15,000 pharmacies – mostly independents – decided not to sign the contract they were offered because offered reimbursement was less than the cost of purchasing the medication from the wholesaler. Express Scripts is owned by the insurance company Cigna

Kroger operates under 22 different names and 3242 total stores and 2,200 pharmacy depts.  It would appear that of the 15,000 pharmacies not signing the new Express Scripts/Tricare contract may or may not include the 2,200 Kroger pharmacies.  Tricare is the health insurance for our military and veterans.

Previously, Express Scripts has been the labeled as largest PBM in the USA

Kroger Health had another successful quarter, delivering higher-than-expected sales and profitability despite cycling the impact of higher COVID vaccine revenue from a year ago. We continue to see significant growth opportunities in healthcare, and our Kroger Health team remains committed to ensuring our customers obtain medically necessary prescriptions. Recently, we announced that we are terminating our Express Scripts agreement for commercial customers as of December 31. The Express Scripts contract would have required Kroger to fill our customers’ prescriptions below our cost of operation, something we could not accept as we aim to keep our prices low for customers during this inflationary period.

We expect this contract termination will reduce sales by about $100 million in Kroger’s fiscal fourth quarter, impacting identical sales without fuel for the quarter by approximately 35 basis points. This decision is not expected to have an impact on operating profit or EPS. Included in our results for the quarter is an $85 million pre-tax charge related to the settlement of all opioid litigation claims with the State of New Mexico. This amount was excluded from our adjusted FIFO operating profit and adjusted EPS results to reflect the unique and nonrecurring nature of the charge.

This settlement is not an admission of wrongdoing or liability by Kroger, and we will continue to vigorously defend against other claims and lawsuits related to opioids. This settlement is based on a unique set of circumstances and facts related to New Mexico, and Kroger does not believe that the settlement amount or any other terms of our agreement with New Mexico can or should be extrapolated to any other opioid-related cases pending against Kroger. It is our view that this settlement is not a reliable proxy for the outcome of any other cases or the overall level of Kroger’s exposure. Currently, Kroger has two active matters pending in West Virginia and Texas scheduled for trial in 2023 and 2024, respectively.

Kroger continues to believe that the claims are without merit, and that it has strong defenses to these claims. Kroger is also differently situated from many of the other defendants in these cases. Our pharmacy operations have a much smaller footprint, both in terms of the size of the business, and market share with respect to opioids, and we are proud of the outstanding work performed by our associates in delivering critical care and services to our pharmacy customers. Turning now to alternative profit businesses, which are a fast-growing and key part of our value creation model.

One Response

  1. The grift of underwater reimbursement is a PBM wet dream. No pharmacy can stay afloat? Send them to our mail order pharmacy In NV, or some other God- forsaken state . Creating drug deserts all over the US. Reaping what has been sown. When the going gets weird…the weird turn pro. CVS Caremark, Express Scripts, Optum Rx… oughtta know.

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