Prime Therapeutics, Walgreens to form pharmacy alliance

Eagan-based Prime Therapeutics has formed a strategic alliance with drugstore giant Walgreens that would combine the companies' specialty and mail-order pharmacy businesses.

In addition, health plan subscribers with pharmacy benefits managed by Prime Therapeutics would have preferred access to Walgreens pharmacies as part of the agreement announced Monday.

Financial terms were not disclosed, but Prime officials believe it could spur growth that pushes the firm beyond its position as the country's fourth-largest pharmaceutical benefits manager (PBM).

Prime Therapeutics is owned by 14 Blue Cross and Blue Shield insurance companies, so the agreement with Walgreens brings together two of the country's strongest brands in health care, said Jim DuCharme, the chief executive of Prime Therapeutics, in an interview.

"Nobody in the industry has integrated and connected the health plan — the Blue plan — with the retail pharmacy network, with the PBM, for unification of data, technology and overall drug cost reduction," DuCharme said. "So, that's probably the most unique feature of this strategic alliance."

Health insurers hire PBMs to manage the pharmacy benefit portion of health plans. That means everything from negotiating prices with drug companies to structuring formularies that stipulate patient co-payments for different medications.

PBMs assemble a network of retail pharmacies where health plan subscribers can get their prescriptions at the lowest cost. The companies also directly fill prescriptions for patients through mail-order pharmacies as well as specialty pharmacies focused on high-cost and complex medications.

Based outside Chicago, Walgreens is the U.S. pharmacy division of Walgreens Boots Alliance Inc. The retailer and Prime Therapeutics already operate their own specialty pharmacies as well as mail-order pharmacies.

With the deal announced Monday, those operations would be merged into one company governed by a separate board of directors and executive team.

The new company doesn't yet have a name, and it's not yet clear where it will have headquarters.

DuCharme, the Prime chief executive, said it's too soon to say whether there could be any job losses with the merger. But he said Prime's specialty and mail-order operations are located outside of Minnesota, where the company employs just over 2,000 of its total 3,900 workers.

The merger agreement is subject to regulatory approval, and is expected to close during the first half of 2017.

The Prime alliance announced Monday includes a new retail pharmacy network agreement. Starting Jan. 1, Walgreens will be the "core participant" in Prime's national preferred pharmacy network, meaning it will be in the select group of drugstores where subscribers can fill prescriptions with lower out-of-pocket costs.

Limiting the number of pharmacies where health plan subscribers can pick up their medications helps control costs, DuCharme said. Right now, he said, that savings is particularly important to Blue Cross insurers that are struggling with financial losses on policies sold through new government-run health insurance exchanges.

DuCharme said the deal should help control medication costs in other ways, too.

"I think the procurement leverage, by bringing together these two important and trusted brands, I think that puts enormous clout pointed toward rising drug costs and toward pharma, that I think is going to give us industry-leading procurement," he said.

Christopher Snowbeck • 612-673-4744