Walgreens and Prime Therapeutics, the nation’s fourth-largest pharmacy benefits manager, announced a long-term strategic alliance that combines the companies’ specialty pharmacy and mail order pharmacy business. The agreement also creates a new retail pharmacy network.

St. Paul, Minn.-based Prime Therapeutics is owned by 14 Blue Cross/Blue Shield health plans.

According to terms of the agreement, the retail pharmacy network will give Prime’s health plan and employer clients access to the Walgreens preferred network. The companies said Prime will honor existing client-specific network choices for health plans, but that beginning January 1, 2017, Walgreens will be the “core participant” in Prime’s national preferred pharmacy network.

“The alliance … brings together Walgreens national pharmacy network and operating efficiencies with the pharmacy benefit management expertise of Prime,” the companies said. “Payers will be able to leverage integrated medical and pharmacy data for better cost control and health outcomes management, while Prime, Walgreens and the combined specialty and mail service company will work together to utilize Walgreens omni-channel services and resources to help improve medication adherence and health outcomes for patients.”

“With costs rising at unsustainable rates, we must take strong and decisive action to make health care more affordable,” said Jim DuCharme, CEO and president of Prime. 

The new combined entity will be a part of Walgreens Boots Alliance, Walgreens’ parent company, and will be governed by a separate board of directors and management team.

Our Take: With more than 20 million lives under management, Prime Therapeutics gives Walgreens a more powerful footprint within the new preferred network. 

It has also long been rumored that Walgreens is looking to acquire a PBM, and if its deal to acquire Rite Aid is finalized, it will have access to a small one in EnvisionRx. 

Most analysts have suggested Express Scripts as the logical acquisition for Walgreens. It’s the only independent PBM that would provide the muscle to compete with CVS Health, which owns Caremark, the nation’s second largest PBM. Walgreens may have too much money tied up right now in its pending acquisition of Rite Aid, so the Prime Therapeutics partnership should be viewed as an interim step to something bigger down the road—like a merger with Express Scripts.

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