October 19, 2011 / 3:20 PM / 8 years ago

UPDATE 2-Arbitrator OKs Walgreen notices on Express Scripts

* Walgreen set to leave Express Scripts network in January

* Express Scripts sued Walgreen in September

* Walgreen:arbitrator denied preliminary injunctive relief

* Court hearing set for Nov. 3

Oct 19 (Reuters) - An arbitrator has denied Express Scripts Inc’s request to make Walgreen Co stop telling clients about its plans to leave the prescription drug manager’s network, Walgreen said on Wednesday.

The case, which was filed by Express Scripts in September, remains open in a U.S. district court in Illinois.

The arbitrator will consider underlying merits of both parties’ claims at a future date, Walgreen said. Meanwhile, the court has scheduled an initial status hearing for Nov. 3.

In June, Walgreen said it would stop filling Express Scripts prescriptions at the end of the year after failing to agree on terms to renew their contract, which expires on Dec. 31. Such a move could lead Walgreen to lose about $5 billion in annual sales, or about 7 percent of its total revenue.

Walgreen has sent memos, created a website () and used other ways to inform patients about its decision and to make it clear that Walgreen’s 7,700 pharmacies will likely not be part of the Express Scripts network starting in 2012.

Express Scripts sued Walgreen in September, accusing the drugstore chain of publishing false marketing materials that it said were designed to encourage Medicare recipients to leave health plans with coverage through Express Scripts. Express Scripts sought injunctive relief to stop such communications.

The issue was then presented to an arbitrator after Walgreen asked the court for such a review. On Sunday night, the arbitrator denied Express Scripts’ preliminary request for injunctive relief.

Express Scripts said it would not comment on the ruling.

Now, as the end of the contract approaches, Walgreen is doing what it can to hold onto some of the business it has with Express Scripts’ patients.

On Monday, Walgreen offered to match or beat competitors’ costs to hold onto the U.S. military personnel prescriptions it fills through Express Scripts’ Tricare plan. Express Scripts said it would only keep Walgreen in the network at rates that it says are right for its clients.

Walgreen has brokered smaller agreements. For example, it will keep filling prescriptions for Blue Cross Blue Shield of Kansas City patients even if it leaves Express Scripts’ network.

Few Express Scripts customers are able to arrange those kind of side deals, leaving Walgreen susceptible to losing more Express Scripts-related business, analysts have said.

Shares of Walgreen fell 8 cents to $33.75 on Wednesday. Express Scripts declined $1.10 to $39.63 on Nasdaq.

The case is Express Scripts Inc. v. Walgreen Co, U.S. District Court for the Northern District of Illinois, Eastern Division, Case No.: 1:11-cv-06223.

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