SOS -- A CRITICAL READ -- Wal-Mart's Generic Prescription Plan: The Connection to Pharmacy Benefit Managers and The Big Drug Chains AND OUR STRS

Note from John Curry: STRS retirees, remember the Ohio STRS vs. Medco case in Hamilton County Common Pleas Court? Please take the time to read the letter below from CORE member John Bos to Dr. Asbury and STRS Member Services Director Gary Russell. PLEASE CLICK ON THE LINK FOR THE EXCELLENT ARTICLES CONCERNING PBMs AND THE WALL STREET JOURNAL TO UNDERSTAND WHERE JOHN BOS IS COMING FROM. PLEASE TAKE THE TIME TO READ THIS EMAIL AND ARTICLES in THEIR ENTIRETY AS IT IS CRITICAL TO OUR Rx SITUATION AND YOUR POCKETBOOK. I KNOW THIS IS "HEAVY READING," BUT IT IS REVEALING. THIS DOES INVOLVE OUR SITUATION! Will STRS consider this when they contract with the next PBM? God, I hope so!

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From: John Bos

To: Dr. Damon Asbury ; Gary Russell

Sent: December 01, 2006

Subject: Seeking Alpha: Wal-Mart's Generic Prescription Plan: The Connection to Pharmacy Benefit Managers and The Big Drug Chains

Please read the entire article!

http://retail.seekingalpha.com/article/17365

STRS is mentioned in the comments. They also stated that we should expect a drop in generic costs. Apparently this has not happened at STRS. We can save over $300 with Walmart for the generic drugs in 2007. Goodbye Caremark, Hello Wal-Mart.

In addition, STRS has costs to Caremark beyond our high deductibles. I have said for many months that they (PBM's) are all a bunch of crooks. I stand on my statement. Who is watching the cookie jar and who is assisting the STRS retirees?

The medical costs for my wife and myself (including insurance premiums) is in excess of $14,000 for 2006. This is WITHOUT any hospital admission or emergency room charges. In other words, we had a good medical year.

After reading the correspondence that Shirlee Zerkel has sent requesting associate coverage and premiums, my frustration levels have gone up even higher. How many associates at STRS paid out $14,000 for medical benefits??? You and I both know the answer to that question.

Please read the article!!!!!! PLEASE!!!

John Bos

Thought you might find this article on SeekingAlpha Retail Stocks interesting [also printed below]:

http://retail.seekingalpha.com/article/17365

Wal-Mart's Generic Prescription Plan: The Connection to Pharmacy Benefit Managers and The Big Drug Chains

Posted on Sep 22nd, 2006 with stocks: CMX, CVS, ESRX, MHS, WAG, WMT Larry Abrams submits: Consider this quote from a Barbara Martinez article in the Wall Street Journal on May 9, 2006 based on transcripts from an Ohio Teachers suit against Medco Health Solutions (MHS) for breach of fiduciary duty:

"Medco says that after overhead its profit margin on mail-order generic drugs for the retired Ohio teachers was only 23 percent and its total margin, after losses on brand-name drugs, was 1 percent."

In other words, the Big 3 Pharmacy Benefit Managers - Medco, Express Scripts (ESRX) and Caremark (CMX) - have been cross subsidizing low to nil margins on mail order brands, and no general management fees, with high margins on mail order generics.

Furthermore, the Big 3 PBMs basically set the price of their retail competitors -- Walgreen (WAG) and CVS (CVS) -- an example of conflict of interest and self-dealing if there ever was one.

Wal-Mart (and for that matter Costco) know of this cross-subsidy and do not need high margin generics to cross-subsidize other lines (eg. mail order brands for PBMs and the front store operations of WAG and CVS).

The pressure for better prices on generics will come from plan sponsors that contract out to PBMs -- the United Healthcare (UNH), the Blues, Principal, Humana, GM, Ford, IBM, Medicare, Medicaid.

This will force PBMs to respond by reducing their margins on mail order generics, will force WAG-CVS to do likewise at retail, and to make up the shortfall with higher prices elsewhere (management fees, mail order brand margins for PBMs, and front store margins for WAG and CVS)

That is the connection between the Wal-Mart (WMT) announcement and its effect on stock prices of other drug supply chainers.