Express Scripts and Kroger Reconcile, Renewing Pharmacy Network Agreement

In a significant turn of events for the pharmaceutical industry, Express Scripts and Kroger Health have announced a new agreement that brings Kroger pharmacies back into Express Scripts' network after a two-year hiatus. This development marks the end of a contentious dispute that began in 2022 when Kroger terminated its pharmacy provider agreement with Express Scripts over pricing disagreements.

Agreement Details and Impact

The new agreement, announced on February 5, 2025, allows customers enrolled in Express Scripts' Medicare prescription drug plans and Tricare plans for military members to fill prescriptions at Kroger pharmacies. Additionally, Express Scripts' commercial and Medicaid clients now have the option to include Kroger pharmacies in their networks.

This reconciliation is expected to have substantial financial implications for both parties. Kroger had previously reported that its sales growth would have been nearly tripled if not for the Express Scripts contract termination. The reunion with Express Scripts, which manages drug benefits for over 100 million people, is likely to boost Kroger's pharmacy revenue significantly.

Industry Context and PBM Scrutiny

This agreement comes at a time of increased scrutiny on pharmacy benefit managers (PBMs) like Express Scripts. The pharmaceutical supply chain middlemen have faced accusations of artificially inflating drug costs and leveraging market power to force unfavorable contracts on pharmacies.

The Federal Trade Commission is currently pursuing legal action against Express Scripts, CVS' Caremark, and UnitedHealth's Optum Rx—collectively known as the "Big Three" PBMs—for allegedly inflating insulin costs. These three companies control approximately 80% of prescriptions in the United States.

Broader Implications for Pharmacy-PBM Relations

The Kroger-Express Scripts reconciliation highlights the complex and often strained relationships between pharmacies and PBMs. While large chains like Kroger have more negotiating power than independent pharmacies, even major players can find themselves at odds with PBMs over reimbursement rates and contract terms.

This agreement may signal a shift in the industry dynamics, potentially influencing future negotiations between other pharmacies and PBMs. However, the specifics of the new contract between Kroger and Express Scripts remain undisclosed, leaving questions about what concessions, if any, were made by either party to reach this agreement.