The Delaware Department of Health and Social Services accused Walgreens of "refusing to share in the sacrifice necessary to help Delaware meet its historic budget challenge," after the company announced Thursday that it will no longer fill Medicaid prescriptions at its 60-plus Happy Harry's locations in the First State.

However, Medicaid patients will be able to continue to have their prescriptions filled at more than 100 other pharmacies, including Rite-Aid, Shop Rite, Acme, Pathmark, Super G, Walmart, and Target, plus independently owned pharmacies throughout Delaware.

To help meet the State’s historic $800 million budget shortfall, the Department of Health and Social Services reduced the rate it pays pharmacies for medication sold for Medicaid recipients.  The reduction saved the State $ 1,000,000, about 2 percent of the total amount spent last year by the State on pharmacy reimbursement.  Reducing the medication payments is one of the ways the administration has been able to avoid proposing cutting Medicaid benefits or removing Delawareans from the program.

Walgreens, according to its recent SEC filing in January 2009, enjoyed $59 billion in total revenue and $2.2 billion in net income for its last reported fiscal year.  In addition, Walgreens recently reported second quarter sales of $16.5 billion, a record for the company.  The reduced rate refused by Walgreens amounted to about $500,000 in savings for the State of Delaware, while Walgreens stood to collect an estimated $18 million in revenue from State, even with the reduced rate.

The Department has been negotiating with Walgreens in an effort to keep them in the program and offered compromises, including modifying the reduction by 50 percent. However, Walgreens rejected those offers of compromise with their public announcement today.  

According to Secretary Rita Landgraf, “I am very disappointed that Walgreens has taken this action.  At a time when more and more Delawareans are losing their jobs, are being asked to pay higher taxes and state employees are being asked to take a significant pay-cut, we need our business partners to help share in the sacrifice that these difficult times require.  Walgreens decision today, while unfortunate, will provide an excellent opportunity for other pharmacies to gain market share in Delaware.”   

According to Alan Levin, the former CEO of Happy Harry’s who sold the Delaware-based chain to Walgreens in 2007 and is now the Director of the Delaware Economic Development Office, “the State’s offer was fair and reasonable and should allow pharmacies to make a reasonable profit.”