Walgreens To Stop Filling Medicaid Prescriptions at 64 Washington Pharmacies as of Feb. 15

DEERFIELD, Ill., January 13, 2010 - As a result of continued reduction in reimbursement under the State of Washington Medicaid program, Walgreens (NYSE: WAG)(NASDAQ: WAG) today announced it will withdraw 64 of its pharmacies from the state's Medicaid program as of Feb. 15. These pharmacies represent 75 percent of the company's total Medicaid business in the state. Walgreens operates 121 pharmacies throughout Washington.

The most recent payment reduction results from a Massachusetts court ruling last fall that reduced the industry pricing standard, even though pharmacies' acquisition costs haven't changed. While many private insurance providers have adjusted pharmacy reimbursement rates to limit the impact of the court ruling, Washington's Medicaid program has yet to do so. That's led to significantly lower payments to pharmacies that severely impact the economic viability of doing business in Washington.

In fact, the most recent payment reduction has resulted in Washington Medicaid reimbursing Walgreens below its cost to break even on nearly 95 percent of brand name medications.

Kermit Crawford, Walgreens senior vice president of pharmacy, said, "Walgreens is committed to providing cost-effective pharmacy services across the state. We have thousands of loyal patients who appreciate and trust our pharmacists, and we are absolutely committed to patient care. That's why we have worked, and are committed to working, diligently with the state on ways to lower its spending on prescription drugs while ensuring patients have access to the full benefit of their drug therapy."

In the past year, Walgreens and the state's pharmacy community have identified tens of millions of dollars in savings to the state through more effective medication management. If implemented, these savings would more than offset the lower payments pharmacies are now receiving.

While continued reductions in pharmacy payments may offer short-term savings, it could have a negative effect on long-term costs and Medicaid patient health. Studies show that medications are effective at lowering overall health costs by keeping people healthy and preventing expensive hospital procedures, while comprising only about 10 percent of overall health care costs. If pharmacies are forced out of the Medicaid program due to these payment reductions, it is likely that other health care costs - which represent the majority of health expenditures - will increase.

Crawford concluded by saying, "Now is the time, with the legislature back in session, to fix the state's pharmacy reimbursement rates. We look forward to working with elected officials over the course of the next several weeks to address this important issue."

Walgreens (www.walgreens.com), which operates 121 drugstores in the State of Washington, provides the most convenient access to consumer goods and services and cost-effective pharmacy, health and wellness services in America through its retail drugstores, Walgreens Health Services division and Walgreens Health and Wellness division. Walgreens Health Services assists pharmacy patients and prescription drug and medical plans through Walgreens Health Initiatives Inc. (a pharmacy benefit manager), Walgreens Mail Service Inc., Walgreens Home Care Inc., Walgreens Specialty Pharmacy LLC and SeniorMed LLC (a pharmacy provider to long-term care facilities). Walgreens Health and Wellness division includes Take Care Health Systems, a manager of worksite health and wellness centers and in-store convenient care clinics.