Press Room

For press inquiries, contact Matt Painter at matthew.painter=at=changetowin.org


Change to Win on Reports About Walgreens’ Inversion Decision:
“Inversion is not in the interest of America and not in the interest the Walgreens’ stakeholders”

The following statement can be attributed to Nell Geiser, Associate Director of Change to Win Retail Initiatives:

“If reports are accurate and Walgreens will not leave America to avoid taxes, this has been an unnecessarily drawn-out and secretive process to arrive where Walgreens should have been from the start: an inversion is not in the interest of America and not in the interest the company’s stakeholders.

“This tax dodge could have cost U.S. taxpayers $4 billion in the first five years. It appears that the company changed its mind after an outcry from Washington and customers across America made it rethink this decision.

“The question remains, in this transformational moment with turmoil in the company’s leadership, is Walgreens doing what’s best for its long-term stakeholders or is it unduly influenced by banks, hedge funds and its international partner.”

Change to Win Retail Initiatives co-authored a study with Americans for Tax Fairness on the potential costs of a Walgreens inversion to Switzerland—an estimated $4 billion in the first five years. The groups also documented that Walgreens receives roughly $17 billion a year—nearly a quarter of its revenue—from Medicare and Medicaid.

Change to Win consulted with former Treasury official Stephen Shay on a proposal outlining how the Obama administration could take earnings stripping incentives out of inversions. Change to Win estimates that more than 80 percent of Walgreens’ earnings stripping opportunities with inversion would be removed by Shay’s proposal. The exact figure is dependent on a number of factors related to the company’s new capital structure.

A group of Senators called for executive action to stop inversions today in a letter to President Obama.

Change to Win Retail Initiatives is a project of the Change to Win labor federation. Since 2005, it has been an active stakeholder in the pharmacy industry, advocating on behalf of workers and the general public for consumer protections, health care access, tax fairness and other safeguards to rebuild the middle class.

 


New report analyzes Walgreens possible move of its corporate address offshore to avoid paying $4 billion in U.S. Taxes over a five year period. 

WASHINGTON – A new report released today by Americans for Tax Fairness (ATF) and Change to Win Retail Initiatives estimates that Walgreens could cost taxpayers $4 billion in lost revenue over five years should the company decide to renounce its American corporate legal status and move its official address to Switzerland, a tax haven. The company is widely reported to be considering this move and says it will announce its intentions as soon as this summer. Walgreens is the nation’s largest pharmacy retailer with 8,200 stores and locations in all 50 states.

The report, Offshoring America’s Drugstore: Walgreens May Move its Corporate Address to a Tax Haven to Avoid Paying Billions in U.S. Taxes, bases its analysis on estimates provided by three major equity research firms, which have said that the company’s income tax rate could be cut to 20%; Walgreens currently pays about a 31% tax rate.

The report finds that Walgreens benefits substantially from U.S. taxpayer dollars:

  • Walgreens receives nearly a quarter of its income from taxpayers through government programs. Of its $72 billion in 2013 sales, an estimated $16.7 billion, or 23%, came from Medicare and Medicaid.
  • It received $46 million in tax breaks over 10 years from the state of Illinois, the current legal location of the Walgreens corporation.
  • U.S. taxpayers have spent $11 million subsidizing executive bonuses at Walgreens over the last five years. A table showing the Walgreens executives getting subsidies is available here.

“Walgreens may decide to no longer be an American company simply so it can dodge paying its fair share of taxes,” said Frank Clemente, executive director of Americans for Tax Fairness. “Many Americans will find it unfair and deeply unpatriotic if the company moves offshore, while continuing to make its money here, leaving the rest of us to pick up the tab for its tax avoidance.”

“It is unconscionable that Walgreens is considering this tax dodge—especially in light of the billions of dollars it receives from U.S. taxpayers every year,” said Nell Geiser, Associate Director of Change to Win Retail Initiatives. “Walgreens should show its commitment to our communities and our country by staying an American company.”

Walgreens is reportedly considering a so-called “corporate tax inversion,” which is made possible by a loophole in the tax code that allows American companies re-incorporate in a foreign country when just 20% of its stock is owned outside of the United States. Walgreens might meet that criterion by completing its purchase of Europe’s largest pharmaceutical retailer and wholesaler Alliance Boots, which is expected to happen in early 2015. Alliance Boots has itself come under criticism for tax avoidance, particularly when it moved from the United Kingdom to the tax haven of Switzerland in 2008.

Walgreens is reportedly under pressure from several large hedge funds and Alliance Boots Executive Chairman Stephano Pessina—who is Walgreens’ largest shareholder—to make the move to Switzerland.

“Because Walgreens is present in thousands of American communities, its potential plan to change its address to Switzerland to avoid paying U.S. taxes may raise the ire of the American public,” said Clemente.

Walgreens may find itself at the center of a public relations firestorm, as it struggles to explain to American consumers why it should continue to enjoy the substantial benefits of operating in the United States while it reincorporates in Switzerland.

The full report can be found at this link

Americans for Tax Fairness is a diverse coalition of 400 national and state organizations that collectively represent tens of millions of members. The organization was formed on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. ATF is playing a central role in Washington and in the states on federal tax-reform issues.

Change to Win Retail Initiatives is a project of the Change to Win labor federation. Since 2005, it has been an active stakeholder in the pharmacy industry, advocating on behalf of workers and the general public for consumer protections, health care access, tax fairness and other safeguards to rebuild the middle class.


Complaint Alleges Walgreens Executive and Indiana Pharmacy Board Staff Violated Ethics Laws to Approve Controversial Pharmacy Model

—Watchdog Groups Change to Win and Common Cause Indiana Argue that Approval of the “Well Experience” Model was Tainted and Puts Hoosiers at Risk—

INDIANAPOLIS, March 31, 2014—An executive of Walgreen Co. abused his position as the Indiana Board of Pharmacy (IBOP) President to help gain approval for a controversial Walgreens pharmacy model called “Well Experience,” an ethics complaint filed today alleges.

Change to Win (CtW) Retail Initiatives and Common Cause Indiana filed the complaint with the Office of the Inspector General.  The watchdog groups charge that Ethics Code violations by Walgreens Manager of Pharmacy Affairs Bill Cover and pharmacy board staff corrupted the regulatory process and led to the board approving a pharmacy format that creates risks to public health and patient privacy.

Indiana law prohibits state appointees from participating in decisions in which they or their employer have a financial stake in the outcome.  Heavily redacted e-mails obtained through the state’s Access to Public Records Act show that Cover was central to the Board’s Well Experience decision-making process and that he used his position on the board to secure special privileges for Walgreens.

The e-mails illustrate inappropriate involvement in the approval process including: Cover’s collaboration with IBOP staff to provide information from Walgreens to other board members; his deliberation on regulatory issues regarding Well Experience with the board’s executive director; and his solicitation of board members’ concerns before any public discussion about Well Experience.

According to the complaint, Cover and the board improperly kept the approval process from public view. The board held secret meetings with Walgreens management in Illinois deliberately arranged to circumvent Indiana laws requiring open meetings.

“Walgreens and the Board of Pharmacy’s disregard for Indiana’s executive branch ethics policies is deeply disappointing,” said Julia Vaughn, Policy Director of Common Cause Indiana. “Good policy is rarely made behind closed doors, and it is simply unacceptable for anyone to take advantage of their position in state government to advance the interests of a private company.”

Additionally, neither Cover nor the board appear to have sought an opinion from the Ethics Commission regarding Cover’s conflict of interest, as required by state statute.

“We believe Well Experience is a deeply flawed pharmacy model that increases risk to patient privacy and public health, and in Indiana, there was an equally flawed process to approve it,” said Nell Geiser, Associate Director of Retail Initiatives at CtW.

Conflicts with State Pharmacy Regulations

The complaint further alleges that the model was not in compliance with Indiana pharmacy regulation, and that Walgreens was aided in its efforts to obtain board approval by Cover’s behind-the-scenes lobbying.

Well Experience moves pharmacists out of their traditional work area to highly visible, public desks. At the time the model was approved, Indiana statute required pharmacists to work within reasonable visual and vocal distance of the technicians they supervised, yet pharmacists in this model are separated by a wall from technicians. In Well Experience pharmacies a single pharmacist generally remains responsible for the entire pharmacy operation, including overseeing technicians, and carries out these supervision duties using digital pictures and live video feeds. In 2013, the board created new pharmacy rules to allow the use of this type of technology to supervise technicians—two years after Well Experience was approved.

Increased Risks to Hoosiers with Well Experience

The relocation of pharmacists and inadequate staffing create problems for consumers.  Well Experience has come under scrutiny from consumer advocates as well as state and federal regulators.

In September 2013, CtW released an investigation that found patient privacy violations in 65 percent of Indianapolis-area Well Experience stores and inadequate medication security in 35 percent.  A follow-up investigation, released this month, found privacy breaches in 60 percent of Indianapolis locations and prescription drugs left unattended in 30 percent.

CtW also found new types of interruptions and distractions to pharmacists at Well Experience pharmacies. Distractions have been associated with higher rates of medication errors in academic studies.

This month, the Wall Street Journal reported that the US Department of Health and Human Services is investigating patient privacy violations at Well Experience pharmacies. Several state boards of pharmacy have either prohibited the pharmacy format or have required modifications.

The Indiana Board of Pharmacy was the first in the nation to approve the model in July 2011.  Walgreens has roughly 50 Well Experience pharmacies in the state. Cover remains a member of the pharmacy board and was its president from February 2011 to January 2012.

Common Cause Indiana is a grassroots lobbying organization that works for open, honest and accountable government.

CtW Retail Initiatives is a project of the Change to Win labor federation. Since 2005, it has been an active stakeholder in the pharmacy industry, advocating on behalf of workers and the general public for consumer protections, health care access, drug price transparency and other safeguards.


Study: Walgreens’ New Pharmacy Model Increases Risks to Public Health, Patient Privacy and Medication Security

Complaint Filed with US Dept. of Health and Human Services Alleging HIPAA Violations; Report Based on 100 “Well Experience” Store Observations

Washington, DC, September 23, 2013—Walgreens’ attempts to revolutionize the pharmacy may increase risks of medication errors and patient privacy violations, according to a new study by Change to Win Retail Initiatives (CtW).  The report titledBehind the Desk uses data from 100 observations of Walgreens’ “Well Experience” pharmacy model in 50 stores located in Florida, Illinois, and Indiana.  Based on the study’s findings, CtW filed a complaint alleging numerous breaches of the Health Insurance Portability and Accountability Act (HIPAA) with the US Department of Health and Human Service’s Office of Civil Rights (OCR).

“The right to privacy is an essential element of quality health care, and Well Experience appears to have fundamental flaws in its design and execution that warrant regulatory action,” said Deborah C. Peel, MD, Founder and Chair of Patient Privacy Rights, a leading national health care privacy organization.  “As the nation’s largest drug chain, Walgreens should know that playing fast and loose with sensitive, protected patient information is not only wrong but also illegal.”

CtW’s investigation details significant problems with Well Experience, including:

  • Violations of patient privacy.  In 80 percent of stores visited, sensitive, HIPAA-protected patient information, such as medical histories, was left unattended and visible to customers in the pharmacy area.
  • Inadequate medication security. Prescription medicine—in one case hydrocodone—was left unattended and within the reach of customers in 46 percent of stores visited.
  • Increased pharmacist distractions.  Field researchers observed nearly 150 distractions and interruptions to pharmacists that were unique to the Well Experience pharmacy model’s design —over one third of the total number observed. Interruptions and distractions are associated with increased medication errors.
  • Low rates of patient counseling.  Field researchers observed an average consultation rate of 8.2 percent in surveyed Well Experience pharmacies, despite Walgreens’ claims that the model increases counseling. Academic studies of chain pharmacies using secret shoppers found rates of 27 to 53 percent, Pharmacists are required by law to offer counseling for new prescriptions.

A key feature of Well Experience is the pharmacist sits in a work station in front of the pharmacy counter, and is typically not in the traditional prescription fill area. This relocates the pharmacist’s work station from a private space in the pharmacy to a public space.  The out-in-front pharmacist remotely monitors the pharmacy technicians and checks the accuracy of prescriptions using photos and video displayed on a computer screen.

The OCR complaint raises additional privacy concerns stemming from the out-in-front pharmacist work station. Pharmacists’ computer screens and mobile devices, used to review prescription information, were sometimes observed to be unattended and visible to the public. The new format also enables shoppers to overhear sensitive telephone conversations about patients. Despite the vulnerabilities created by relocating the pharmacist to a public area, Walgreens’ policies and procedures appear to provide scant guidance on HIPAA compliance.

The report echoes the concerns of several state boards of pharmacy about Well Experience’s impact on the supervision of pharmacy technicians and the accuracy of prescription fills. For example, the Maryland board has rejected the model last year.

“Walgreens must not compromise pharmacists’ ability to perform their core duties of safely dispensing medication, counseling patients and protecting sensitive health information,” said Nell Geiser, Research Director of Change to Win Retail Initiatives.

About Change to Win Retail Initiatives

Change to Win Retail Initiatives is committed to making retailers more accountable and transparent to consumers, workers and all stakeholders.


Walgreens Loyalty Program Leaving Many Customers Unrewarded, According to New Poll

Survey’s Results Raise Doubts about Balance Rewards’ Impact on Sales;
Gives Insight into Recapture of Express Scripts Customers.

A new nationwide poll of more than 2,000 Walgreens (NYSE, NASDAQ: WAG) shoppers raises concerns about the effectiveness of the company’s Balance Rewards loyalty program in changing consumer behavior.  Despite Balance Rewards’ impressive membership growth since its September 2012 launch, the poll points to problems with the program’s design that may be limiting customer engagement and participation.

Key findings include:

  • No clear impact on changes in spending.  Among regular Walgreens shoppers, Balance Rewards members are no more likely than non-members to say they have increased their spending at Walgreens.
  • Not meeting members’ demands for savings.  Only 16 percent of members believe they have saved a significant amount of money with the program, and three-quarters of members say that the program’s deals do not fit with items they usually buy.
  • Points redemption and accumulation difficult. Twenty-one percent of members report having redeemed Balance Rewards points.  More than two-thirds (69 percent) of members say it is not easy to earn rewards.
  • Balance Rewards points don’t pay off.  Based on customer-reported estimates of membership spending and points accumulation, the average Balance Rewards member is earning less than one cent for every dollar spent at Walgreens after six months of participation in the program—less than half of what CVS ExtraCare reports its members receive.

The poll also found that only 41 percent of customers who moved a prescription from Walgreens in 2012 due to insurance coverage issues say they have moved the prescription back to Walgreens. One analyst estimates that its dispute with pharmacy benefits manager Express Scripts cost Walgreens roughly 77 million prescriptions in 2012.

“Now is a critical time for Balance Rewards, as customer sentiment crystallizes and investors expect to see results,” said Nell Geiser, research director of Walgreens Strategy Watch, which commissioned Kelton Research to conduct the survey.  “Walgreens has made small adjustments to Balance Rewards to increase its appeal, but we believe the poll’s findings point to larger, structural problems with the program.  It simply may not be engaging and delighting customers in the way the company says it is.”

Loyalty and marketing experts have raised concerns that Balance Rewards point system may be overly complicated and delay rewards for too long for consumers.  In fact, 83 percent of polled Balance Rewards members said they look for membership programs that offer points on all purchases, not just selected items as Walgreens offers.

Walgreens Strategy Watch is a corporate transparency initiative of Change to Win.

Methodology

Walgreen Strategy Watch, a corporate transparency initiative of Change to Win, commissioned Kelton Research to conduct the poll in May of 2013.  Kelton pollsters reached 2,139 Walgreens customers including 1,134 Balance Rewards members. In this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 2.9 percentage points (for members) and 3.1 percentage points (for non-members) from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample. The margin of error for any subgroups will be slightly higher. 


Walgreen’s In-Store Failings Threaten Customer Loyalty and Sales, Says New Report

Study Finds Out-of-Stock Sale Items Persistent in 76% of Walgreens Stores, Mislabeled Promotions Common in 94%.

Stores Surveyed in Los Angeles, Miami, New York and St. Louis

New York, May 16, 2013—Walgreen Co.’s (NYSE: WAG) failure to execute the most basic of retail tasks—keeping shelves stocked and correctly labeled—may be undermining efforts to build customer loyalty and raise flagging sales, according to a report issued today by Walgreen Strategy Watch, a corporate transparency initiative of Change to Win.  The report, titled Off Balance: Out of Stock and Mislabeled Sale Items at Walgreens, details how widespread inventory and promotional problems at the nation’s largest chain drugstore may threaten its loyalty program Balance Rewards.

During March and April, researchers made three trips to 200 stores for a total of 600 visits in some of the company’s largest markets: Los Angeles, Miami, New York and St. Louis. Key findings of the report, available for download at www.WalgreenStrategyWatch.org, are:

  • Out-of-stock problems persistent at more than three-quarters of stores.  Seventy-six (76) percent of stores had out-of-stock sale inventory during every survey visit.
  • Items were consistently out of stock in multiple markets.  For example, a store-brand feminine hygiene product was out of stock during 73 percent of visits across all markets. 
  • Mislabeled sale items common in nearly every store.  Ninety-four (94) percent of stores had at least one discounted item not marked as on sale during multiple survey visits, and 50 percent of surveyed locations had three or more items that were not labeled as on sale during each visit.

“Our findings point to significant in-store execution problems that raise questions about Balance Reward’s effectiveness in driving front-end sales,” says Nell Geiser, Director of Walgreen Strategy Watch. “For years, Walgreen has been known for its operational excellence, but now we believe management may have lost focus on its core retail business.”

Since Walgreen introduced Balance Rewards in September 2012, it has not disclosed detailed metrics showing the program’s impact on customer behavior.  To understand how well the company is implementing the promotions important to Balance Reward’s success, researchers surveyed stores for a basket of common health and household items advertised in the company’s circular and online, sales that now require membership in Balance Rewards.

One key measure of performance has suffered since the loyalty program was introduced eight months ago: Walgreen’s front-end, or non-prescription, sales have dropped for comparable stores.  This decline comes amidst Walgreen’s largest marketing campaign ever, announcing Balance Rewards’ launch, and as its competitors experience front-end sales growth.

Retailers lose sales 40 percent of the time when customers do not find an item on hand, causing significant lost sales ever year.

Walgreen Strategy Watch (www.WalgreenStrategyWatch.org) is an independent corporate transparency initiative of the Change to Win labor federation.  Members of CtW affiliates participate in Taft-Hartley plans with over $200 billion in assets, including ownership of Walgreen common stock.  CtW’s affiliates represent drugstore workers, including some of those employed by the Walgreen Company.  Walgreen Strategy Watch shares information and analysis with various stakeholders.