Express Scripts CEO: Benefit Manager, Walgreen Remain At Odds
17 November 2011 - 3:57AM
Dow Jones News
Pharmacy-benefit manager Express Scripts Inc. (ESRX) and
drugstore chain Walgreen Co. (WAG) don't appear any closer to
mending their rift and signing a new deal for 2012, Express
Scripts's top official indicated Wednesday.
A dispute over terms for a new contract erupted publicly in
June, when Walgreen said it wouldn't be part of Express Scripts's
pharmacy-provider network when their current deal expires after
this year. While analysts initially believed some kind of agreement
was still possible, the companies haven't settled their differences
and appear ready to break ties.
"There's a big division right now between us and them," said
George Paz, Express Scripts's chairman and chief executive, during
a Lazard Capital Markets health-care conference.
He reiterated that Express Scripts is willing to sit down and
talk with Walgreen, but said other side doesn't "appear to be
wanting to do that."
Companies like Express Scripts manage prescription-drug benefits
and claims for employers and health-insurer clients. They also run
mail-order pharmacies, which are a rising source of tension between
them and traditional retail outlets. Pharmacy groups have strongly
opposed Express Scripts's plan to buy rival pharmacy-benefit firm
Medco Health Solutions Inc. (MHS).
Walgreen's exit from Express Scripts's network means the benefit
manager's clients will have to go elsewhere to fill prescriptions.
Walgreen has acknowledged Express Scripts's network represents
about $5.3 billion in annual sales, but said the long-term fallout
from accepting unfavorable contract terms would be worse than the
short-term impact. The two sides have had differing takes on who is
pushing unfavorable terms.
Analysts don't see as much of an immediate hit for Express
Scripts, although the company must convince customers they'll
retain easy pharmacy access without the largest U.S. drugstore
chain's thousands of outlets. Express Scripts has said it has
strong client support to move ahead without an agreement.
Paz on Wednesday discussed his view of the sticking points and
how the dispute unfolded while reiterating that Express Scripts
remains willing to talk. He also said the money and time both
companies have spent managing this dispute is "pretty ludicrous,"
and that it's "sad we're in this situation."
Express Scripts shares recently traded down 1.8% to $45.96 while
Walgreen shares moved up 5 cents to $32.60.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
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