A Big Question Looms for Walgreen
&Nbsp; ) last year, which cost Walgreen nearly $4.5 billion in annual revenue. If the current deal with Express Scripts isn't renewed, it would cut Walgreen's annual revenues by more than 7%. Walgreen now fills more than 20% of U.S. prescriptions, but without the services of Express Scripts, that number is sure to decrease.According to Express Scripts, the sticking point is that non-specialty branded medication prices are expected to increase by over 30% and specialty branded medication prices by 50% over the next three years. Express Scripts' planned repayment rate cuts were unacceptable to Walgreen, which said that the rates were below the industry standard.
A look at the quarter
Regardless of this brouhaha, the company has been performing well. Profit jumped by more than 30% on a year-on-year basis, and the company said it's on track to meet its full-year guidance. Revenues for the quarter increased to $18.37 billion, up 6.8% from a year ago, and same-store sales increased 4.1%. Much of this growth was aided by a 6.4% increase in prescription sales, which accounted for more than 65% of total sales. The quarter also brought an increase in customer traffic and average sales, as demand for cough/cold, pain, sleep, and private-brand drugs went up.
Walgreen also opened or acquired 41 new stores during the quarter and expects to close the year with store growth of 2.5%-3%. It recently acquired drugstore.com , which will bring with it more than 3 million customers and 60,000 online-ready products.
Fundamentals
The gross margin rose by 0.5 percentage points, aided by higher generic-drug sales and higher front-end sales growth (except prescription drugs). Net income rose 30.2% year over year, to $603 million.
The Foolish bottom line
Walgreen performed well this quarter and should continue growing into its next and final quarter of the year. The effect of its split with Express Scripts, if that indeed happens, may not be felt this fiscal year. How it will react to the split is yet to be seen, but with a number of tie-ups and mergers this year, it may be able to cope with any adversities.
Express Scripts Pharmacy - News
Even though Walgreen (NYSE: WAG ) posted record top- and bottom-line numbers for its third fiscal quarter, shares fell by more than 5% as it indicated plans to sever ties with Express Scripts (Nasdaq: ESRX ) .
Express Scripts Inc., one of the largest pharmacy benefits managers in the US, spent $490000 in the first quarter as it lobbied the federal government on a host of health care issues. The St. Louis company said its interests included health care reform
Caremark will handle the mail-order and specialty benefit starting Jan. 1. It already handles the retail pharmacy part of that contract. Moody's said Express Scripts, St. Louis, may have the greatest financial flexibility of the three.
Hoey pointed to the kind of negotiating clout Walgreens wielded on Tuesday in its decision to discontinue talks with pharmacy benefit manager Express Scripts. Losing almost 8000 points of service carries greater consequences than losing a handful of
Express Scripts, Inc., one of the largest pharmacy benefit management companies in North America, is leading the way toward creating better health and value for patients through Consumerology(SM), the advanced application of the behavioral sciences to
Walgreen's Shocks Express Scripts
Is not renewing its agreement with Express Scripts. In a move that has shocked Express Scripts, Walgreen will not be a part of Express Scripts’ pharmacy provider network, effective January 1, 2012.
The company believes that Walgreen’s current rates are not competitive as compared with its peers. In the coming few years the cost of non-specialty branded medications is forecasted to increase about 10% annually and cost of branded specialty medications is expected to jump more than 14% per year. If Walgreen does not agree to adjust its rates, the clients and patients will be burdened by the branded price inflation.
Moreover, more than $60 billion worth of branded drugs are expected to lose patent protection in the near term, which will lead to generic versions of those medications hitting the market. If Walgreen provides competitive rates, clients and patients will be able to reap the economic benefits of increased generic utilization.
Walgreen’s current proposal of not adjusting rates is directed towards making profits for itself. Further, Walgreen wants to decide which clients and members to serve in a bid to focus on the most profitable ones. Express Scripts believes that neither the network providers nor Express Scripts should control pharmacy benefit plan design. This should be solely done by plan sponsors in the best interests of their members.
Meanwhile, Express Scripts had requested to continue the same contract terms that were mutually agreed upon earlier.
We note, if Walgreen maintains its current stance, Medicare prescriptions filled by it would cost the federal government an additional $300 million. These prescriptions can be filled at more than 50,000 other pharmacies for a lower price.
Express Scripts believes that Walgreen will negotiate its terms going forward in order to provide optimal care at a reasonable and competitive rate in the US.
We currently have a Neutral recommendation on Express Scripts, which carries a Zacks #3 Rank (short-term Hold rating).
Some , Jefferson County residents may want to find another pharmacy in 7 months. 
because pharmacy benefits manager Express Scripts Inc. doesn't pay it enough to fill prescriptions.
Walgreens may no longer accept Express Scripts as of January 1st. Express Scripts is the second largest pharmacy... 
RT : Walgreens Planning to Move Forward Without Express Scripts, Inc. Pharmacy Provider Network in 2012. Read more at 
Walgreens faces off with benefit manager Express Scripts Express Scripts Pharmacy - Bookshelf
Hoover's Handbook of American Business 2008
One of the largest pharmacy benefits management (PBM) companies in North America , Express Scripts has about 50 million members in the US and Canada. ...MANAGED CARE PHARMACY PRACTICE
1998 — Rite Aid Pharmacy Corporation purchases PCS Health Systems. ... Express Scripts created in 1986 by Sanus Corporation Health Systems. ...Plunkett's insurance industry almanac
Edward J. Stiften, CFO/Sr. VP George Paz, Chmn. Express Scripts, Inc. is one of the nation's largest independent pharmacy benefit managers, ...Plunkett's Health Care Industry Almanac 2006 (E-Book), The Only Complete Reference to the Health Care Industry
Edward J. Stiften, Sr. VP/CFO Barrett A. Toan, Chmn. Express Scripts, Inc. is one of the nation's largest independent pharmacy benefit managers, ...The Almanac of American Employers 2008, Market Research, Statistics and Trends Pertaining to the Leading Corporate Employers in America
Express Scripts provides progressive health care management by leveraging expertise in pharmacy benefit management (PBM) in order to positively ...Day-by-day Note Directory
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