The Five Dumbest Things on Wall Street This Week

1. Down on the Pharmacy

CVS CVS could use some strong medicine.

The drug store chain surprised Wall Street Wednesday by unveiling a $20.6 billion acquisition of mail-order pharmacy Caremark CMX. The deal was billed as a merger of equals, creating the first integrated pharmacy services outfit.

"Together, CVS and Caremark will help manage the costs and complexities of the U.S. healthcare system," said CVS chief Tom Ryan, who will run the new company. That's a tall task, given runaway inflation in healthcare spending in recent years.

But Ryan isn't done there. He also sees the new company, to be based in CVS' hometown of Woonsocket, R.I., "enhancing value for employers, health plans and consumers."

So far the agreement isn't enhancing value for investors. CVS dropped 7% in furious trading Wednesday, and Caremark dropped 2%, erasing the modest premium that Caremark holders were supposed to get out of the stock swap.

The selloff only steepened the recent decline in CVS and Caremark. Shares across the pharmacy sector have plunged between 15% and 30% in the six weeks since Wal-Mart WMT cut prices on generic drugs. In the meantime, drug-industry players have come under pressure from wholesale pricing changes as well.

That dismal backdrop had some observers deriding the deal as a desperation move. Needless to say, CVS isn't buying that line.

"We are not doing this," Ryan said on a Wednesday afternoon conference call, Dow Jones reports, "from a position of weakness."

Could have fooled us.

Dumb-o-Meter score: 93. Oddly, this so-called merger of equals will leave CVS holders controlling nearly 55% of the stock.

To watch Colin Barr's video take of this column, click here.