Will CVS Be Hurt as Walgreen Cuts Ties? - TheStreet

Will CVS Be Hurt as Walgreen Cuts Ties?

CVS stock fell Monday after Walgreen said it would end its deal with its pharmacy benefits management business. Will the decision hurt CVS in the long term?
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(CVS article updated with comments from CVS.)



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CVS Caremark

(CVS) - Get Report

tumbled in Monday trading after rival



ended its deal with the pharmacy benefits management business.

Walgreen said on Monday that it will no longer handle prescriptions managed by Caremark because of disagreements over CVS's business practices and drug pricing. "Unfortunately, as a result of CVS Caremark's pharmacy benefit management practices toward Walgreens, it no longer makes good business sense for Walgreens to be part of their network for new and renewed plans," Walgreen CEO Greg Wasson said in a statement.

Walgreen does plan to honor current contracts, but won't participate in new or renewed plans. In about three years, it may no longer have any business dealings with Caremark.

Walgreen currently receives 7%, or about $4.5 billion, of its annual revenue from Caremark plans.

"Today's announcement by Walgreen is nothing more than a transparent effort to raise its reimbursement rates at the expense of plan sponsors and members and illustrates an inability to adapt to the demands of the marketplace in today's challenging and rapidly evolving health care environment," CVS said in a statement Monday.

Shares of CVS fell as much as 12% on Monday, before recovering slightly, to close down 8.1% at $31.04. Walgreen also fell, by 2.7% to $30.00.

The news begs a question, which we wiill ask below: Do you think CVS be hurt by Walgreen's decision to end its deal with CVS? Take our poll below, to see what


has to say.

-- Reported by Jeanine Poggi in New York.

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