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Animosity Increasing Between PBMs and Pharmacies

Both Walgreen and Express Scripts stand to lose if their dispute isn't resolved.

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Retail drugstore chain  Walgreen (WAG) and pharmacy benefit manager (PBM)  Express Scripts (ESRX) remain locked in a contract dispute. If the two sides can't make a deal by the end of the year, millions of Express Scripts' members could be forced to fill their prescriptions elsewhere. Both companies stand to lose from this fight, which we see as evidence of a broader trend of increasing animosity between health-care payors and health-care providers over reimbursement rates.

The Walgreen-Express Scripts spat comes about one year after a similar disagreement between Walgreen and another pharmacy benefit manager,  CVS Caremark (CVS). In that case, Walgreen and Caremark reached an agreement in 11 days, preventing any serious disruption to either party. While there is no way to know exactly what the final contract terms were, we suspect that the resolution in that case was favorable to Walgreen and that Walgreen hopes to repeat the experience with Express Scripts.

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Matthew Coffina has a position in the following securities mentioned above: ESRX. Find out about Morningstar’s editorial policies.