(Updated, 4 p.m.)
WOONSOCKET – CVS Caremark Corp. stock dropped the most in seven months on Monday after Walgreen Co. announced it will no longer participate in new or renewed prescription-drug plans awarded to the company’s pharmacy-benefit-management division.
Beyond Cash Donations: How New Forms of Giving Are Transforming Not-for-Profit Accounting
Evolving Funding Landscape for Not-for-Profits Not-for-profit organizations are being asked to do more with less,…
Learn More
CVS shares dropped as low as $29.62, their lowest point since Nov. 5, in New York Stock Exchange trading before partially recovering to close at $31.04, down $2.75, or 8.1 percent, according to Bloomberg News.
Deerfield, Ill.-based Walgreen said working with CVS plans “no longer makes sense to us” because the local pharmacy giant’s relationship with Walgreen “fundamentally changed” in the wake of the 2007 merger of CVS Corp. and Caremark Rx Inc., citing a lack of communication and changes in reimbursement rates.
“Unfortunately, as a result of CVS Caremark’s pharmacy-benefit-management practices toward Walgreen, it no longer makes good business sense for Walgreen to be part of their network for new and renewed plans,” Walgreen President and CEO Greg Wasson said.
CVS issued its own statement, saying it was “surprised and disappointed” by Walgreen’s decision but open to discussing it.
“Today’s announcement by Walgreens 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’ statement said.
“The timing’s opportunistic” on Walgreen’s part, Jeff Jonas, an analyst at Gabelli & Co., told Bloomberg. “We’re getting into the final selling season for 2011 drug plans, and this creates a lot of uncertainty and a lot of disruption.” He said the move could hurt CVS as it tries to renegotiate contracts for next year.
Walgreen Co., the largest U.S. pharmacy chain by stores and sales, operated 7,680 locations in 50 states, Washington, D.C., Puerto Rico and Guam as of Feb. 28, according to a Securities & Exchange Commission filing in March.
CVS operated 7,063 retail drugstores in 41 states, Washington, D.C., and Puerto Rico as of March 31, most of them under the CVS/pharmacy or Longs Drugs brands, according to an SEC filing last month.
