Express Scripts customers once again will be able to fill prescriptions at Walgreen stores, after the two companies announced Thursday that they have resolved a contract dispute, the Wall Street Journal reports.
Walgreen ended its relationship with Express Scripts on Jan. 1, after battling over contract negotiations for months. Express Scripts customers had to switch to another pharmacy or pay for medications out of pocket if they wanted to continue to fill prescriptions Walgreen stores.
In June 2011, Walgreen said it would sever ties with Express Scripts at the end of the year because the pharmacy benefit manager pays less than the published costs of providing prescriptions (Martin/Kell, Wall Street Journal, 7/19).
According to the New York Times, analysts estimate that the dispute cost Walgreen more than $4 billion in revenue and caused Walgreen's stock to decline significantly (Japsen, New York Times, 7/19). Express Scripts customers accounted for 88 million of the 819 million prescriptions Walgreen filled in 2011.
The companies did not disclose financial terms of the new multiyear agreement, which takes effect Sept. 15 (Frost, Los Angeles Times, 7/19). The agreement does not mean Walgreen will automatically recover all of its lost customers, according to the New York Times (New York Times, 7/19).
However, the deal already has had a positive effect for Walgreens. In the wake of Thursday's announcement, Walgreen's shares jumped by nearly 12% (Krauskopf/Wohl, Reuters, 7/19). Competitors CVS Caremark and Rite Aid saw shares decline by about 6% (Wall Street Journal, 7/19).
CVS Expects To Retain Business Gained From Walgreen, Express Scripts Dispute
Walgreen competitor CVS gained customers from the dispute, and CVS officials on Thursday said they expect to retain at least 50% of the business acquired as a result of the rift, Reuters reports.
CVS said this new business is expected to add about five cents per share to its profit in the second half of 2012 (Wohl, Reuters, 7/19).