Rite Aid Sees Potential Boost From Walgreen/Express Scripts Spat
September 08 2011 - 4:06PM
Dow Jones News
Rite Aid Corp. (RAD) may see more pharmacy customers as a result
of the dispute that threatens to end the relationship of larger
rival Walgreen Co. (WAG) and pharmacy-benefits manager Express
Scripts Inc. (ESRX).
Rite Aid could even pick up some disgruntled customers if
Walgreen and Express Scripts resolve their dispute and Walgreens
pharmacies remains part of the network of pharmacies Express
Scripts clients use, Chief Executive John Standley told listeners
at the Goldman Sachs retail conference in New York.
Standley noted it is too soon to tell how many customers it
would gain, if any. In any event, he said it is unlikely the battle
between Walgreen and Express Scripts will lead to a "sea change" in
the PBM industry and the costs for drugstores.
The increasingly heated battle grew more intense this week, as
Walgreen began distributing materials to employers and insurers,
stating why it feels talks with Express Scripts are at a
standstill. Walgreen said, among other things, that Express Scripts
balked at Walgreen's offer to promote 90-day prescriptions at
retail, saying Express Scripts wants to protect its own 90-day
mail-order business. It also suggested that losing Walgreen could
violate some contracts with insurers and employers have with
Express Scripts that mandate patients having ready access to
24-hour pharmacies, a position Express Scripts disputed.
On Thursday, at a separate presentation at a conference hosted
by Stifel Nicolaus, David Myers, vice president of investor
relations at Express Scripts, criticized Walgreen's approach during
the dispute.
Myers said it was "a shame" the drugstore negotiated only
briefly and then went public with the issue while six months
remained on the current deal. He also accused Walgreen of
"spreading a tremendous amount of misleading and inaccurate
information," and said the company never responded to a recent
Express Scripts offer that guaranteed Walgreen's rates would be "in
the middle of the pack of all pharmacies in our network."
Not just Walgreen is trying to shake up the PBM cost structure,
Rite Aid CEO Standley said. Wal-Mart Stores Inc. (WMT), the world's
largest retailer, is aggressively moving to discuss costs with
large employers, insurers and PBMs, as more patients opt to take
advantage of Walmart's $3.99 prescriptions.
Rite Aid hopes to remodel hundreds of stores in its aging base
this year, but Chief Financial Officer Frank Vitrano said those
remodels are getting off to a slow start.
Vitrano acknowledged the companies massive debt load, and said
it plans to fund its next significant debt maturity in 2013 through
its revolving credit facility. In response to a question, the
executive said Rite Aid, which has been enjoying same-store-sales
growth in recent month after a lengthy period of malaise, may be
"modestly" cash flow positive this year.
-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171;
maxwell.murphy@dowjones.com
--Jon Kamp contributed to this article.
Express Scripts Holding Company (delisted) (NASDAQ:ESRX)
Historical Stock Chart
From Apr 2024 to May 2024
Express Scripts Holding Company (delisted) (NASDAQ:ESRX)
Historical Stock Chart
From May 2023 to May 2024