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Wal-Mart's plan to manage pharmacy benefits sends shares of MedcoHealth, CVS Caremark and Express Scripts falling

 

25-Jan-2008: Shares of the nation's biggest managers of pharmacy benefits fell Thursday after Wal-Mart Stores Inc. said it will enter the prescription-claims processing business.

MedcoHealth Solutions Inc. declined $1.54, or 1.6 percent, to close at $95.65. CVS Caremark Corp. fell 90 cents, or 2.4 percent, to close at $36.19. Both trade on the New York Stock Exchange. Express Scripts Inc. slipped $1.33, or 2.1 percent, to close at $62.98, on the Nasdaq stock market.

Wal-Mart Chief Executive Lee Scott, in a speech Wednesday to 7,000 store managers, said the firm will save employers $100 million in 2008 by managing pharmacy benefits.

The prospect that competition from the world's largest retailer will hurt established benefits managers' profits by lowering prices is a "knee-jerk concern" among investors, Charles Rhyee, an Oppenheimer & Co. analyst, said Thursday.

"You've seen it in other industries where they've stepped in and changed the game, so who is to say they can't do it again?" Rhyee said.

Kemp Dolliver of Cowen & Co., said Bentonville, Ark.-based Wal-Mart is unlikely to pose a threat to the largest pharmacy-benefit managers. Wal-Mart could struggle, because employers don't often change such managers, he said. "Clients do make changes, but they're worried about disruptions, and they're not going to move to someone cheaper unless they have confidence in their ability to execute."

Source: Chicago Tribune