Friday, November 17, 2006

Wal-Mart nails Caremark once again -- Pravachol now available for $4 a "pop"

Wal-Mart Crushes Pharmacy Stocks Again
TheStreet.com
By Melissa Davis

Senior Writer

11/17/2006 2:25 PM EST

(Click here to view published article, also shown below)

Wal-Mart (WMT) has given pharmacy benefit managers another bitter pill to swallow.

This week, the heavyweight retailer added the generic form of Pravachol -- a popular cholesterol-lowering medication -- to its new $4-a-month prescription drug program. The addition of the drug, which lost its exclusivity just weeks ago, ranks as the biggest threat yet to PBMs that enjoy fat margins on non-branded drugs.

UBS analyst Ricky Goldwasser sounds worried.

"The significance of adding a drug such as Pravachol to the list is twofold," he explains. "First, as a newer drug, it is a more profitable drug to pharmacies and PBMs compared to other drugs on the list. Second, it raises the question as to whether Wal-Mart will add additional drugs as they exit (the) 180-day exclusivity period."

Importantly, Goldwasser asks, could generic forms of blockbusters Zocor and Zoloft - both expected to boost future PBM profits significantly - be next on Wal-Mart's list? Given the latest development, he says, the chances for this look higher.

Goldwasser therefore remains on the sidelines with neutral ratings on all three PBM stocks. Medco (MHS) fell the hardest on Friday, dropping 4.3% to $49.46. Express Scripts (ESRX) slid 3.8% to $67.41. Meanwhile, Caremark (CMX) - which is merging with CVS (CVS) in a move viewed defensive by some - got off the easiest. Its shares slipped 2.4% to $47.46

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