The press release states that the companies will not be disclosing terms of the new contract, but we believe WAG ultimately accepted a lower rate than it initially wanted to return to the ESRX network. While ESRX had some incentive to settle as it may have been difficult to win new business without WAG, the lack of customer disruption and seemingly good customer retention at ESRX and MHS so far this selling season indicate that WAG lost at least some leverage in the dispute. ■ Structural concerns remain. While this agreement removes a large near-term overhang, bigger picture structural issues remain. We continue to believe that the confluence of retail pharmacy commoditization (proven by ESRX), PBM consolidation, and payers’ (both private and governmental) desire to lower costs may eventually result in longer-lasting profit compression in retail pharmacy (especially post the generic wave). Walgreens’ acquisition of Alliance Boots also creates an overhang, given the high valuation, concerns over the logic of the deal, and large payment to be made in three years. While the current valuation looks attractive, the stock is not nearly as cheap pro forma for Alliance Boots.