SAN FRANCISCO (MarketWatch) -- CVS Caremark Corp. /quotes/comstock/13*!cvs/quotes/nls/cvs (CVS 31.37, -2.43, -7.18%) said Monday it was "surprised and disappointed" by Walgreen Co.'s /quotes/comstock/13*!wag/quotes/nls/wag (WAG 30.35, -0.49, -1.59%) announcement it will no longer participate in any new or renewed prescription-drug plans awarded to CVS's pharmacy benefit-manager business. CVS criticized Walgreen's move as disruptive to plan members. "Walgreens has tried this approach several times in the past, targeting employers, health insurers and government entities," CVS said in a statement. "Today's announcement by Walgreens is nothing more than a transparent effort to raise its reimbursement rates at the expense of plan sponsors and members and illustrates an inability to adapt to the demands of the marketplace in today's challenging and rapidly evolving health care environment." CVS shares dropped 7.3% and Walgreens shares fell 1.7% in recent activity.
I doubt this has anything to do with merger intentions. This is the same dance that opposing parties have done for ages, whether it is union against management, doctor against medicare, or any other. In the end, it will result in resolution, with WAG getting assurances from CVS. Otherwise, CVS will be hobbled going into contract renewals with PBM clients. WAG's timing does not go unnoticed. And, of course CVS issues a press release that takes them to task. What else are they going to do/say? As they say in the Air Force, if you are taking on shrapnel, you are probably over the target. WAG will eventually be the winner in this dispute, IMO.