Jan 1 came and passed, and ESRX is up $2, while WAG is down, when market is up 200+ points.
WAG being big thought they can push their ways, like they do with all other PBMS, not they have to sit back and think twice.
Now all other PBMS will take advnatage and minmize their WAG payments. So this ESRX think will have huge indirect impact to WAG.
With all due respect, I don't think you've really thought this through. ESRX is at risk of continuing to lose contracts over time as employers/insurers are face with the choice of keeping a PBM that has lost access to > 20% of the retail pharmacy market and in many areas the ONLY 24 hour pharmacy ((I just talked to an ER doc last night who wasn't sure what to do with his UCare (managed medicaid & Medicare Advantage plans in Minnesota) patients during overnights when the only 24 hour store within driving distance is WAG). My guess is ESRXs market share continues to be eroded over time as new contracts come up for renewal.
Consider, on the other hand, competitor PBMs who come up for contract renewals with WAG. Their #1 strategic advantage when trying to negotiate continued or new contracts with employers/insurers will be their claim that they can provide near 100% market access whereas ESRX, a very big player who they might be competing with for new contracts or attempting to take contracts away from, can make no such claim. As such, it stands to reason that they will continue to reimburse at the standard fair market rates that WAG commissions. I think the WAG management team understands this and I think you have failed to see the larger picture. You just need to utilize a little game theory to predict how this is likely to play out!!
So the short of the long: WAG endures some short-term pain, but ESRX has now picked a fight with a big player that is much better organized and better connected. WAG is in a long-term strategic position that gives them all the leverage, while leaving ESRX out to hang all their hopes on a merger with MHS that seems ever more likely to fail.
Just want to say thanks for posting. Your very well-written posts, from someone with some actual knowledge of the business, are so welcome on this board.
And your posts are much needed here....needed to counter the endless stream of Nostradamas-like posts from losers trying to make themselves feel important.
Your analogy is bases on the outlook that higher concentrations of Chain Drug stores will yield Saving and better cost outcomes in healthcare spend.
If that where true than Walmart, Target, Supermarkets, as well as Independents would discontinue their operations, which is far from the truth.
What you are seeing is the beginning of a outcome/cost based limited network of Rx providers.
As for the 24 hr issue, there are many Independents pharmacists who provide 24hr on call service that go in and open to fill a Rx for a emergency.
Perhaps you are not aware of this in your area but it does exist.
As for your game theory it is a misdirection of the situation, PBM's mailorder will gain market share for Maintenance medication(Convenience factor)as a result, Walgreens will see less folks purchasing Sushi, leading to high % spend for operations being paid for by less customers.
Culling the Heard is what competition is about, something that Walgreens is facing at this gaming table.
The hourglass of sand was flipped over at midnight on New Years. When Q2 resultrs are announced, if MAJOR new client acquisitions are not attained, Walgreens will be forced to begin trimming store count. The SGA in under-utilized stores is like a lead weight chained to Deerfield's corporate neck.
The more WAG stores that are closed, the less desirable it becomes to have Walgreens in any PBM network. Then consider that the ESRX acquisition of MHS may well be approved.
Reread my October post that listed the Armageddon Chronology.