CVS Caremark Receives FEP contract

Zacks

CVS Caremark Corporation (CVS) announced receiving the much awaited Blue Cross and Blue Shield Federal Employee Program (FEP) contract. Per the contract, CVS Caremark will render integrated pharmacy benefit services for a period of three years. The news, however, failed to shoot share price up. In fact, the shares went down 1.55%, ending the session at $74.13 as on Mar 27.

The muted market reaction on this positive news could be due to the possibility of this approval already been factored into the share prices, to an extent. This, along with the negative sentiments in the broader market, might have offset the enthusiasm of investors on this development.

The Blue Cross and Blue Shield Service Benefit Plan continues to be of great value and an ideal choice for millions of federal employees and their families.  The aforementioned contract requires CVS Caremark to serve more than 5 million federal employees, retirees and dependents. Moreover, the company will provide services like retail pharmacy benefit management services, including network contracting and management of a comprehensive suite of highly-customized clinical programs, along with mail order and specialty pharmacy services.

The new agreement, which extends CVS Caremark’s relationship with the FEP through 2017, builds on more than two decades of promised services by the former. CVS Caremark has been serving the FEP’s retail pharmacy benefit management program since 1993.

The Pharmacy Services segment of CVS Caremark, which contributed around 60.1% of the total revenues in 2013, continues to be the area of focus. Management believes that the Specialty Pharmacy segment is well positioned, based on its unique assets, capabilities and services, which have been strengthened by the Coram LLC acquisition.

We are encouraged by the latest contract won by CVS Caremark, which will expectedly strengthen the company’s position and help in increasing market share. 

Currently, CVS Caremark has a Zacks Rank #3 (Hold). Investors interested in the broader healthcare sector could consider stocks such as Alexion Pharmaceuticals, Inc. (ALXN), Alkermes plc (ALKS) and ANI Pharmaceuticals, Inc. (ANIP). All of these stocks sport a Zacks Rank #1 (Strong Buy).

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