Walgreen Co. (WAG) recently announced that it will not serve as pharmacy provider for any new and renewed prescription drug plans awarded to CVS Caremark Corp’s (CVS) pharmacy benefit manager (PBM), after June 7, 2010. However, in order to provide continuity of care to pharmacy patients, Walgreen will continue to participate in current CVS Caremark plans, for which it is already a pharmacy provider.
 
In response to Walgreen’s action, CVS Caremark stated that it would continue to engage in discussions with Walgreen about the latter’s participation in its pharmacy networks. In fact, management of both companies recently met to discuss matters of mutual concern.       
 
As the nation’s largest provider of prescriptions, CVS Caremark manages over 1 billion prescriptions on an annual basis. Its revenues increased 1.6% year over year to $23.8 billion in the first quarter of 2010, driven by both segments, Pharmacy Services and Retail Pharmacy. CVS Caremark’s quarterly earnings from continuing operations came in at 60 cents per share, a couple of cents above the Zacks Consensus Estimate.
 
Walgreen is the largest national retail pharmacy chain in terms of revenue and profitability. It operates a network of over 7,500 drug stores in 50 states, the District of Columbia, and Puerto Rico. The company had net sales of $17 billion, up 3.1% year over year, in the second-quarter fiscal 2010 (ending February 2010). Walgreen reported quarterly earnings of 68 cents per share, which missed the Zacks Consensus Estimate of 71 cents per share.
 
We currently have Neutral ratings on both CVS Caremark and Walgreen.
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