CVS Caremark (NYSE: CVS) and Walgreen (NYSE: WAG) are longtime competitors -- both Fortune 500 companies in the pharmacy services/retail drug store business -- and according to a recent CNN article, the feud has intensified. Both companies run pharmacy benefit management (PBM) plans with several million members. CVS Caremark dropped Walgreen from its PBM in reaction to Walgreen's announcement on Monday that it would no longer participate in new or renewed plans from CVS Caremark's drug benefits unit.
CVS Caremark's move is clearly a direct attempt to compete for Walgreen's customers. It means that some CVS Caremark plan members may not have their prescriptions honored at a Walgreens pharmacy, and consequently, may be forced to pay much more at Walgreens. Walgreen, of course, is not pleased, and its spokesperson said: "Right now, you may be 2 miles from a Walgreens, but because of this action, you may have to drive 20 miles to another pharmacy to get prescriptions filled."
CVS Caremark maintains that, excluding Walgreen, its pharmacy network includes about 57,000 pharmacies across the country (including other retail chains, supermarket pharmacies, and independent pharmacies), while Walgreen operates 7,500 stores nationwide. However, Walgreen has more than 50% market share in certain cities, and industry consultant Adam Fein said, "Personally I think that CVS Caremark is making a major strategic blunder. I don't think they can assemble a credible pharmacy network in certain cities without Walgreens."
What do you think? Blunder or brilliant move? Let us know in the comments box below.
