Bloomberg News

Walgreen Climbs on Express Scripts Extension in Kansas City

October 17, 2011

(Updates with closing share price in fifth paragraph.)

Oct. 17 (Bloomberg) -- Walgreen Co., the largest U.S. drugstore chain, rose the most in three weeks after extending an agreement with Express Scripts Inc. covering 430,000 customers in Kansas City, Missouri.

As of Jan. 1, 2012, Walgreen will continue participating in the prescription-drug program that Express Scripts administers for Blue Cross and Blue and Shield of Kansas City, the health insurer said in a statement on its website Oct. 14.

The national agreement between Walgreen, the largest U.S. drugstore chain, and Express Scripts, a manager of drug benefits for companies, unions and other employers, expires at the end of 2011. Express Scripts may be more willing to come to terms on the national contract with Walgreen as more of its customers sign individual deals with the retailer, said John Heinbockel, an analyst at Guggenheim Securities in New York.

“We continue to believe that a resolution will occur within the next few weeks given the impact on both companies if the relationship is severed,” Heinbockel wrote today in a note to clients. He has a “buy” rating on Walgreen.

Walgreen, based in Deerfield, Illinois, climbed 2.7 percent to $33.89 at 4:01 p.m. in New York, the biggest gain since Sept. 26. Express Scripts slipped less than 1 percent to $40.08.

Walgreen’s national contract with Express Scripts is worth more than $5 billion in annual drug sales.

Express Scripts Clients

Walgreen is hearing from “many other Express Scripts clients who are interested in having Walgreen in their networks,” Michael Polzin, a spokesman for the retailer, said today by telephone.

The Blue Cross and Blue Shield agreement in Kansas City doesn’t signal that Walgreen and Express Scripts are resolving the disputed national agreement, Polzin said. He declined to comment on negotiations except to reiterate Walgreen’s statement Sept. 27 that “we are planning not being part of the Express Scripts network as of Jan. 1.”

Express Scripts reiterated its rejection of the Walgreen offer. “If it had been something that we thought was good for our customers, we would have accepted it,” said Brian Henry, a spokesman for the St. Louis-based pharmacy benefits management company.

--With assistance from Pat Wechsler in New York. Editors: Robin Ajello, Kevin Orland

To contact the reporter on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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