Walgreen, Express Scripts Bury The Hatchet & Reaffirm Relationship

Walgreen, Express Scripts Bury The Hatchet & Reaffirm Relationship
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Walgreen, Express Scripts Bury The Hatchet & Reaffirm Relationship

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Talk about patching things up. Walgreen Company (NYSE:WAG) today hit the headlines after news of its reunion with long time customer Express Scripts Holdings Co. streamed in. The two have come back together, following a disputed contract that led to 7 months of bitter discord.

In the 7 months of separation, Walgreen has teetered in profound misery. Walgreen’s stock has shed off more than 30 percent ever since mid last year, when news of the growing divide between it and Express Scripts came to light. At the onset of 2012, a darker shed of gloom shrouded the pharmaceutical behemoth. Throughout the year, sales figures have fallen on a year-over-year basis. In addition to that, investors and analysts have been lashing out for a better part of the year, remarking that Walgreen’s executives not only parted ways with good business, but also allowed the press to perform its usual prying.

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All the same, hope seems to have taken seed back at Walgreen. Ripples of excitement have struck investors, as the stock skyrocketed in pre-market trading. In fact, when the emblematic trading bell sounded, shares went up 15 percent, trading at $35.50.

Although conclusive details surrounding the new relationship have not yet surfaced, it has been announced that the agreement will come into effect on September 15th.

Greg Wasson, Walgreen’s chief executive and president, gave insight on the matter citing that he was delighted in the ability of WalgreenScript and Express Scripts to reach an amicable agreement, based on underlying company principles. “This agreement is good for our shareholders, our employees, and the patients and communities we serve every day.  We look forward to once again filling prescriptions and offering our health and wellness services as part of the Express Scripts network,” he noted.

Express Scripts unique business model was the probable factor behind Walgreen’s bulging incomes before the prolonged spat. Express Scripts acts as a quasi middleperson between pharmaceutical firms and selective groups, like health insurers and employees.  In 2011, it greatly contributed to the 819 million prescriptions that Walgreen filled- more than 10 percent.

Something that adds an interesting twist to this rekindled relationship between Express Scripts and Walgreen is the Medco Health Solutions Inc. (NYSE:MHS) factor. Apparently, Medco Health Solutions, which was once Express Script’s bitter rival, will be acquired by Express Scripts for $29.1 billion. This was of course after federal regulators approved the acquisition this spring.

This brings three big wig health players to a high stakes table, that is only too familiar with internal politics and silent wrangles. It is not known what will come of the existing Medco, Walgreen relationship at the end of this year. All the same, this news perhaps marks the beginning of a new chapter in the American pharmaceutical industry, as Walgreen embarks on what may be the next big monopoly.

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