CVS Health Corp said on Tuesday Walmart Inc is leaving its network for commercial and Medicaid prescription drug plans after the two companies failed to agree on pricing.
CVS said the dispute would not impact Walmart's presence in its Medicare Part D pharmacy network, which according to Cowen & Co analyst Charles Rhyee was a bright spot as it represented a larger chunk of CVS' scripts.
Higher Costs For Customers
"At a time when everyone is working hard to find ways to reduce healthcare costs, Walmart's requested rates would ultimately result in higher costs for our clients and consumers," Derica Rice, president of CVS Caremark, said in a statement.
However, CVS said Walmart's Sam's Club division would remain within its pharmacy networks. Walmart spokeswoman Marilee McInnis said the retailer was continuing discussions with CVS Caremark, the company's pharmacy benefits unit.
"We are committed to providing value to our customers across our business, including our pharmacy, but we do not want to give that value to the middleman," the retailer said in emailed statement.
Pharmacy benefit managers (PBMs) have been in the crosshairs of the US administration, which in July proposed a rule that would scale back protections that allow rebates between drug manufacturers, insurers and PBMs.
Since then, details of the rule have not been released.
Continuing Consolidation
Evercore ISI analyst Ross Muken said the separation indicates continuing consolidation across the complex sector and a greater push toward narrow networks.
"As the dust settles, we expect further tension among the various players and large integrated players to continue to exert economic pressure on competitors," Muken wrote in a client note.
Currently, less than 5% of affected CVS Caremark members use Walmart exclusively to fill their prescriptions, CVS said.
The drug store retailer, which completed its $69 billion acquisition of health insurer Aetna last year, said it has requested Walmart to remain in its networks through 30 April, and did not expect the split to impact its 2019 financial results.
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