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CVS, Walmart settle dispute on pharmacy contract

Posted at 11:18 AM, Jan 18, 2019
and last updated 2019-01-18 12:18:00-05

Pharmacy retail giants CVS Health and Walmart have resolved their dispute only days after announcing an impasse in reimbursement negotiations that threatened to affect millions of consumers.

CVS announced on Monday that Walmart would be leaving the drugstore network of its pharmacy benefits unit, CVS Caremark, because they couldn’t come to an agreement on how much the PBM unit would pay Walmart pharmacies to fill prescriptions.

Analysts have estimated that a potential break-up would have resulted in more than 50 million CVS Caremark commercial and Medicaid plan members no longer being reimbursed for filling prescriptions at Walmart, according to a CNBC report.

The dispute played out with wide media coverage. It comes at a time with pharmacy benefit managers are driving hard bargains with drugmakers and drugstores to show they can deliver lower costs for consumers.

“The resolution speed of today’s announcement is surprising … and likely points to the general negotiating strength that PBMs have,” wrote Evercore ISI analyst Ross Muken in a note to clients that was reported by CNBC.

In 2012 when Walgreens Boots Alliance was shut out of network in a pricing dispute it quickly lost market share.

“Consumers will largely move wherever their insurance is accepted, and so Walmart would have likely lost out on the vast majority of these (prescriptions),” Muken said in his report.

The split would have been problematic for CVS, which is embarking on an ambitious plan to change its image. CVS is aiming to become a one-stop health-care center for prescriptions and preventive medical care at its clinics after closing its recent acquisition of health insurer Aetna.

It would have made CVS’ PBM unit’s contract renewals more difficult. CVS is one of the nation’s largest PBM’s.