Without its PBM Partner, Walgreen is a Sell: Citi

[Stocks-to-Watch]

Walgreen (WAG) doesn’t look likely to restore its partnership with pharmacy benefit manager Express Scripts (ESRX), and the loss of prescription business could weigh on the company, wrote Citi analyst Deborah Weinswig in a note today. Walgreen is trying to go it alone in the PBM business, but the company’s sales pitch doesn’t appear to be catching on, Weinswig argues in downgrading the shares to Sell.

Citi conducted a survey of company benefits managers, and the managers reported that Walgreen appears to be charging higher prices than the employers’ current rates.

“Although WAG has said that its rates are comparable to what employee sponsors get from the PBMs, 43% of the respondents that have seen WAG’s rates found them to be higher than their current rates (vs. 14% who found out that WAG’s rates were lower).”

In addition, employees don’t appear to be complaining about the changes to their pharmacy benefits.

“During our channel checks, we were surprised to hear that 75% of benefits managers had not received significant pushback from employees since WAG left the ESRX network on 12/31/11. In addition, 66% of respondents indicated that the exclusion of WAG from the network would not meaningfully impact their employees.”

Weinswig lowered her price target to $28. Walgreen shares were recently down 1.3%, at $33.85.



Original Article Source by Barrons.com