WMT Walmart Inc

By Anna Wilde Mathews and Sarah Nassauer 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 16, 2019).

CVS Health Corp. is battling Walmart Inc. over the cost of filling prescriptions, a clash that could result in a split between the retail behemoth and the health-care giant.

Walmart is expected to leave CVS Caremark pharmacy networks over the dispute, a split that could occur as soon as early February, though CVS said it has asked for an extension through April 30. The two sides could also still end up hammering out a deal, despite the current public hostilities.

Different versions of how the dispute played out quickly emerged.

CVS Caremark, the pharmacy-benefits unit of CVS Health, said Monday that Walmart is seeking an increase in what the retailer gets paid for prescriptions, which would "ultimately result in higher costs for our clients and consumers." CVS Caremark, which is separate from CVS's retail drugstores, reimburses pharmacies when shoppers with CVS Caremark prescription coverage buy medicine.

But a person familiar with Walmart's position said Walmart didn't ask CVS to increase the amount it pays the retailer when shoppers fill a prescription. Walmart asked CVS to maintain rates at current levels, said this person. In response, a CVS spokesman pointed to the company's earlier statement.

Negotiations over rates reached a boiling point last week when Walmart sent a contract termination letter to CVS, according to people familiar with the situation. Walmart continued to negotiate with CVS as recently as last Friday, said one of these people.

Walmart aims to continue discussions with CVS Caremark and is "trying to find a solution that benefits all parties," said a spokeswoman for the retailer. "We are committed to providing value to our customers across our business, including our pharmacy, but we don't want to give that value to the middleman.... Walmart is standing up to CVS's behaviors that are putting pressure on pharmacies and disrupting patient care."

The Walmart spokeswoman said problems can come up when a PBM has strong power to influence where people can get their prescriptions filled.

CVS said in its statement that it remains "open to continuing timely good faith negotiations with Walmart in the hopes of reaching an agreement to provide quality pharmacy care at a reasonable cost."

If the two giants part ways, it will affect people whose employers have CVS Caremark-administered drug benefits, as well as Medicaid enrollees with CVS drug coverage. Their plans wouldn't pay for prescriptions filled at Walmart. Walmart is one of the country's largest retail pharmacy players, offering pharmacies in nearly all of its approximately 4,600 U.S. stores.

CVS said it retains a large network of more than 63,000 pharmacies without Walmart, and less than 5% of its members enrolled in affected plans use only Walmart for prescriptions.

But the impact could be heavier for the employees of clients in rural areas and the South, where Walmart is a particularly important presence, said Nadina Rosier, who is head of the pharmacy practice at advisory firm Willis Towers Watson. "It truly depends on your vantage point," she said. "If you're a member who works for an employer where Walmart is the dominant player, you're going to feel the pain."

The public spat shows how tensions are rising between pharmacies, pharmacy-benefit managers and insurers amid steep pressure from consumers, employers and politicians to stem rising drug costs. Pharmacy-benefit managers, as well as drug manufacturers, have come under scrutiny amid complaints about opaque pricing practices, and PBMs are under pressure to wring out more cost.

A similar high-profile battle between a pharmacy-benefit manager and a pharmacy company played out in 2012, when millions of Express Scripts Holding Co. customers had to switch prescriptions to different pharmacies because Walgreen Co. dropped out of the PBM's network. The clash was resolved after seven months.

Now, the issues are complicated by mergers that are creating new competitive fault lines in the industry. CVS recently completed its nearly $70 billion acquisition of health insurer Aetna, creating an industry giant that combines a retail pharmacy, pharmacy-benefit management and Aetna's insurance businesses. Insurer Cigna Corp. also recently closed its $54 billion acquisition of Express Scripts.

CVS is also closely aligned with Walmart competitor Target Corp., buying up the pharmacies inside Target stores in 2015.

Walmart has considered diving deeper into the health-care space. Last spring, Walmart held preliminary talks with health insurer Humana Inc., The Wall Street Journal has reported, but those talks have cooled.

CVS Caremark said the dispute with Walmart doesn't affect the pharmacy networks in its Medicare plans, and the split also doesn't involve Sam's Club stores, Walmart's chain of warehouse stores. The issue won't materially impact CVS's financial results, it said.

Write to Anna Wilde Mathews at anna.mathews@wsj.com and Sarah Nassauer at sarah.nassauer@wsj.com

(END) Dow Jones Newswires

January 16, 2019 02:47 ET (07:47 GMT)

Walmart (NYSE:WMT)
Historical Stock Chart
Von Mär 2024 bis Apr 2024

Walmart (NYSE:WMT)
Historical Stock Chart
Von Apr 2023 bis Apr 2024