Earlier this week, Walmart and CVS Health disclosed the details on a contract impasse that put them at a head. Fortunately, only a few days later, the pair has announced Walmart will remain part of CVS Health’s network for the purposes of commercial and Medicaid pharmacy customers.
While the two did not provide any financial terms for the contract they have formed, they did reveal that they could not agree on pricing and that Walmart has plans to leave the pharmacy network for all prescription drug plans managed by CVS for companies and for health insurers, as well as drug plans for the government-managed low-income Medicaid program. It was Tuesday when the two were still in discussion.
Apparently, only a few days later, the two companies have finally managed to reach an agreement. And with this announcement, CVS shares grew more than 1.5 percent, to $64.76, in premarket trading.
Indeed, some analysts comment that losing Walmart’s pharmacies could negatively impact the ability CVS has for signing up customers for drug plans in 2020. As such, the speed by which the two companies have resolved their dispute probably points more to the negotiating strength of pharmacy benefit managers than anything else. After all, consumers tend to move to outlets who accept their insurance; and Walmart probably would have lost out on an as many as 20 million estimated CVS prescriptions.
You may recall that Walgreens Boots Alliance and pharmacy benefits manager Express Scripts—which is now part of Cigna—had a similar dispute in 2012. At the time, Walgreens stopped filling Express Script customer prescriptions and sales slipped. This pushed the companies to try at negotiations again, which they did, and Express Scripts (Cigna) put Walgreens back into its network.
CVS is among the biggest pharmacy benefit managers in the country. With the acquisition of Aetna—which happens to be one of the biggest health insurance companies in the country—CVS is now a major health network in the United States. Accordingly, Walmart senior vice president Sean Slovenski described that this new agreement is “fair and equitable,” meaning that both sides find benefit.