Walgreen Hopes for the Best (WAG, ESRX, UNH, CVS, SXCI, CHSI)

Late last Friday, Walgreen Co. (NYSE: WAG) issued a brief statement on the company’s dispute with Express Scripts Inc. (NASDAQ: ESRX):

The parties have agreed to dismiss their respective claims, and no other action has been or will be taken by either party with respect to this case. These dismissals have no impact on the parties’ ability or inability to come to terms on a pharmacy agreement. The parties and their counsel will have no further comment on this matter.

This morning, Walgreen announced that it had signed a multi-year agreement with OptumRx, a division of Unitedhealth Group Inc. (NYSE: UNH), that would give OptumRx’s 14 million members access to Walgreen’s 7,800 retail stores.

That’s a start for the drugstore giant, but it hardly makes up for the loss of some 150 million members of the Express Scripts network now that the Medco-Express Scripts deal is done. OptumRx trails both CVS Caremark Inc. (NYSE: CVS), which claims about 60 million subscribers, and a combined SXC Health Solutions Corp. (NASDAQ: SXCI)-Catalyst Health Solutions Inc. (NASDAQ: CHSI) in subscribers and revenues, but Walgreen had to start somewhere.

Walgreen sold its own pharmacy benefits management operations to Catalyst in March of 2011, which at the time added about 9 million subscribers to Catalyst’s existing 8 million. When the deal with SXC and Catalyst is completed, the combined company will claim about 25 million subscribers.

Walgreen’s deal with OptumRx and the ending of the dispute with Express Scripts doesn’t leave the drug store chain a whole lot better off than it was before. A deal with Express Scripts, while not out of the question, seems like a remote possibility at best. A deal with CVS Caremark also seems remote given that Walgreen competes with CVS retail stores. That leaves a deal with the combined SXC-Catalyst, which would bump Walgreen’s network up to about 40 million. That’s still a long ways from either CVS Caremark or Express Scripts.

Walgreen’s shares are up 0.33% just after noon at $30.03 in a 52-week range of $29.80-$45.34.

Paul Ausick