Why CVS and Walmart Are Parting Ways

January 15, 2019 by 247chrislange

Source: Thinkstock
CVS Health Corp. (NYSE: CVS) has announced that it will be parting ways with megastore Walmart Inc. (NYSE: WMT). Specifically, Walmart has opted to leave the CVS Caremark pharmacy benefit management commercial and Managed Medicaid retail pharmacy networks.

Ultimately this came down to a price dispute, but what else is new in how Walmart deals with its business partners.

Note that this transition does not impact Walmart’s participation in the CVS Caremark Medicare Part D pharmacy network. Additionally, Walmart’s Sam’s Club division remains in the CVS Caremark pharmacy networks.

Walmart’s termination from the CVS Caremark commercial and Managed Medicaid retail pharmacy networks is not expected to have a material impact on the financial results of CVS in 2019. Currently, less than 5% of affected CVS Caremark members use Walmart exclusively to fill their prescriptions.

Derica Rice, president of CVS Caremark, the pharmacy benefit management business of CVS Health, commented:

At a time when everyone is working hard to find ways to reduce health care costs, Walmart’s requested rates would ultimately result in higher costs for our clients and consumers. While we have enjoyed a long relationship with Walmart as a low cost provider in our broad national networks, based on our commitment to helping our clients and consumers manage rising pharmacy costs, we simply could not agree to their recent demands for an increase in reimbursement.

Shares of Walmart were last seen trading at $96.23, in a 52-week range of $81.78 to $109.98. The stock has a consensus analyst price target of $106.81.

CVS traded down 2% at $64.00 per share, with a consensus price target of $90.74. The 52-week trading range is $60.14 to $83.88.

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