Express Scripts preparing for network without Walgreens

Credit Suisse analyst Edward Kelly says 'supports our view that a near-term resolution is unlikely'

NEW YORK — Express Scripts is readying for a pharmacy network without Walgreens, according to an analyst report published Thursday.

Credit Suisse analyst Edward Kelly reported that Express Scripts issued a letter to clients on Monday encouraging those clients to begin pushing prescriptions to alternative pharmacies. "While this is the next logical step in this very public negotiation, it supports our view that a near-term resolution is unlikely and suggests that the possibility of no deal (while still low) is increasing," Kelly wrote.

The crux of the issue may come down to regulatory approval of the Express Scripts/Medco merger. If approved, that provides Express Scripts significantly more scale, enough so that any migration of prescriptions out of Walgreens' pharmacies could have a material impact, Kelly noted. "For now, Walgreens remains steadfast on its terms, but we believe the company will eventually be forced to make concessions as the loss of [Express Scripts] (before even considering Medco) could pressure Walgreens’ earnings by 20%."

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