Moody's gives CVS Caremark high rating among PBM competitors

Noted company's retail pharmacy biz contributes to 'strong market position'

NEW YORK — Moody's Investors Service compared the three largest pharmacy benefit managers — CVS Caremark, Express Scripts and Medco Health Solutions — in a report issued Tuesday. While it maintained a positive view of all three, it gave CVS Caremark the highest credit rating.

"CVS Caremark has the highest credit rating of the three companies and is the only one with a retail pharmacy business, providing it with size and diversity that offset financial metrics that are weaker than the company's PBM peers," the report stated.

Moody's said the three PBMs have ratings in the "Baa" category, and while they do face similar far-reaching opportunities, such as an increased use of generic medications and a greater focus on curbing rising healthcare costs, there are differences that exist among them. Moody's also stated that one of the biggest challenges facing PBMs is a reduction in commercial insurance membership.

"CVS Caremark is the only one of the three large PBMs with a retail pharmacy business. This business provides greater scale and diversification and offers CVS Caremark more protection from a downturn in the PBM segment. The company derives more than half of its revenues and almost 60% of its operating income from its retail pharmacy business. CVS Caremark has a strong market position in both of the competitive retail and PBM segments," Moody's stated.

Moody's also noted the fact that CVS Caremark now will handle the $3 billion mail-order and specialty prescription drug benefit for the Federal Employee Program starting January 2012, which for the last three years had been handled by rival Medco Health Solutions.

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