CVS Caremark locks up GE contract for ‘09; Deal marks major victory for PBM business
NEW YORK CVS Caremark’s PBM business continues to gain market share as the company appears to have snapped up the GE Prescription Drug Benefit Plan from Medco Health Solutions, Drug Store News has learned.
According to sources, GE administrators have informed company employees that their pharmacy benefit plan will change from Medco to CVS Caremark starting Jan. 1. GE has confirmed the information.
“We believe this demonstrates CVS’ strength in its broad healthcare offerings and expansive network that no other PBM or drug retailer can replicate, and will allow CVS to continue to gain market share,” stated Citi Investment Research analyst Deborah Weinswig analyst in a research note. CIR is a division of Citigroup Global Markets.
The GE contract, effective Jan. 1, 2009, would mark the third-largest PBM contract win for CVS Caremark. It has already won the PBM contracts to service the Employee Retirement System of Texas, and the BellSouth portion of the AT&T contract. These two contracts combined are worth nearly $1 billion in annual revenues, Weinswig noted. Including other smaller contracts, new contract wins to date represent about $3 billion in year one revenues, in addition to the potential $1 billion from the GE contract.
“As a result of the additional $1 billion in revenues we are now expecting in 2009, we are raising our 2009 EPS estimate by 3 cents. We are also raising our 2010 EPS estimate by 3 cents,” stated Weinswig.
Medco Health Solutions administers benefits for 310,000 active GE employees and dependents, plus 235,000 retirees and dependents. CIR managed care analyst, Charles Boorady, estimates revenues of $1,500 per person per year from actives and $2,500 per person per year from retirees, yielding $1 billion to $1.1 billion in annual revenue potential.
According to Goldman Sachs analyst John Heinbockel, the contract win should further payors’ and investors’ perception of the attractiveness of the CVS/Caremark business model.
“Because this helps to validate the retail/PBM business model, it should enable CVS’ P/E multiple to narrow the gap versus its PBM peers, boosting its valuation and share price in the process,” stated Heinbockel in a research note.
FDA issues third approvable letter for Wyeth’s bazedoxifene
WASHINGTON Wyeth Pharmaceuticals’ new drug for treating postmenopausal osteoporosis has hit another speed bump.
The Food and Drug Administration sent a third approvable letter to Wyeth for the drug bazedoxifene pending analyses about the incidence of stroke and venal thrombosis in patients who use it. The FDA made a similar request in a letter sent in December.
Merck reported that its postmenopausal osteoporosis drug Fosamax (alendronate sodium) had worldwide sales of $3.05 billion in 2007.
Longs plans drive-through windows at Hawaiian locations
NEW YORK Longs Drug Stores plans to open drive-through windows at some of its stores in Hawaii, the company announced recently.
The drugstore chain, based in Walnut Creek, Calif., will add a drive-through window to its store in Maui later this year. The new store it plans to open in Honolulu will also have a window.
Walgreens, which recently opened its first locations in Hawaii, credits itself with inventing the concept of the drugstore with a drive-through pharmacy more than 15 years ago.