Reinventing Pharmacy: The Price Increase for Caremark Could Be a Price Decrease for Manufacturers

The battle between CVS and Express Scripts for ownership of Caremark has made little impact on drug-company executives. But there is an important implication for pricing in the Medicare Part D world: CVS wants to use Caremark to help it get higher payments for providing pharmacy services. But in the zero-sum game of reimbursement, any additional profits for chains will likely come from reduced prices on drugs.

The proposed no-premium, merger-of-equals combining CVS Corp. and Caremark Rx Inc. landed with a thud when it was announced November 1. The deal to "create a powerful force for change in pharmacy services" sparked a sell-off in shares of both companies. And that opened up an opportunity for Express Scripts Inc. to step in with a more straightforward $26 billion cash-and-stock takeover bid for Caremark, promising to create "the world’s preeminent pharmacy benefit management company."

The angst this tussle has generated in the distribution world has had little impact on drug companies. But there is...

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