Walmart, CVS settle pharmacy pricing dispute; ink fresh partnership

In a deal that marks the reunion of two of the world’s largest store operators, Walmart (WMT) and CVS Health (CVS) put aside differences over drug pricing and decided to revive their partnership this week. The retail giant entered into a fresh multi-year agreement with CVS, under which it will continue to cater to the latter’s customers across the market by participating in its pharmacy benefit management program.

The settlement came after extensive discussions between the managements of the companies. However, they did not disclose the details of the deal. Earlier this month, the tie-up faced a potential split after the dispute between the companies, over the cost of filling prescriptions, reached the tipping point.

Had the partnership fallen apart, it would have affected not only the companies but thousands of Walmart customers who depend on the CVS Caremark pharmacy network and the Medicaid customers who avail CVS coverage. According to the CVS management, the reimbursement rates demanded by Walmart would have resulted in higher costs for its customers. However, the participation of Walmart unit Sam’s Club in the CVS pharmacy network was not affected by the impasse.

Had the partnership fallen apart, it would have affected not only the companies but thousands of Walmart customers

Being one of the leading pharmacy benefits managers, CVS’ prescription plans are very popular among the public due to the relatively low pharmacy costs. Its association of Walmart has been in the best interest of the beneficiaries as the tie-up ensured network stability.

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The market was quick to respond to Friday’s announcement and CVS shares moved up about 3% in early trading, after closing the previous session lower. Walmart started 2019 on a positive note, recovering steadily from the lows seen towards the end of last year. The stock made modest gains when the day’s session started.

Walmart, which currently plays a major role in facilitating the delivery of pharmacy services, last year extended its reach in the market by forging a partnership with health insurance company Anthem (ANTM), with a special focus on senior citizens. The retailer is also having a prescription drug partnership with healthcare firm Humana (HUM). With CVS recently adding Anthem’s rival Aetna into its fold, the broadened network now offers seamless delivery of multiple healthcare services.

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