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Key May revenue figure falls 5.8 pct for Walgreen

Updated: June 5, 2012 12:02PM



Drugstore operator Walgreen Co. continued its sales slide into May, as prescriptions dropped again largely because of its break with pharmacy benefits manager Express Scripts Holding Co.

The nation’s largest drugstore chain said Tuesday revenue from stores open at least a year fell 5.8 percent last month, but that represented a smaller decrease than it saw in March and April.

Deerfield-based Walgreen said pharmacy revenue from stores open at least a year dropped 8.5 percent, as prescriptions fell 7.6 percent compared to May 2011.

The overall performance missed Wall Street expectations. Analysts forecast, on average, a 5.2 percent drop in total revenue from stores open at least a year, according to Thomson Reuters I/B/E/S. The analysts expected a deeper drop of 9 percent in pharmacy revenue at stores open at least a year.

Walgreen said prescriptions processed by Express Scripts made up nearly 13 percent of its total in May 2011. Comparable pharmacy store revenue declined in this year’s month due to that and generic drug introductions. Generic drugs are cheaper than brand-name alternatives and tend to depress pharmacy revenue but improve profitability.

Walgreen has said its sales would fall after its contract with Express Scripts expired at the end of last year. Pharmacy benefits managers, or PBMs, run prescription drug plans for employers, insurers and other customers. Walgreen used to fill prescriptions for Express Scripts.

St. Louis-based Express Scripts, the nation’s largest PBM, has said it ended the Walgreen contract because the drugstore chain wanted a premium compared to what Express Scripts paid other pharmacies. Walgreen has said it would rather give up the revenue it got from Express Scripts than continue filling unprofitable prescriptions.

Walgreen saw revenue from stores open at least a year fall 6.8 percent in March and 6.4 percent in April. Chief Financial Officer Wade Miquelon said Tuesday in a statement the company’s trend for prescriptions filled has improved since January.

Walgreen also said Monday it extended an agreement to work with another PBM, OptumRx, a subsidiary of insurer UnitedHealth Group Inc.

Citi analyst Deborah L. Weinswig said in a research note that announcement was a positive sign that Walgreen will remain in other PBM networks, but it could face another big loss.

Express Scripts closed a $29.1 billion deal to buy another PBM, Medco Health Solutions, in April. Weinswig said she expects that Walgreen will likely leave Medco’s network too.

Walgreen operated 7,889 drugstores at the end of May, or 175 more than last year. Sales for its fiscal third quarter, which ended May 31, fell 3.3 percent to $17.77 billion.

Walgreen shares fell 27 cents to $30.24 in morning trading Tuesday, as the stock approached its one-year low of $29.80, which it hit June 1. The stock topped $45 in June 2011, but it has since fallen 33 percent.



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