Express Scripts climbs as drugstore chain Walgreens says it is up for considering more deals

IndustriesAssociated Press

Shares of Express Scripts jumped Thursday amid investor speculation that the pharmacy benefits manager's off-and-on relationship with Walgreens may take a torrid turn.

Leaders of Walgreens said that they are open to considering more mergers, acquisitions or joint ventures. That comes even though the nation's largest drugstore chain is still digesting a roughly $16 billion deal that finalized its combination with European health and beauty retailer Alliance Boots, which runs the United Kingdom's largest pharmacy chain.

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That integration is going better than expected, Walgreens Executive Vice Chairman and Acting CEO Stefano Pessina told analysts Thursday. He said it could continue in the several months it would take to finalize another deal.

Walgreens didn't name targets or offer any specifics on what it might consider. But investors have been speculating that the drugstore chain could make a run at Express Scripts, the nation's largest pharmacy benefits manager, said Jeff Jonas, a portfolio manager with Gabelli Funds.

Pharmacy benefits managers, or PBMs, help negotiate the prices that customers pay for prescription drugs. They are seen as a key component in the push to contain soaring costs from specialty drugs, and they offer a potentially lucrative focus for health care companies: finding ways to tame customer costs.

Walgreens competitor CVS Health Corp. has a sizeable PBM operation, and Rite Aid Corp. said in February that it would spend $2 billion to buy one.

Late last month, the nation's largest health insurer, UnitedHealth Group Inc., said it would spend more than $12 billion to buy the PBM Catamaran Corp.

Walgreens, which runs more than 8,000 drugstores, sold its PBM business years ago, and it had a contract dispute with Express Scripts a few years back.

The companies resolved that dispute, and Jonas noted that Walgreens management has changed since then. He said some combination of the two would make "tons of sense." But he also has doubts about it happening, given the fact that Walgreens just did a big deal, and Express Scripts, which filled about 1.3 billion prescriptions last year, is huge.

Shares of Express Scripts Holding Co., which is based in St. Louis, climbed more than 5 percent, or $4.36, to $88.72 in afternoon trading while broader indexes were flat.