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The leading provider of prescriptions and related health care services in the US, CVS Caremark Corporation (CVS) has decided to participate in the annual JP Morgan Healthcare Conference scheduled on January 10, 2012. The company will be represented by its president and CEO, Mr. Larry Merlo, at the conference.

Currently, CVS Caremark is ranked among the top three pharmacy benefit managers (PBM) in the US. The other big players in this chart are Express Scripts (ESRX) and Medco Health Solutions (MHS). Together these three companies control roughly 50% of the market by covering approximately 240 million prescription drug consumers annually.

Rhode Island-based CVS Caremark is a combination of a PBM as well as retail drug chain. In terms of contractual arrangements with large plan sponsors, CVS Caremark holds a leading position in the industry.

CVS Caremark’s Pharmacy Services business has been witnessing significant challenges over the past several quarters due to the general macroeconomic turmoil and the recent debt crisis, which adversely impacted consumer purchasing power. However, based on its 12-year contract with Aetna (AET) and the acquisition of the Medicare Part D business of Universal American Corp, (UAM), the company’s performance in this segment has turned around.

Alongside, the company is looking forward to gain from the ongoing generic wave. The amount of branded drugs expected to go off-patent in 2012 will be more than double than that recorded in the past five years. This factor, combined with the US healthcare reform is expected to supplement the adoption of prescription drug benefit, which thereby would further bolster CVS Caremark’s business. The company is expected to throw light on this matter in the upcoming healthcare conference.

Additionally, CVS Caremark intends to take advantage of the ongoing Walgreen (WAG)-Express Script dispute as the company is well positioned to serve Express Scripts members with access to pharmacy care and customer service. We expect the company to provide some more details therein.

Further, we are looking forward to assess the consequences of the pending merger between Express Script and Medco on CVS Caremark’s business. We foresee that the proposed deal combining two of the three largest US drug benefit managers will create an industry leader that holds over one-third of the market.

Currently, CVS Caremark, Express Scripts, and Medco are serving large plan sponsors. Given their size and potential to offer exclusive contracts, over 40 of the “Fortune 50” largest corporations depend on these three top shots for PBM services. However, post merger, in terms of covered lives, we anticipate CVS Caremark to significantly lag the joint company’s achievability.CVS Caremark currently retains a Zacks #2 Rank (short-term Buy rating). However, over the long term, we are Neutral on the stock, at par with Medco, Express Script and Walgreen.

 
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