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CVS/Omnicare merger puts spotlight on Express Scripts: analyst

08 June 2015

(St. Louis Business Journal)

Scott Harrison, a portfolio manager with Clayton-based investment company Argent Capital Management, said Express Scripts will now be watched closely.

May 21, 2015 (Corey Noles)

CVS Health’s deal to buy pharmaceutical distributor Omnicare leaves mail-order pharmaceutical giant Express Scripts (NASDAQ: ESRX) as the lone pharmacy benefits manager (PBM) not associated with a brick-and-mortar pharmacy, according to an analyst with Clayton firm Argent Capital Management.

The deal, announced Thursday, will likely lead to more speculation about the St. Louis-based Express Scripts’ future merger and acquisition plans.

CVS Health will pay more than $10 billion for Omnicare. In exchange, the retail brick-and-mortar pharmacy gets its own PBM. The move will stretch CVS’ reach into long-term care facilities, nursing homes, hospitals and other new avenues, according to the Associated Press.

Scott Harrison, a portfolio manager with Clayton-based investment company Argent Capital Management, said Express Scripts will now be watched closely.

Argent Capital Management previously owned a stake in Express Scripts, which had 4,700 employees in the region as of June 2014.

“The bottom line in this market is that you’re either acquiring, or you have a target on your back,” he said. “Acquisitions are nothing new to Express Scripts so nothing would surprise me.”

Harrison said Express Scripts has used acquisitions in the past — it acquired Medco Health Solutions in 2012 for $29.1 billion — as a means of building its base as it became the nation’s largest PBM.

“The health care market is putting pressure on pharmacies constantly to tie themselves to a PBM, and that only boosts the merger and acquisition market even further,” Harrison said. “Today’s acquisition is only the continuation of a trend we have been watching for the last few years.”

He added there would likely be no immediate impact on Express Scripts.

In late April, Express Scripts was said to be interested in Omnicare.

Earlier that month, talk came of an Express Scripts merger with Walgreens after Walgreens CEO Stefano Pessina told analysts the company was open to more mergers and acquisitions.