Express Scripts had sued Walgreen claiming the chain had launched a campaign to disparage the pharmacy-benefits manager by disputing whether Medicare recipients who remain with Express Scripts can fill Part D prescriptions at Walgreen next year.
"We believe that the lawsuit by Express Scripts clearly signals that the contract dispute will be more challenging to resolve," analyst Maggie Taylor said.
Moody's now rates Walgreen at A2, five steps above junk territory. The ratings firm said Walgreen's credit metrics, which are already weak for the firm's current rating, could slump further if it fails to resolve the dispute or significantly make up for revenue lost after its split with Express Scripts.
Walgreen's June decision to stop participating in Express Scripts' pharmacy benefit network put about $5.3 billion of its revenue at risk, Moody's said, adding that the argument could also hit the chain's front-end sales by depressing traffic.
Walgreen's sizable contract with Medco Health Solutions Inc. (MHS) is also endangered by Express Scripts' planned merger with its competitor, Moody's said.
Walgreen shares were flat at $36.96 after hours Friday. The stock has climbed 27% over the past year.
Description : ESRX – Express Scripts Inc – Long Term Stock Chart
Description : Express Scripts Logo
Description : ESRX-Express-Scripts-Inc-Stock-Chart-2007-2011
Source : http://online.wsj.com/article/BT-CO-20110916-711883.html
