(Reuters) - Express Scripts Inc (ESRX.O) might lose a “small fraction” of its business from a dispute with drugstore chain Walgreen Co WAG.N, its chief financial officer said on Wednesday, but it would not be a significant amount.
Express Scripts, which manages prescription drug benefits for employers and other clients, has been locked in a high-stakes public dispute with Walgreen since June, when the largest U.S. drugstore chain said it would stop filling prescriptions covered by Express Scripts at the end of the year after failing to agree on contract terms.
Express Scripts prescriptions are expected to be worth $5.3 billion in sales for Walgreen this year, or about 7 percent of the chain’s total expected revenue.
Speaking at an investor conference, Express Scripts CFO Jeff Hall said many of its customers support the company in the dispute because they do not want to pay a premium price to have Walgreen in the network.
“We would expect that some small fraction of our business might move away,” Hall said at the Morgan Stanley Global Healthcare Conference in New York. “We don’t think that’s a meaningful amount of our business.”
Hall said there was no cut-off deadline after which no resolution could be reached between the two sides. But he said that after Jan 1, when Walgreen stores would leave the network, some members may not return to the stores should an agreement eventually be struck.
“In general, they don’t move back,” he said.
Walgreen resolved a similar spat with CVS Caremark Corp (CVS.N) last year, but it appears to be digging in its heels more deeply in the dispute with Express Scripts.
Last week, Express Scripts filed an injunction in federal court in Illinois alleging Walgreen published false marketing materials designed to encourage Medicare recipients to leave health plans that are Express Scripts clients.
Walgreen, whose “white paper” to clients outlined its plan to leave its Express Scripts’ business, was not immediately available to comment.
The stakes in the dispute with Walgreen rose higher in July when Express Scripts announced its $29 billion deal to acquire rival Medco Health Solutions Inc MHS.N and create a powerhouse in managing prescription drug benefits.
However, the deal is attracting significant antitrust scrutiny, and Express Scripts said earlier this month that the U.S. Federal Trade Commission had asked for additional information about it.
Some analysts have said it is a coin flip as to whether the deal wins regulatory approval. Medco shares are trading about 24 percent below the offer price, reflecting in large part skepticism the deal will be completed.
Hall said he believes the main regulatory concern is whether the deal would be pro-competitive and reduce costs.
“We will look forward to making our case on why this is indeed going to lower the overall cost of healthcare for the U.S.,” Hall said.
He said it was still “probable” that the deal closes in the first half of next year. “There’s nothing that we’ve seen so far that would make us push that date out any further,” he said.
Hall also sounded a dour note about Americans continuing to cut back on healthcare spending because of the weak economy, the latest sign of such a persistent pull-back.
While Express Scripts sees prescriptions increase 3 percent to 5 percent in an average year, he said, there has been virtually no growth over the past three years.
“The economy has actually gotten worse since the June-July timeframe...and we don’t see the economy getting any better,” he said. “If the economy stays at this place, then utilization is going to continue to be lower than previously expected.”
Reporting by Lewis Krauskopf in New York, additional reporting by Jessica Wohl in Chicago