wickedone, we have all been predicting margin pressure on retail pharmas as a derivative of competition (Walmart), lowered reimbursements (PBM imperative) and healthcare reform (Medicare/Medicaid budget cliff). I agree with you that Caremark matching the ESRX lowered reimbursements is a given; they must remain competitive or put contracts at risk for value seekers constantly looking for ways to moderate rising overall healthcare costs. The statement used to be "Cash is King" but that has now been replaced with "Cost is King"... never a Walgreens strength.
There is a clue in yesterday's PR and the extraordinary highlighting of dividend/buyback spend as a plus for shareholders. WAG spent $1.9 billion on these items in FY12. That's all well and good, until the cost of such programs gets considered in the competitive matrix. Also ignored is the buried truth that the Alliance Boots deal actually re-diluted virtually ALL the shares WAG bought back over the last 5 years... a small "problem" that is conveniently skirted amidst all the grandiose corporate self-aggrandizement and congratulatory back-slapping.
When Walgreens "(empty)suits" bleat poverty and screech publically about unfairly lowered reimbursements and "mean old Mr. PBM" they ignore the hard truth that their inability to comply is a self-inflicted wound... not an inevitable and undigestible affront to ALL players in the Rx space. M&A costs, new debt cost, SGA bloat and a new loyalty program all add to the seperation of Walgreens from more cost-limber competition (other than maybe debt-ridden Rite Aid, as you correctly note). Walgreeens competitors simply do not carry these burdens to any major extent.
I am not widely experienced in the metrics of drug wholesaling so I can't say with conviction whether this direction tilts the balance more towards Walgreens in the future, or not. What I can say is that WAG needs to say a whole lot more about its strategic vision and business plan or they risk appearing to be throwing the kitchen sink up against the ceiling and hoping it sticks.
GLTA,
Yank
