Much has been made of Walgreen's fight with Express Scripts and Express Scripts' subsequent denial of a new benefits contract with Walgreen's. Walgreen's stock has been pummeled. Is this an overreaction or is the big haircut deserved? To answer the question we have to look inside the numbers.
First let's look at Walgreen's pharmacy business. The pharmacy accounts for 65% of the company's business. For fiscal 2011 Walgreen's filled 819 million prescriptions or 1 in 5 retail prescriptions in the United States. Express Scripts accounted for roughly 88 million of those prescriptions. Of those 88 million, Walgreen's has secured new agreements(dropped Express and stayed with Walgreen's) with about 10 million. So Walgreen's will lose about 78 million prescriptions because of the Express Scripts situation. That would be a 10% reduction in total prescriptions approximately. So using a little fuzzy math and some generalization, Express Scripts accounts for 6.5% of Walgreen's revenue. A recent
