CVS Caremark Corp. and Walgreen Co. said Friday they have settled a contract dispute that could have cut reimbursement for customers at 7,500 pharmacies, prompting them to search for a new place to fill prescription drugs.
Details of the deal were not disclosed. Shares of both companies surged.
Both companies have been negotiating for months and earlier this month said they would end their partnership. That partnership allows people whose prescription drug benefits are handled by Caremark to be reimbursed for prescriptions filled at Walgreen's pharmacies.
CVS Caremark Corp., based in Woonsocket, R.I., said Walgreen's participation means the CVS Caremark national pharmacy network will have more than 64,000 participating pharmacies.
Walgreen Co., based in Deerfield, Ill., is the largest U.S. drugstore chain based on locations and revenue, slightly ahead of CVS Caremark.
Walgreen wanted to be paid more for filling prescriptions. Caremark makes money by reducing costs for plan members and sponsors.
"We are very pleased with the outcome of this mutual, multiyear agreement that meets our business objectives," Kermit Crawford, executive vice president of pharmacy for Walgreen, said in a statement. "The agreement makes good business sense, provides the framework we need to operate our business going forward, and assures choice and convenience for the many consumers who look to us for quality pharmacy care."
Caremark has one of the largest pharmacy benefits management networks. It negotiates contracts with employers and handles the drug benefit part of their health plans, paying pharmacies to fill prescriptions. It saves money by negotiating volume discounts.
"We are pleased to have reached a mutually agreeable solution together with Walgreens that is consistent with our top priority to provide convenient access to affordable high-quality pharmacy health care," Per Lofberg, president of CVS' pharmacy benefit management business, said in a statement.
Shares of CVS rose $1.70, or 5.3 percent, to $33.54 in premarket trading while shares of Walgreen rose $2.43, or 8.3 percent, to $31.70.
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