Drug Stores

Rarely are two major rivals as closely matched as Walgreen and CVS. Chain strength is relatively equal, but when it comes to catching breaks of late, Walgreen seems to be the blessed twin.

CVS has admitted to having supplied erroneous information to the Medicare website during a critical period last fall when recipients were making annual decisions on a Medicare Part D provider. The incorrect data led senior citizens who opted for CVS’s SilverScript program to pay about 4 percent more for medications than they were initially told. CVS also faces ongoing pressure from union-led coalition Change to Win, which has called for investigations into the CVS/Caremark merger because it believes there are inherent conflicts of interest in a pharmacy benefits manager and drug chain sharing the same corporate parent.

All this comes during a time of transition for CVS; president and COO Larry Merlo is scheduled to succeed retiring chairman and CEO Thomas M. Ryan next May.

Walgreen, on the other hand, has had free sailing with its acquisition of some 250 Duane Reade drug stores in metropolitan New York City. The $618 million purchase, expected to close by the end of summer, enhanced Walgreen’s move toward providing more fresh and prepared food options. Duane Reade was well along with its launch of DR Delish (an even broader selection of food offerings that includes fresh salads and frozen desserts) when the companies merged.

Walgreen has done pioneering work in the pharmacy arena, going directly to companies and government agencies to provide prescription medications for their employees. Such a strategy should be enhanced by the Duane Reade acquisition since “New York is a great market to do that in,” says Andrew Wolf, a drug industry securities analyst for BB&T Capital Markets.