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Express Scripts, Walgreens Tie Up to Cut Specialty Drug Price

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In a bid to ensure availability of specialty brand drugs Express Scripts Holding Company (ESRX - Free Report) and Walgreens Boots Alliance (WBA - Free Report) recently announced plans to expand their existing group purchasing efforts.

Since biosimilars have the potential to lower production costs, the move is considered to be a prudent and timely one.

ValoremRx Specialty Solutions, LLC, will assist the companies to carry out the move by helping pharmacies selling expensive drugs to simplify the global supply chain and lowering costs for patients and clients using the specialty pharmacies of Express Scripts (Accredo) and Walgreens.

Express Scripts joined Walgreens Boots Alliance Development GmbH (“WBAD”) group in May 2017 through a wholly-owned subsidiary, Innovative Product Alignment, LLC.

Notably, WBAD, is a global group purchasing organization that sources and contracts generic pharmaceuticals on behalf of its members. The move made Innovative Product Alignment, a member of WBAD.

Rationale of the Move

Specialty medication include costly and complex drugs and are prescribed on a regular basis. The latest pact will improve Express Scripts’ supply chain and make these medicines, including biosimilars, affordable and accessible to patients.

Per a research conducted by RAND Corporation, biosimilars for arthritis and cancer, have the potential to yield billions in cost savings in the United States. It may lead to a $54 billion reduction in direct spending on biologic drugs between 2018 and 2027.

Promising Market

Per a study by SNS Research, approved biosimilars will account for nearly $22 billion revenues by the end of 2020. Regulatory efforts to reduce healthcare costs are likely to aid this growth.

Given the potential that the market holds, we believe the latest move by these two medical behemoths is a strategic and timely one.

Share Price Performance

Over a year, Express Scripts has outperformed the broader industry. The stock has returned 6.9% compared with the industry’s gain of 1.9%.


Zacks Ranks & Other Stocks to Consider

Express Scripts carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader medical space are Centene Corp. (CNC - Free Report) and Bioverativ Inc. . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Centene’s projected long-term growth rate is 14.4%. The stock has returned 16.9% in the past six months.

Bioverativ has an expected long-term growth rate of 14%. The stock has returned a whopping 106.8% in the past three months.

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