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CVS Health's PBM Pharmacy Platform to Ride on Walmart Deal

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Shares of CVS Health Corporation (CVS - Free Report) rose 3.4% on Jan 18 to close at $65.52 following the company’s announcement of yet another major alliance. This time, the company has teamed up with retail and eCommerce giant Walmart (WMT - Free Report) on a multi-year agreement. Financial terms of the deal were kept under wraps.

Per the terms of the deal, Walmart will continue to participate in the CVS Caremark pharmacy benefit management (PBM) commercial and Managed Medicaid retail pharmacy networks. According to CVS Health, this will provide the company’s clients and their members with enhanced network stability.

Notably, CVS Health already has an agreement with Walmart for the latter's participation in the CVS Caremark Medicare Part D pharmacy network. Additionally, Walmart's Sam's Club division has a contract to participate in the CVS Caremark pharmacy networks.

With this latest participation of Walmart, CVS Caremark’s national pharmacy network will have nearly 68,000 participating pharmacies. This will include independently-owned, community-based pharmacies, other local pharmacies in grocery stores, mass merchants plus regional and national chains.

Inorganic Growth Activity: A Key Focus

With the e-commerce giant Amazon's (AMZN) foray into the pharmacy retail market, the traditional retail pharmacy and drugstore players like CVS Healthare collaborating to defend their position. Recently, this leading PBM company achieved a momentous healthcare consolidation by acquiring United States’ third largest health insurer Aetna for a colossal sum of $70 billion.

Economists have termed this deal to be of immense value deal that could reshape the landscape of American health care. On completion of the transaction, CVS Health expects to earn $750 million from near-term synergies with low- to mid-single digit accretion in the second year from the closure date.

Share Price Performance

Over the past six months, shares of the company have underperformed its industry. The stock has slipped 1.3% versus the 3% rise of the industry.

Zacks Rank and Key Picks

CVS Health Carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the broader medical space are Veeva Systems (VEEV - Free Report) and Omnicell, Inc. (OMCL - Free Report) .

Veeva Systems’ long-term earnings growth rate is estimated at 19.5%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Omnicell’s long-term earnings growth rate is projected at 11.8%. The stock carries a Zacks Rank #2 (Buy).

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