CVS Caremark Corp. is continuing its pharmaceutical supply relationships with McKesson Corp. and Cardinal Health Inc.

CVS Caremark, McKesson, Cardinal Health, pharmaceutical supply, pharmaceutical distributor, CVS Caremark's retail pharmacies, Paul Julian, George Barrett, Walgreens, AmerisourceBergen, Alliance Boots, pharmaceutical distribution

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CVS renews Rx distribution pacts with McKesson, Cardinal

April 25th, 2013

NEW YORK – CVS Caremark Corp. is continuing its pharmaceutical supply relationships with McKesson Corp. and Cardinal Health Inc.

McKesson said Thursday that it has renewed its current distribution agreement with CVS Caremark.

For McKesson's 2012 fiscal year, CVS Caremark and Rite Aid Corp. were its largest customers, accounting for about 16% and 10%, respectively, of the pharmaceutical distributor's total revenue.

"We are extremely pleased to continue our long-standing relationship with CVS Caremark," Paul Julian, executive vice president and group president at McKesson, said in a statement. "McKesson's comprehensive supply-chain solutions continue to help CVS Caremark ensure the highest levels of product availability and product integrity, empowering CVS Caremark to provide outstanding pharmaceutical care to its customers."

Also on Thursday, Cardinal Health announced that it has entered new agreements to supply pharmaceuticals to CVS Caremark's retail pharmacies and distribution centers through mid-2016.

Cardinal said the stores and distribution centers served under the new pact are "essentially the same as those serviced in the prior arrangement."

"CVS Caremark has been a long and valued partner to Cardinal Health," chairman and chief executive officer George Barrett stated. "We are excited to continue to build on that tradition. We look forward to working together to create value for our evolving heath care system."

CVS Caremark and Walgreen Co. accounted for 22% and 21%, respectively, of Cardinal's total revenue for its 2012 fiscal year.

In its fiscal 2013 second-quarter 10-Q filing with the Securities and Exchange Commission on Feb. 6, Cardinal said its contracts with CVS and Walgreens are scheduled to expire in June 2013 and August 2013, respectively, and that Walgreens and CVS issued requests for proposal for pharmaceutical distribution services during August 2012 and December 2012, respectively.

But on March 19, Cardinal said it won't renew its pharmaceutical distribution pact with Walgreens when it lapses this summer. Cardinal made the announcement the same day that Walgreens and joint venture partner Alliance Boots unveiled a far-ranging partnership with drug wholesaler AmerisourceBergen Corp.

Cardinal noted at the time that the nonrenewal of its contract with Walgreens won't negatively impact earnings for the 2013 fiscal year because the existing agreement with the drug chain remains in place throughout fiscal 2013. Cardinal also pointed out that although Walgreens is one of its two largest customers, during fiscal 2012 60% of revenue from Walgreens was bulk sales, which yield lower profit.