CVS Caremark said it's "surprised and disappointed" with Walgreens' move to exit the Caremark pharmacy benefit management network.

The company called Walgreens' action a negotiating tactic to boost its reimbursement rate from Caremark.

Industry analysts, meanwhile, expect the two companies to come to an agreement on the matter.

WOONSOCKET, R.I. — CVS Caremark Corp. expressed disappointment with Walgreen Co.’s announcement that it won’t be a part of CVS Caremark’s pharmacy benefit management network going forward.

Walgreens said Monday that it no longer plans to participate in any new and renewed prescription drug plans awarded to CVS Caremark’s PBM business after June 7. The Deerfield, Ill.-based drug store chain said the relationship with CVS Caremark’s PBM unit was "no longer in the best interests of its customers, pharmacists and shareholders" and cited issues with CVS Caremark regarding its Maintenance Choice program, transfers of prescription plans to other pharmacies and reimbursement rates.

"We were surprised and disappointed by Walgreens’ announced intention not to participate on a go-forward basis in CVS Caremark PBM pharmacy networks," CVS Caremark said in a statement released Monday afternoon. "Our network of participating pharmacies is currently the largest ever maintained by Caremark Pharmacy Services, our PBM business, with more than 64,000 participants (only about 7,000 of which are Walgreens stores). Walgreens is offered comparable reimbursement rates as other large national retail chains, including CVS/pharmacy."

CVS Caremark noted that the matter isn’t closed and that it aims to keep talks going with Walgreens. The drug chain is the largest pharmacy provider in the Caremark PBM network.

"CVS Caremark remains open to discussions regarding Walgreens continued participation in our PBM pharmacy networks," CVS Caremark stated. "In fact, we just recently met with Walgreens management regarding these issues."

According to CVS Caremark, Walgreens’ action is a strategy to try to boost its reimbursement rate from Caremark. The company alluded to Walgreens’ move earlier this year to stop accepting new Medicaid patients in its Washington stores because of state cutbacks in pharmacy reimbursement.

"Walgreens has tried this approach several times in the past, targeting employers, health insurers and government entities," the statement from CVS Caremark said. "Today’s announcement by Walgreens is nothing more than a transparent effort to raise its reimbursement rates at the expense of plan sponsors and members and illustrates an inability to adapt to the demands of the marketplace in today’s challenging and rapidly evolving health care environment.

"CVS Caremark is focused on being responsive to our clients’ needs and offering them innovative solutions that reduce costs and improve health care outcomes," the statement continued. "The fact is our clients, not retail pharmacies, dictate plan designs. Unfortunately, Walgreens has a demonstrated pattern of publicly objecting to plan designs not to their liking, such as mail-based programs and other innovative programs that are designed to reduce costs and meet client needs."

In a research note released Monday, Sanford Bernstein & Co. analyst Helene Wolk wrote that Walgreens is attempting to use its leverage in the pharmacy market, of which it has an approximately 18% share, to force CVS Caremark to hike its reimbursement.

"We believe Walgreens’ actions represent a negotiating tactic, albeit a very aggressive one, to garner increased reimbursement from Caremark," she stated.

Wolk also pointed to Walgreens’ tough stance on pharmacy reimbursement in Washington. "Aggressive and public negotiations are not new for Walgreens, as it stopped filling scripts for new Medicaid patients in the state of Washington over a reimbursement dispute this spring," she said in her research report.

CVS Caremark reported that it’s the nation’s largest provider of prescriptions, filling or managing more than 1 billion prescriptions annually. Along with its Caremark Pharmacy Services division, the company provides prescriptions through over 7,000 CVS/pharmacy stores.

"We will continue to prioritize the needs of our clients and their members, including access to convenient and affordable pharmacy care," CVS Caremark stated. "Furthermore, we believe a public relations strategy that threatens network withdrawal is not a proper way to resolve business issues and is not in the best interests of patient care."

William Blair & Co. analyst Mark Miller indicated that CVS Caremark and Walgreens are likely to reach to an accord on the matter because of the potential business consequences for both companies.

"As the prospect of an adverse business impact approaches later this year, Walgreens would clearly have greater incentive to negotiate a mutually acceptable agreement with CVS Caremark," he said in a research note.

Likewise, CVS Caremark would take a hit without Walgreens in its PBM pharmacy network, Miller noted. "Our view is that the PBM marketplace is too competitive for CVS Caremark to feature a less attractive retail network — Walgreens has nearly 20% share of the U.S. market for retail prescriptions," he wrote.

Analyst Bill Dreher of Deutsche Bank Securities pointed out that Walgreens’ move leaves a big hole in the Caremark network. "With the prospect of Walgreens and its 7,500 pharmacies exiting the CVS network, CVS’ PBM offering will look less compelling to payers," Dreher wrote in a research report on the matter.

Miller said the re-establishment of working ties "would be in the best interests of both companies."

"Our best guess is that Walgreens ultimately will remain in the networks for 2011," he wrote in the research note. "To do so, the companies would simply need to come to an agreement by the end of this calendar year."

*Editor’s Note: Article updated June 8 with additional analyst comment.