Walgreen Co. sets drug plan for Caterpillar

— Walgreen Co., the second largest U.S. drugstore chain, formed a partnership to sell prescription drugs to Caterpillar Inc. employees, supplementing a similar program with Wal-Mart Stores Inc.

Caterpillar may cut prescription costs by using a proprietary price list identifying what Walgreen pays directly to manufacturers, the Deerfield, Ill.-based retailer said Wednesday in a statement.

The world's largest construction-equipment maker will pay that price plus a determined markup.

Caterpillar has a partnership with Wal-Mart under which it gets pricing on drugs directly from the giant retailer. Wal-Mart expanded that program to other employers trying to cut costs by sidestepping prices provided by third-party pharmacy-benefit managers.

The Walgreen "move offers further evidence of the future of health care, whereby the middlemen [pharmacy-benefit managers] are increasingly squeezed out of the picture," Robert Summers, an analyst at Pali Capital Inc. in New York, wrote Wednesday in a note to clients. "Consumers and corporations can realize significantly lower costs by partnering directly with retailers."

Walgreen shares rose 87 cents, or 2.67 percent, to $33.41 in New York Stock Exchange trading Wednesday. The shares have climbed 35 percent this year.

Business, Pages 28 on 08/27/2009

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