Express ScriptsESRX

Morningstar Rating

Stock Research and Analysis

by Matthew Coffina

We expect pharmacy benefit managers, or PBMs, like Express Scripts to enjoy a bevy of positive trends in the next several years. The aging population, a slew of patent expirations for brand-name drugs, health-care cost-containment efforts, and increasing Read more

Bulls Say

Demographic trends and growth in overall drug spending provide PBMs with a solid backdrop for growth.

Express Scripts makes much higher margins on generic drugs. It will benefit from the $81 billion worth of brand-name drugs expected to lose patent protection during the next seven years.

Some regulatory reform would be beneficial for Express Scripts, such as creation of a pathway for approval of generic biologics and efforts to expand coverage to the nation's 46 million uninsured.

The acquisition of WellPoint's NextRx PBM subsidiaries boosts Express Scripts' scale, and its competitive advantages. Read more

Bears Say

Major health-care reform could be damaging to Express Scripts. For example, Medicare may be expanded to new populations, and this huge federal program could potentially negotiate its own drug prices.

The managed-care, retail pharmacy, and pharmaceutical manufacturing industries are all in a consolidation phase. Larger customers and suppliers have bargaining power over Express Scripts.

Express Scripts has been losing market share to competitors, and growth driven by margin expansion could be unsustainable over the long run.

Express Scripts could be hurt by irrational pricing by competitors. For example, CVS Caremark could underprice its PBM services to drive greater traffic to its retail stores. Read more

Strategy

Express Scripts' strategy is to align its interests with those of its customers, so that the lowest costs for clients also translate into the highest profits for the company. Cost control is primarily Read more

Management

We think Express Scripts' stewardship is good. Management stands out for its focus on capital discipline and returns on invested capital. The company is led by chairman and CEO George Paz, who came to Express Scripts as CFO in 1998. Paz succeeded Barrett Read more

Profile

Express Scripts is one of the three largest pharmacy benefit managers in the United States. Through its mail-order pharmacy and network of retail pharmacies, Express Scripts Read more

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