Express Scripts Holding Company (ESRX), Novo Nordisk A/S (ADR) (NVO), Walgreen Company (WAG): Don’t Mess With This 800-Pound Gorilla in the Pharma Space

Walgreen Company (NYSE:WAG) lost that challenge, as its Express Scripts customers — which accounted for 80 million annual prescriptions — flocked to CVS Caremark and Rite Aid, which announced that they would fill Express Scripts prescriptions during the dispute. As a result, Walgreen’s prescription sales plunged 8.1% by the fourth quarter of 2012.

Realizing the error of its ways, Walgreen Company (NYSE:WAG) made amends with Express Scripts, agreed to its new terms, and resumed their partnership last September. Since then, the outlook for Walgreen has improved considerably. Walgreen recently announced that August sales had improved 5.6% over the previous year, and pharmacy sales had risen 6.4%. This marks Walgreen’s sixth consecutive month of rising sales, and is a clear confirmation of the strength of Express Scripts.

The Foolish bottom line
By analyzing Express Scripts’ relationships with pharma companies like Novo and Lilly, and its dominance of pharmacies like Walgreen, its easy to see why some critics are concerned that the company has too much clout and pricing power.

However, that power is precisely what makes Express Scripts a lucrative long-term investment. Although shares have remained fairly flat over the past year, the stock has climbed more than 80% over the past five years and nearly 800% over the past decade.

Pharmaceutical companies must curry Express Scripts’ favor, pharmacies must agree to its prices, and consumers must choose from the rugs that it offers. With its acquisition of Medco last year, Express Scripts is now the 800-pound gorilla that sits at the center of the pharma universe — and it’s always a sound idea to invest in industry leaders.

The article Don’t Mess With This 800-Pound Gorilla in the Pharma Space originally appeared on Fool.com and is written by Leo Sun.

Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Express Scripts. The Motley Fool owns shares of Express Scripts.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.