Walgreen to start drug plan for Caterpillar employees

Walgreen Co., the second-largest U.S. drug store 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-based retailer said today in a statement. The world's largest construction-equipment maker will get that price plus a determined markup.

Caterpillar has a partnership with Walmart under which it gets pricing on drugs directly from the retailer. Walmart expanded that program to other employers that are 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 middle-men PBMs are increasingly squeezed out of the picture," Robert Summers, an analyst at Pali Capital Inc. in New York, wrote today in a note to clients. "Consumers and corporations can realize significantly lower costs by partnering directly with retailers."

The Walgreen program, starting Jan. 1, covers more than 70,000 Caterpillar employees, retirees and dependents. The plan is in addition to the one provided by Walmart, said Darren Brandt, an outside spokesman for Walgreen.

Bentonville, Arkansas-based Walmart, the world's largest retailer, didn't immediately respond to a request for comment.

Walgreen rose 55 cents to $33.09 at 12:49 p.m. in New York Stock Exchange composite trading. Before today, the shares had climbed 32 percent this year.