CVS Caremark and prescription drug distributor Cardinal Health are combining their buying power through a 10-year joint venture to purchase generic medicines.
The joint venture will become active in July and will negotiate supply contracts for both Dublin, Ohio-based Cardinal and CVS Caremark, the nation's second largest drugstore chain and one of the largest pharmacy benefits managers.
Cardinal will make $25 million quarterly payments to CVS Caremark, which is headquartered in Woonsocket, R.I., over the life of the contract. Those payments boil down to a total of about $435 million after taxes.
Drugstores and pharmacy benefits managers have been hit with a wave of generic drugs over the past few years as popular brand-name medications like the cholesterol fighter Lipitor lost patent protection. These cheaper generic drugs have hurt pharmacy revenues but they also help earnings because they come with a larger margin between the cost the company pays for the drug and the reimbursement it receives. -BusinessWeek.com
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