Morgan Stanley analyst Ricky Goldwasser said the guidance cut made by Walgreens Boots Alliance (WBA) is due to the same “perfect storm of industry headwinds” addressed by CVS Health (CVS) earlier in the year, including increased reimbursement pressure, lower generic deflation, lower brand inflation and declining comparable sales in the front-end of the store. Though Walgreens management suggested reimbursement headwinds should normalize in fiscal 2020, Goldwasser said he could see more downside from continued reimbursement headwinds and structural changes if new rebate rule comes into play. He also views pharmacy reimbursement pressure as a leading indicator suggesting risk to distributors’ sell side margins and earnings, including for AmerisourceBergen (ABC), which Goldwasser notes is part of the WBAD purchasing consortium. Other drug distributors include McKesson (MCK) and Cardinal Health (CAH).
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