Express Scripts Vs. CVS: Who Wins?

In its latest Head-to-Head series, Citi analysts compared the two largest PBM services providers in North America -

and

. In the report published Friday Citi noted, "Both companies are leading players in the pharmacy benefit management industry, touting different business models as differentiators. We compare and contrast them on the basis of their business models, relative positioning given industry trends, and valuation." Both Express Scripts and CVS expect generic utilization to continue growing through 2016, the "trajectory appears to be slowing" on account of "replenished pipelines for manufacturers" and robust prospects for new drug approvals (NDAs) over the next several years. "With these industry tailwinds beginning to wind down, PBMs will need to find other growth drivers over the next 5-10 years," the analysts said. Citi declares the winner as Express Scripts. Although both Express Scripts and CVS are well positioned to "participate in tailwinds from trends in the PBM space," the analysts believe that Express Scripts offers investors "greater value at current prices" as well as a "more channel agnostic business model." Express Scripts is the largest PBM in the US. It, therefore, has the leverage to "drive favorable pricing economics for both its clients and shareholder," the report mentioned. The analysts believe that macro trends including growth in generics and specialty make PBMs "increasingly relevant" and where Express Scripts' size and scale make it "optimally positioned." CVS seems poised to meet the top end of its long-term growth guidance and is likely to benefit from "its multi-channel business model, strong growth initiatives that are driving share gains, and industry tailwinds," Citi believes that this is already priced into the company's shares.