Thread regarding Walgreens layoffs

The struggles for Walgreens (WBA) are “a very good case study” of the risk to the wider sector, Colas said Wednesday. Health-care stocks are up for the year, but have trailed the S&P 500.

Walgreens executives said they’re struggling because of pressure on reimbursements from insurers and lower prices on branded d--gs. Generic d--gs, whose prices have been falling, are falling at a slower rate.

“Of course, the pharmacy trends are not only impacting our business,” said CEO Stefano Passino on the company’s conference call with analysts. “They are impacting the overall market and will likely continue to do so over the coming months.”

Morgan Stanley analyst Ricky Goldwasser expects that d--g distributors —which include Cardinal Health (CAH), AmerisourceBergen (ABC), and McKesson (MCK)—are vulnerable because of the new pressure on reimbursement rates. Those stocks all fell more than 3% on Tuesday, but have since stabilized, trading about flat since then. All three were down slightly on Thursday morning.

Goldwasser sees more reimbursement pressure ahead for pharmacies, and that could spell trouble for the distributors. “Our cautious thesis on distributors stocks is predicated on the risk of future deterioration of profit pool from independents and regional retail pharmacies, which represent distributors’ most profitable custom segment,” he wrote.