Walgreen Company (WAG), Express Scripts Holding Company (ESRX): Drug Stores Set to Profit From Obamacare

As the implementation of Obamacare moves forward, drug stores are set to profit from it, as people who were previously not receiving treatment now have that option. The switch has many pharmacies changing operations, as they get ready for Obamacare’s full implementation in 2014.

Walgreen is re-branding

Walgreen Company (NYSE:WAG) is re-branding over 370 locations into “Healthcare Clinics,” and this shows the company is gearing up to provide medical services. The clinics are staffed by nurse practitioners, and this means the firm will now treat more than just strep throat and pink eye, for example. The more the company can offer, the more customers will visit the store for products and services.

I think this move will be a success, as there is currently a shortage of primary care physicians. Furthermore, with millions of additional people getting treatment for their ailments beginning in January, due to the Affordable Care Act (Obamacare), the amount of profits that the company will roll in could be staggering. The move also could take patients away from CVS Caremark (NYSE:CVS), which already has a high integration of products and services.

Analysts also see gains ahead for the company. EPS is expected to increase 7% this fiscal year, and another 13% next year. The real gains are expected next year, when the company profits from the Affordable Care Act. Revenue is set to increase by about 4.6% in 2014, according to a consensus of 21 analysts.

CVS Caremark offers it all

The potential profits that pharmacies could realize is echoed by CVS Caremark (NYSE:CVS) when it announced that it would use its stores to educate people about the coverage options. The company’s efforts to promote the strategy show that there is considerable profit to be made by drug stores.

I see the company’s offerings of a retail pharmacy, MinuteClinic and PBM (pharmacy benefit management) as giving the firm a competitive advantage. Offering all of these services provides savings to customers by combining the services, and therefore, lowering expenses. Those lower costs could be passed on to the consumer.

Analysts also think that the company is set for growth. EPS is projected to increase 16% this year, and another 12% next year. However, I think the uptake of Obamacare clients could result in even more substantial gains. After all, the competition for those clients could result in a price war between drug stores, and CVS’ integration of services could allow it to lower prices without digging too much into margins.