Express Scripts Inc. (ESRX) Chief Executive George Paz reaffirmed the company's earnings guidance Monday and criticized the performance of a rival's "retail model" nearly two years after losing a bitter battle against the merger that formed CVS Caremark Corp. (CVS).

Express Scripts and stand-alone pharmacy benefits management peer Medco Health Solutions Inc. (MHS) saw their shares slide Friday after CVS Caremark, the drug store chain-pharmacy benefits management giant, issued disappointing guidance for 2009.

Express Scripts' Paz said at the JP Morgan Healthcare Conference that his company was reiterating its outlook for roughly 19% per-share earnings growth this year, in spite of having clients in troubled industries considering workforce reductions. He tied Express Scripts' strength to its ability to help clients keep drug costs under control.

Paz sought to downplay the significance of differentiated business models, and criticized the retail model represented by CVS Caremark, saying clients care primarily about controlling drug spending.

"There is a retail model, which is the one we worked very hard against two years ago ... I don't believe that model works, because of all the conflicts, and I think we are starting to see some of that," Paz said.

Drug-store chain CVS acquired giant pharmacy benefits manager Caremark Rx for nearly $27 billion in March 2007 after winning a takeover fight with Express Scripts, which had made a hostile bid for its larger PBM rival. Executives of CVS and Caremark had promised their deal would change the pharmacy industry landscape by enabling the retail drug store and the PBM to combine capabilities and offer new products and services. Now some on Wall Street are questioning whether the deal has delivered the value promised.

CVS Caremark issued disappointing guidance for this year mostly because it has repriced a significant portion of its PBM contracts to lock in major clients.

CVS also noted that PBM business profitability was being hit by some of the company's combined retail-PBM offerings, as the PBM mail-order pharmacy loses some volume on maintenance prescriptions to CVS retail stores.

"The only thing that really matters is controlling trend," or clients' spending on prescription drugs on behalf of covered members, Paz said.

Express Scripts has an aligned model that means lower drug trends for plan sponsors, the CEO said.

"I don't need to be differentiated in retail, that means I'm going to grow my business by 2% to 5%," he said, referencing CVS's 2009 growth forecast for its PBM business.

"I need to be differntiated in a way that makes a difference for our plan sponsors and our clients and I believe that's the model we have today," Paz said. Express Scripts will continue to grow its generics, mail-order and specialty businesses and create shareholder value, he said.

He outlined Express Scripts' efforts to influence members to take an active role in managing their conditions, including choosing the lowest-cost drug from the optimum channel.

In October, Express Scripts said it expected 2008 per-share earnings of $3.07 to $3.10 and 2009 earnings of $3.63 to $3.73.

Executives of CVS Caremark and Medco are scheduled to speak at the conference Tuesday.

-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; dinah.brin@dowjones.com

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