The bitter pricing clash between Walgreen, the country’s largest pharmacy, and Express Scripts, now the largest pharmacy benefits manager (PBM) following its acquisition of Medco this year, ended with Walgreen capitulating, an industry analyst tells CFO. And one likely result, he says, will be a cost break on prescriptions that employees of Express Scripts corporate clients fill at Walgreen.

That is, the cost break will come to the extent that health-plan members care to switch back to Walgreen after being forced to find new pharmacies when the warring parties’ contract ended last December 31 without being renewed.

The companies jointly announced on Monday that they had resolved their 13-month dispute in which the PBM claimed, and Walgreen denied, that it was paying higher rates to the pharmacy than to its competitors for filling prescriptions.

Terms of the deal were not announced. But Ross Murken, an analyst who covers the PBMs and pharmacies for ISI Group, says that starting September 15, when the new contract takes effect, Walgreen will be getting an average of $1 to $2 less per prescription from Express Scripts than it had under the previous contract. He says that intelligence was obtained from “members in the channel” of the PBMs, pharmacies, and corporate health-plan sponsors.

Rather than pocket the savings, Murken suggests, Express Scripts will more likely charge corporate clients less for prescriptions filled at Walgreen. “Express Scripts customers that choose to have Walgreen back in their network will enjoy a lower-cost provider,” he says. “And while Medco continued to have a contract with Walgreen, its clients that use Walgreen will have a lower cost as well.”

Industry observers had agreed that Walgreen had lost billions of dollars in revenue from customers who departed for other pharmacies after Walgreen exited the Express Scripts networks. Some published reports put the figure at $4 billion, but Murken says “it’s a bigger number than that.”

The company badly miscalculated what the fallout would be, he adds. “If you do a store overlay of Walgreen and CVS, there’s about a 90% correlation of store placements within a mile. They’re basically on top of each other, so it wasn’t a big deal for most companies. There has been very little turnover in contracts from vendor to vendor because of Walgreen being out of the Express Scripts network.”

It’s debatable how many of the departed customers will come back to Walgreen now, notes Sean Brandle, a partner in the health and benefits practice of consultancy Mercer. “It’s not going to be an easy task for Walgreen to get those members back,” he says. “There’s a prescription-transfer process that members have to go through, and they just did that last year” when they left Walgreen.

It appears that many will be not be able to return even if they want to. The press release that announced the deal said Walgreen “will be part of the broadest network of pharmacies available to Express Scripts clients.” The PBMs make available to employers various networks with more or fewer pharmacies. Plan sponsors that have chosen a narrower network than Express Scripts’s broadest one have to switch networks if they want to let plan members use Walgreen.

And companies have grown more willing lately to use smaller networks. “Most clients historically have not wanted member disruptions, so they have chosen broader networks,” says Brandle. “But the Express Scripts-Walgreen dispute has changed that a bit.”

A bigger factor pushing companies to consider smaller networks of pharmacies, and of health-care providers as well, is the simple desire to spend less on health care. Because smaller networks typically are less costly to plan sponsors, Brandle questions whether the new Walgreen-Express Scripts deal will result in the cost savings Murken suggests.

He says that while he has no information on the deal’s terms, “Clients may now have to pay a premium to have Walgreen in their network. So I’m not so certain that there will actually be any savings.”

A Walgreen spokesman declined to comment on the company’s challenge in building its business back up or discuss anything else that was not in the press release, which revealed little information other than the facts of the new contract, its effective date, and its applicability only to customers choosing the broadest Express Scripts pharmacy network.

For his part, an Express Scripts spokesman said the agreement “does provide plan sponsors who choose the broadest Express Scripts network sufficient time to ensure a smooth transition for those patients who will want to have their prescriptions filled at Walgreen’s pharmacies. We can’t speculate on what the landscape will look like on September 15, but we’ll work to do what’s in the best interest of our plan sponsors.”