Express Scripts Holding Co (ESRX.O), the largest pharmacy benefit manager in the United States, said drug price inflation would likely be restrained going into 2017 and that scrutiny into pricing strategies was here to stay.
Shares of Express Scripts, which also said it was engaged in M&A discussions, were down 5 percent at $69.35 on Wednesday, making the stock the biggest drag on the S&P healthcare index .SPXHC.
Express Scripts' comments come at a time when drug pricing is a hot political topic in the United States.
President-elect Donald Trump pledged last week to "bring down drug prices," voicing similar concerns raised by other presidential candidates in the run-up to the election.
Prescription benefit managers (PBMs) negotiate drug benefits for health plans and employers, and have in recent years taken an increasingly aggressive stance in price negotiations with drugmakers.
They often extract discounts as well as after-market rebates from drugmakers in exchange for including their medicines in their formularies with low co-payments.
Drug price inflation will unlikely represent a "significant headwind" in 2017, Chief Executive Tim Wentworth said on a call with analysts, noting that the company has not seen the value of rebates change recently.
"You're probably going to see some restraint compared to what we have maybe seen in the last couple of years."
Short seller Citron Research's Andrew Left called Express Scripts the "culprit behind pharmaceutical price gouging" last week, saying it benefits from the "opaqueness" of drug pricing.
"We don't accept where drug prices are today. We believe they can and should be lower," Wentworth told Reuters in an email on Wednesday.
Evercore ISI analysts said the stock could remain vulnerable to the drug pricing debate and the scrutiny on rebates.
Express Scripts' shares have struggled for most of this year after a major customer, health insurer Anthem Inc ANTM.O, sued the company over drug rebates.
The PBM also forecast 2017 adjusted earnings of $6.82-$7.02 per share, largely in line in Wall Street estimates.
Up to Tuesday's close, Express Scripts' stock had fallen about 16.3 percent since the beginning of the year.
(Reporting by Natalie Grover in Bengaluru; Additional reporting by Ankur Banerjee; Editing by Saumyadeb Chakrabarty)