The business stories that matter, by Fortune's Colin Barr
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January 3, 2008, 10:12 am

More money for Medco

Big pharmaceutical companies aren’t the only ones being scorched by the rise of generic drugs. Shares of the major drug store chains - CVS/Caremark (CVS), Walgreen (WAG) and Rite Aid (RAD) - plunged between 5 percent and 8 percent Thursday morning after the companies reported that increasing use of cheaper generic drugs weighed on their December sales. The chains were already looking at a weak retail environment, given 2007’s surge in food and  energy prices and the decline of the U.S. housing market. But CVS, Walgreen and Rite Aid all said Thursday morning that consumers’ shift to generic drugs reduced their sales gains by around 4 percentage points. On the bright side, the drug store chains’ pain probably means bigger profits for the big mail order pharmacies. That’s why Medco (MHS) and Express Scripts (ESRX) - two huge stock market winners last year - extended their gains Thursday.

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Colin Barr covers business and finance for Fortune.com. Previously he was an editor at TheStreet.com and author of the weekly Five Dumbest Things on Wall Street column, and an editor at Dow Jones Newswires.
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