But here's the catch. A lot of those customers -- employers, unions or governments -- have contracts that prevent them from immediately leaving Express Scripts so their workers can stay with Walgreen's, says Walgreen spokesman Michael Polzin. The real test will come this spring and summer, which is renewal season for PBM contracts, he says.

"As we enter the PBM selling season, you are going to have one PBM, Express Scripts, out there selling without the nation's largest drugstore chain in their network," says Polzin, referring, of course, to his own company. "Virtually all the other PBMs will be out there selling with the nation's largest drugstore in their network. We will see who has a better success."

The idea that Walgreen has enough muscle to score big victories against Express Scripts over the next six months is not so unlikely.

Founded in 1901 by Charles Walgreen, the eponymous drugstore chain grew rapidly with innovations like brighter lighting, wider aisles, friendlier service and expanded merchandise offerings. In 1927, the company went public. By 1960, it had filled 100 million prescriptions, more than any other drug chain.

Now it handles more than 800 million prescriptions a year through 7,840 stores. It had $72.2 billion in sales last year, two-thirds of that from pharmacy sales. Walgreen is particularly strong in several regions, with huge market share -- and clout -- in areas including Texas, Florida and San Francisco. It has also appeared on Fortune magazine's World's Most Admired Companies list for 18 years running.

In short, Walgreen has some weight to throw around.

And -- according to Walgreen-sponsored studies, at least -- most employers and their insurance companies (known as "payers") would want to see 5% or so in savings in exchange for offering their employees a smaller pharmacy network without Walgreen. "We don't think payers are interested in restricted networks unless there is real substantial savings. And those savings have not been offered to date through restricted networks," says Walgreen's Polzin.

"Most payers don't want narrow networks," agrees Wolf. That's one reason he is bullish on Walgreen stock. Scott Mushkin, an analyst with investment banking group Jefferies, says that in an early February meeting with the company, Walgreen execs predicted the chain will retain at least two-thirds of Medco business even if the merger with Express Scripts goes through.

2. Regulators could block the Express Scripts-Medco merger. The Federal Trade Commission has concerns about the concentration of power among PBMs that will result from this merger. The FTC was expected to rule by now, leading many to conclude it won't block the deal. But Morningstar analyst Matthew Coffina says there's still a 40% chance the merger will be blocked. If so, Walgreen stock "is going right up," says Wolf. Another possibility: The FTC could impose restrictions on Express Scripts-Medco that help Walgreen.

3. Walgreen could make a dramatic move to raise its clout -- by getting bigger. Rite Aid stock advanced sharply last week on speculation that Walgreen would buy it. Coffina doubts that Walgreen would purchase the whole chain. But it could buy Rite Aid stores in regions where it is weaker, such as the Northeast and Southern California, says Credit Suisse analyst Edward Kelly.

A more dramatic option would be a marriage between Walgreen and CVS, the two giants of the drugstore space, says Coffina. That's admittedly a long shot. But with PBMs getting bigger, a Walgreen-CVS merger would go a long way toward improving the bargaining power of these drugstores so they could defend their profit margins, says Coffina.

If antitrust regulators give the green light to an Express Scripts-Medco merger, it could be tough for them to put up roadblocks to mega-marriages in the pharmacy space -- even between two giants like Walgreen and CVS.

Many analysts see Walgreen as vulnerable, of course, which is why the stock is cheap. While Walgreen's stores fill 21% of scripts in the country, for example, they do it with only 13% of the pharmacy counters, points out Kelly, at Credit Suisse. "We are convinced that PBMs are in the stronger position," says Coffina. "Their clients are willing to walk away from a pharmacy chain even if it will save them only a modest amount of money. We are not enthusiastic about Walgreen."

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So who ultimately wins? We'll know a lot more by Labor Day -- after the contract renewal season between employers and PBMs this spring and summer. If you're going to invest, be aware of that timeline.

I'll side with Walgreen and Wolf, the BB&T analyst who is bullish on the stock. After all, as Apple (AAPL) has demonstrated, customer loyalty is a powerful force in retail. And loyalty to a 111-year-old store likely runs deeper than loyalty to a company you know only because your employer has hired it to handle part of your health plan.

Stocks mentioned in this article: Walgreen (WAG, news), Express Scripts (ESRX), Medco Health Solutions (MHS), CVS Caremark (CVS) and Rite Aid (RAD).

At the time of publication, Michael Brush did not own or control shares of any company mentioned in this column.

Michael Brush is the editor of Brush Up on Stocks, an investment newsletter. Click here to find Brush's most recent articles and blog posts.