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Why Catamaran Shares Ran Aground

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of pharmacy benefit management (PBM) services provider Catamaran (TSX:CCT, NASDAQ:CTRX) were down by more than 10% at one point today after Walgreen announced that it’s moving 120,000 employees to a private health insurance exchange where they can choose a plan from multiple insurers.

So what: This is a similar type service as the one that Catamaran and other PBM service providers, um, provide.  Another big pure-play in this space, Express Scripts, was also off on the news.

Now what: While this was just an announcement and has no financial implications for Catamaran today, the possibility that other corporations might follow Walgreen’s lead has scared investors.  The health insurance game in the U.S. is a tough one for us Canadians to get our heads around and given all the moving parts that go into it, investors would do well to have a complete understanding of all of the dynamics at work before wading in.

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Fool contributor Iain Butler doesn’t own shares in any companies mentioned.  The Motley Fool doesn’t own shares in any of the companies mentioned.

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