This may not come as a surprise. After all, CVS is a huge retailer and Caremark, which is a large pharmacy benefits manager, operates a big mail-order operation. But a recent lawsuit confirms that the merger is going to make life tougher for generic drugmakers, as Adam Fein at Drug Channels points out this morning.

In July, CVS filed a lawsuit against Prasco, a generic drugmaker that had a contract to supply a copycat version of Allegra to the drugstore chain. The contract, Fein notes, specified that CVS had a “Most Favored Nation” clause to guarantee that CVS paid the lowest price of any customer.

But paragraph 21 states “As a result of the merger, CVS learned that, contrary the Agreement, Prasco had not, in fact, charged CVS the lowest price offered to any other customer. Instead, CVS learned that Caremark had been charged a lower price than CVS.” And so CVS is taking advantage of the fact that generic makers compete for supply contracts and shelf space by lowering prices to the biggest customers.

The big generics can expect more of this sort of thing, Fein writes, since there are only nine big customers left: Three wholesalers – AmerisourceBergen, Cardinal Health, and McKesson - and six drug-store chains and mail-order pharmacies - CVS/Caremark, Medoc, Express Scripts, Rite-Aid, Walgreens and Wal-Mart.

By the way, Fein also notes that Exhibit B of the Prasco lawsuit demonstrates the power of a big buyer in the generic drug supply chain. CVS gets price protection as a generic drug’s price falls. “In other words, they can recover any decline in inventory value for products in their distribution centers plus five week’s inventory at store level (apparently without regard for actual store inventories),” he writes. “This is the opposite of the investment buying by the channel that occurs for branded pharmaceuticals.”