Shares of Express Scripts (ESRX) are slipping following a cautious mention by Andrew Left's Citron Research, who said the company's rebate system is "a financial engineering kickback scheme." Commenting on the report, a spokesman for the company told The Fly that drug makers, not rebates, raise prices, while arguing that flat premiums prove that the company is doing its job.

CITRON'S CAUTIOUS REPORT: Andrew Left's Citron Research, which has previously been critical of Express Scripts, posted a new cautious report about the company on its website. The short-selling research firm argued that Express Scripts is one company in the healthcare system that "deserves to fall to the mighty sword of the new Trump administration," saying that its rebate system is "a financial engineering kickback scheme." Calling the company "The John Gotti of the Pharmaceutical Industry," Citron Research said the CMS bulletin issued last week is "devastating" evidence against its practices. The percentage of pharma spending Express Scripts "extracts from rebates is far greater than its peers, and expanding," alleged Citron, claiming that the pharmacy-benefit manager diverts "huge cash flows" from companies that actually invest in innovative R&D into "kickbacks" for themselves. Therefore, if Express Scripts loses 50% of its rebates under the Trump administration, "they lose 30% of EPS, and the stock goes straight to $45," the short-selling research firm contended.

REBATES DO NOT RAISE PRICES: Contacted by The Fly following the Citron report, a spokesman for Express Scripts stated that "rebates don't raise drug prices, drug makers raise drug prices," adding that the company is "a unique market force that drives down drug costs and makes medicine affordable." "Regarding the CMS report, premiums are flat with escalating drug prices proves that we do our job. That's a function of benefit design, which the government controls. DIR payments reduce government liability as they are netted against reinsurance payments to plan sponsors. Keep in mind, Congress enacted that pharma fund the coverage gap discount which also moves beneficiaries to the catastrophic phase earlier. Despite pharma efforts to the contrary, we are doing our job well to rein in costs," the spokesperson contended.

WHAT'S NOTABLE: Late last year, Left's Citron Research posted cautious comments on Twitter, comparing Express Scripts to Valeant Pharmaceuticals' (VRX) specialty pharmacy Philidor and putting a $45 price target on the shares. The firm had tweeted, "When @therealdonaltrump tells $ESRX 'you're fired' heads will roll. $ESRX culprit behind pharmaceutical price gouging. Price Target $45" and "$ESRX is Philidor of the pharma industry. @therealdonaldtrump promises to fix drug pricing? Two words: EXPRESS SCRIPTS."

PRICE ACTION: In late morning trading, shares of Express Scripts have dropped about 1.8% to $67.97.

OTHERS TO WATCH: CVS Health (CVS) and Walgreens Boots Alliance (WBA), competitors to Express Scripts, are also lower near noon.