CVS, the drugstore chain that seems to have a lock on every corner in town not already owned by Walgreens, is buying Caremark Rx, reports the New York Times. The all-stock deal is valued at $21 billion.

It’s a big seachange for the drugstore and pharmaceutical industry and will take CVS from being a major retailer to being the nation’s biggest pharmaceutical benefits manager. Much as I hate the word, this deal has a lot of "synergy."

And it’s also a bit of a defensive move. Having PBM and retail under the roof might block the onslaught of the $4 generic price now being touted by Wal-Mart.

The new operation will be a major rival to Medco Health Solutions, which has a large dispensing operation in Las Vegas. The PBMs now do $235 billion worth of business as the pharmaceutical end of managed care under the health insurance most employees now have.

And the PBMs market power drives costs lower for employers and insurers. Last year, for example, Caremark dispensed 530 million prescriptions. Still for all that market muscle the real profits are in new discoveries and hallmark pills like Viagra and that little purple pill that keeps popping up on the evening news. That’s where the drug companies make their real money.