The battle among pharmacies to win big corporate accounts with promises of lower costs and improved efficiency has entered a new phase.

Walgreen Co. (WAG) announced Wednesday it will offer prescription drugs directly to Caterpillar Inc. (CAT) for its workers and retirees, launching a program that will parallel the one Wal-Mart Stores Inc. (WMT) already has with the heavy equipment manufacturer.

Meantime, Caterpillar announced it had signed a two-year contract with Wal-Mart, in effect extending the pilot program on prescription drugs that has been in place since September. Wal-Mart also announced for the first time publicly that it has added other companies to the prescription program it began solely with Caterpillar, though it declined to provide details.

Once both programs are fully in effect, as of Jan. 1, 70,000 Caterpillar employees, retirees and dependents will have more options to meet their prescription-drug needs. The Caterpillar arrangement could also serve as a template for other large corporations as retailers expand their efforts to provide employers with simple, cost-effective and transparent ways to manage their drug plans.

The move is seen as a competing pricing structure to that of standalone pharmacy benefits managers. Usually, employers and governments contract with PBMs to administer coverage, which includes choosing what drugs are covered and how much they will cost companies and patients.

"We're in the midst of a retail pharmacy war right now that started about three years ago and in my opinion is only going to get more intense," said Adam Fein, president of Pembroke Consulting. A movement to this type of model is "one of the key battlegrounds by which larger and more efficient pharmacies are going to try to take market share" from other pharmacies.

The maneuvering also comes at a time of heightened uncertainty over the future of health care in the U.S. President Barack Obama's massive reform initiative has been mired in Washington amid outcry over the costs and confusion about what the bill will entail.

With its agreements, Caterpillar will be negotiating its pricing directly through Wal-Mart and Walgreen instead of paying a PBM to handle that part of the business. Savings will come through lower prescription drug costs for Caterpillar.

The pact with Caterpillar is the first time Walgreen has worked directly with a company in supplying prescription medicines. Walgreen already manages a network of onsite health-care centers for major companies such as Walt Disney Co. (DIS) and Toyota Motor Corp. (TM).

Caterpillar and Walgreen began discussing working together shortly after the Wal-Mart pilot program began last fall. Wal-Mart didn't know Caterpillar was talking with Walgreen, but the arrangement with Wal-Mart had always been a nonexclusive one, said Caterpillar pharmacy benefits manager Todd Bisping.

"We learned we could take a complex and confusing process and simplify it to save significant amounts of money," Bisping said.

The Peoria, Ill., manufacturer went with the Deerfield, Ill., pharmacy chain because it wants to expand its health-benefits programs to more pharmacies, said Bisping, who added that the company may sign on with additional pharmacy chains.

According to Walgreen, nearly 70% of all Americans live within five miles of a Walgreen store and 50% live within two miles. Walgreen operates about 6,950 pharmacies across the U.S., while Wal-Mart has around 4,100.

"This is just Walgreen offering an even more holistic approach," said Andrew Wolf, an analyst at BB&T Capital Markets. "A lot of this may have to do with convenience. Walgreen's are nearly on every street corner, and people may also prefer to get their drugs at a traditional drug store."

Wal-Mart spokeswoman Christi Gallagher said Wal-Mart feels the success of its pilot effort "allowed Caterpillar to continue seeking ways to drive out unnecessary costs from their health-care spend."

Wal-Mart started the program as a way of trying to define itself as a prescription supplier to businesses. The Bentonville, Ark., retailer has made clear it wants to expand the program.

As part of its arrangement with Caterpillar, Walgreen will offer Caterpillar employees double-digit percentage discounts on non-pharmacy goods. Walgreen and Caterpillar are also talking about expanding the program to have health clinics onsite at certain Caterpillar offices or near them, Bisping said.

Wal-Mart doesn't have either arrangement with Caterpillar. But services, as well as prescription prices, could change once the formal contract with Wal-Mart is announced. Right now, Caterpillar is picking up the co-pay cost for employees on generics from Wal-Mart. Employees pay full price, under their health plans, on brand drugs.

Walgreen shares gained 2.7% to close Wednesday's session at $33.41, while Wal-Mart shares rose 0.3% to $51.80. Caterpillar shed 1.2% to $47.25,

-By Karen Talley and Kelly Nolan, Dow Jones Newswires; 212-416-2196; karen.talley@wsj.com