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UPDATE 2-Express Scripts blames economy, Street unsure

* Shares fall 11 percent

* Company blames economic outlook

(Adds analyst quote, updates stock price)

Nov 6 (Reuters) - Express Scripts Holding Co on Tuesday said its business of managing pharmacy benefits for large employers will come under pressure next year in the weak economy, but investors questioned whether the company's own strategy was on track.

Shares of Express Scripts, which became the largest U.S. pharmacy benefits manager after buying rival Medco Health Solutions earlier this year, fell 11 percent, a day after the company warned that Wall Street's 2013 forecasts were too aggressive.

Company executives, in a conference call on Tuesday that was punctuated by heated exchanges with industry analysts, tried to explain their view.

``Large employers have pulled back on hiring plans, using contractors and part-time employees when necessary. Mid- and small employers are cutting back on healthcare decisions while waiting for more clarity on healthcare reform,'' Chief Executive George Paz said during the call.

``And we continue to see low rates of drug utilization as individuals deal with uncertainty at the household level,'' Paz said, referring to a cutback on spending by Americans as they worry about their job security.

Analysts asked Express Scripts to reconcile its view with that of other industry sources who expect an increase in drug use next year that would benefit the sector as a whole.

Express Scripts competes against CVS Caremark Corp., whose shares were up 1.2 percent to $47.18, and Catamaran Corp. , whose U.S.-listed shares were off 2.5 percent at $48.41.

Shares of Express Scripts were off $7.11 at $55.77 near midday.

The outlook took Wall Street by surprise and created frustration, explained Charles Rhyee, an analyst at Cowen & Co. who was on the call.

``People were trying to understand what it could be that they were missing and if it was more serious than what the company was saying. But I think the company was adamant it was not anything more than what they said,'' Rhyee said.

Express Scripts blamed its weaker outlook on new information about a tough 2013, marked by customer attrition as the number of people with employer-based health plans decreases with unemployment. Even those with health plans are expected to spend less on drugs, they said.

Under the U.S. Patient Protection and Affordable Healthcare Act, more small employers are expected to offer healthcare in 2014 and others will be insured from state-based health exchanges. If Republican challenger Mitt Romney wins Tuesday's presidential election, he has vowed to roll back the healthcare law signed by President Barack Obama.

``All I can tell you is what we see in our numbers. And we see utilization trends decline. And we represent a pretty big piece of the puzzle here,'' Paz said.

One analyst asked why, given the outlook for earnings, investors should buy the stock at all.

``If you're not in the market buying stock or deleveraging aggressively, I'm not sure why we need to own the stock in the near term,'' Robert Willoughby, an analyst at Bank of America/Merrill Lynch said during the call, asking if the stock's new level was a good assessment of the company's growth outlook.

Paz responded in a short sentence. ``I think our stock is tremendously undervalued.''

(Reporting By Caroline Humer; Editing by Leslie Adler and Grant McCool)