Walgreens Store (Photo : Reuters)
After announcing its closing of about 200 stores in the United States, a multi-billionaire from Italy predicts that Walgreens might consider the acquisition of its competitor Rite Aid. That is due to the cost squeeze resulting from Obamacare.
The announcement of the closings has stirred protests from the stores affected. Workers hope that a major pharmacy chain will open near those locations.
Stefano Pessino is the CEO of Walgreens Boots Alliance, Walgreens' umbrella company. His prediction is related to the U.S.'s recently passed Affordable Care Act.
Due to the passing of the law, more poor and uninsured people now have access to healthcare, according to Forbes. Pessino explains this gives the government more leverage in the industry.
Pessino says that a similar situation has existed in Europe for "decades," according to Forbes. It has resulted from its government-operated healthcare systems.
Walgreens has not announced exactly which stores it will be closing. However, the company wants to shed stores that are least profitable. Its store-closings might not be its only action. It might also open approximately 200 new stores in more profitable locations.
UnitedHealth Group purchased Catamaran Corporation after it was reported by Forbes that Walgreens might purchase Rite Aid. The $12.8 billion purchase established the U.S.'s third biggest Pharmacy Benefit Manager (PBM), according to CDA News.
CVS, Walgreens' competitor, purchased Caremark in 2006. Then Walgreens left the market by selling Catamaran- owned Catalyst Health Solutions.
Walgreens wanted to focus its company on the retail part of the industry, rather than the pharmacy part. As a result of the consolidating of PBMs, the partnership of CVS-Express Scripts Holding Co. controls about half of the PBM market.
Walgreens has joined Express Scripts Network. Still, by not possessing its own PBM it trails CVS in the sector.
If Walgreens purchases Rite Aid it would not improve its leverage in the PBM sector. However, it would expand its retail empire, which has been its forte in the past.
Walgreens is the largest pharmacy chain in the U.S. with about 8,200 stores and $76.4 billion in revenue (2014). The company was founded in Chicago, Illinois, in 1901.
