By now, many of you reading this have heard of the proposed Rite Aid acquisition by Walgreens. Here is a little insight into the current state of affairs of the U.S. retail pharmacy market.
In 2014, the sale of prescription drugs in the U.S. totaled $263 billion. The top 15 pharmacies accounted for almost 80% of the pharmacy industry’s revenues. Approximately 15% of U.S. prescriptions are filled through the mail. It is estimated that CVS fills about 23.7% of prescriptions; Walgreens and Rite Aid combined fill about 22%.
Walgreens is the largest pharmacy chain with 8,200 stores.
CVS is the second-largest pharmacy chain with 7,800 stores.
Rite Aid is third with 4,600 locations in 31 states.
Wal-Mart has 4,000 locations.
Kroger has 2,000 locations.
Chains operate more than 40,000 pharmacies.
The largest 25 chains total 34,700 locations and employ nearly 77,000 pharmacists.
Chains fill over 2.7 billion prescriptions yearly.
California has 9% of the U.S. pharmacies, followed next by Texas and New York with 7% each, and then Florida with 6.5%.
The Mergers & Acquisitions
Due to healthcare reform, profit margins are falling at the same time that drug prescriptions are increasing. As we are seeing in the health insurance industry, the law is also spawning a lot of M&A activity in the pharmacy world. In February, Rite Aid announced the $2 billion purchase of Envision Pharmaceutical Services (a pharmacy benefit manager). In May, CVS paid $1 billion to acquire Omnicare. In June, CVS announced the intent to buy Target’s pharmacies for $1.9 billion. And now, Walgreens is proposing to buy Rite Aid for $9.4 billion.
If Walgreens acquires Rite Aid, the new conglomerate would yield three times as many pharmacies as Wal-Mart. Walgreens would more than double its existing number of stores in 14 states. The merger is expected to close in mid-2016, pending review by the Federal Trade Commission. Meanwhile, review is already underway regarding the CVS proposal to buy Target’s pharmacies. This would add 1,600 pharmacies to the CVS portfolio.
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