Walgreens to acquire Rite Aid in deal worth around 10b

[30Percent]

There will be a lot of Rite-Aid pharmacists flooding the job market. There's too much uncertainty with their positions and they will try to lock up another job. They won't know if they are going to be transferred around, have hours cut or let go.

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[MatCauthon]

Walgreen's runs some outpatient pharmacies in hospitals.

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Yikes. The only barrier to entry for Walgreens in the outpatient market is that there isn't a large chain of them like Rite-Aid.

Right now I am staking my career in outpatient and ambulatory services. With 340b our hospital has no incentive to unload these pharmacies.

 

[MatCauthon]

There will be a lot of Rite-Aid pharmacists flooding the job market. There's too much uncertainty with their positions and they will try to lock up another job. They won't know if they are going to be transferred around, have hours cut or let go.

This is going to be especially bad for new graduates. Walgeens is going to be able to offer super low starting wages in some areas-- that is if a new grad can find a job in the first place. Some areas only have Walgreens and Rite-Aid and no CVS.

 

[pharmguitar]

I smell anti-trust.

 

[Judgment Dragon]

This is going to be especially bad for new graduates. Walgeens is going to be able to offer super low starting wages in some areas-- that is if a new grad can find a job in the first place. Some areas only have Walgreens and Rite-Aid and no CVS.

What are some examples of these areas?

 

[Lnsean]

In general, higher volume pharmacies are more profitable than lower volume pharmacies. If you can combine 3 stores doing 1500 per week into one store doing 4500 per week you make a lot more money. I think we are going to see this.

Dude, you are the most smart and witty person on these here forums. I tip my fedora to you, gentlesir.

 

[confettiflyer]

Right now I am staking my career in outpatient and ambulatory services. With 340b our hospital has no incentive to unload these pharmacies.

Anecdotally, I'm seeing a lot of money flow toward am care due to just the sheer demand of it, and 340b is definitely a good reason to keep those pharmacies. But can't we partner with chains to dispense to our patients under our 340b account? I can't exactly recall, 340b is not my forte.

 

[MatCauthon]

What are some examples of these areas?

http://www.cvs.com/stores/cvs-pharmacy-locations

Just a quick look. CVS has almost no stores in the Pacific NW. Washington only has 3 stores, and no stores in Oregon, Idaho, Colorado, Wyoming, Alaska.

 

[jasonkido]

Lets just pray that the deal doesn't go through. Antitrust would be the only way or rite aid backs out and wants more money.

 

[Wheresmyaricept]

Lets just pray that the deal doesn't go through. Antitrust would be the only way or rite aid backs out and wants more money.

This has been in the works for a while. Boots people have been visiting the Walgreens DC's for the last few months to make sure they'll be able to supply the influx of stores.

If the Express Scripts/Medco merger made it through anti-trust, this can.

 

[PharFromNormal]

Do you guys thinking the front end store will provide Walgreens an incentive to keep more rite aids around? Eventhough some of the rite aids may not be high volume, the front end stores could be doing well.

No - think of the rent and utilities alone they can save on the consolidation. Front store revs are considerably less than Rx. If Wags would benefit from having a front store end in close proximity to a wags with a pharmacy why wouldn't they already? Only in certain markets are front end only stores a good idea, like some urban markets.

 

[PharFromNormal]

Anecdotally, I'm seeing a lot of money flow toward am care due to just the sheer demand of it, and 340b is definitely a good reason to keep those pharmacies. But can't we partner with chains to dispense to our patients under our 340b account? I can't exactly recall, 340b is not my forte.

Yup. Wags already has a ton of 340b partnerships.

 

[BMBiology]

Wag is down 10% on weak revenue

 

[pillpharmer14]

http://www.cvs.com/stores/cvs-pharmacy-locations

Just a quick look. CVS has almost no stores in the Pacific NW. Washington only has 3 stores, and no stores in Oregon, Idaho, Colorado, Wyoming, Alaska.

Target has stores in the Pacific NW. This was reportedly one of the benefits of acquiring their pharmacies. Once they've got the infrastructure in place (district office, Mckesson routes, ect.) I wouldn't be surprised if they expand into the area.

 

[Dred Pirate]

Target pharmacies weren't being closed. Many Rite-Aids are right next to Walgreens and will need to be closed. This will decrease some of the labor force.

don't you see the SEC making them divest some of these stores? Although, not sure who the hell would step in and take them

 

[xiphoid2010]

Anecdotally, I'm seeing a lot of money flow toward am care due to just the sheer demand of it, and 340b is definitely a good reason to keep those pharmacies. But can't we partner with chains to dispense to our patients under our 340b account? I can't exactly recall, 340b is not my forte.

Not an authority on 340b either, but based on what I know, I don't see why it can't.

Also there is also pressure on inpatient side. CMS is moving to pay new hospital outpatient clinics at the lower rate paid to doctors offices, although clinics already owned or purchased will be grandfathered in. Oh well, there goes another. Adapt or die, law of the jungle.

 

[xiphoid2010]

There will definitely be quite a bit of lay-offs. Cost savings are probably the biggest driver behind mergers, and guess what the biggest piece of cost pie is? Overlapping positions will be gone, who needs two CEOs, CFOs? ect. Rite-aid side will summer more. There will definitely be quite a few store closures, as former competitors across the street no longer make sense.

But financially, the bigger Walgreens will likely be in a stronger position. So from an impartial 3rd person perspective, I can see the merits. Changes, favorable to you personally or not, is constant and unavoidable. Adapting to change or even ride it, putting up a safety net or preparing alternative solutions are as much a part of a successful career as good lucks and prayers.

 

[steveysmith54]

No - think of the rent and utilities alone they can save on the consolidation. Front store revs are considerably less than Rx. If Wags would benefit from having a front store end in close proximity to a wags with a pharmacy why wouldn't they already? Only in certain markets are front end only stores a good idea, like some urban markets.

Last that I heard, it's close to 60:40... 60 being pharmacy. I could be wrong. I would think fear that CVS will begin occupying that closed down rite aid or walgreens would entice them to keep extra stores open. But, who knows.

 

[confettiflyer]

WHY DOES NO ONE ELSE CARE ABOUT THE ICE CREAM, HEARTLESS PEOPLE YOU ALL.

 

[BMBiology]

Save the ice cream! Let's start a FB page and petition the WH

 

[BMBiology]

as a consumer, this merger is bad. What if Walgreens start to play hard ball with the PBM like they did with express scripts? Many patients would not be able to get their prescriptions fill?

What if the smaller chains start to merge or even close? That is a real possibility.

 

[Lnsean]

as a consumer, this merger is bad. What if Walgreens start to play hard ball with the PBM like they did with express scripts? Many patients would not be able to get their prescriptions fill?

What if the smaller chains start to merge or even close? That is a real possibility.

I agree that the merger is bad for pharmacists and patients but there are just too many pharmacies out there that Walgreens would not be limiting anything of significance. What's to stop you from going to a supermarket or a department store or an independent or mail order?

 

[BMBiology]

I agree that the merger is bad for pharmacists and patients but there are just too many pharmacies out there that Walgreens would not be limiting anything of significance. What's to stop you from going to a supermarket or a department store or an independent or mail order?

Supermarket pharmacy and independent are hurting right now. This just made it worse and they may just decide to close.

If wag can get a better price from the pbm then the pbm will pass on the cost to the insurance company and it will pass it to the consumers.

Drugs are not like cable. It is something people need.

 

[Lnsean]

Supermarket pharmacy and independent are hurting right now. This just made it worse and they may just decide to close.

If wag can get a better price from the pbm then the pbm will pass on the cost to the insurance company and it will pass it to the consumers.

Drugs are not like cable. It is something people need.

Combined...walgreens and rite aid's market share doesn't even surpass CVS...so if anything...I would think CVS would have more control currently and WAG+RAD would be able to compete better. Definitely less choice for the patients and pharmacists alike but these worries are overblown. If Medco + Express scripts are able to merge, I don't see why WAG+RAD wouldn't be allowed to do so.

 

[297point1]

Hope that you are right.

I might be...
http://www.reuters.com/article/2015/10/29/us-walgreens-boots-results-idUSKCN0SM19B20151029

Though I've grown a little more skeptical that the FTC is going to step in, as a few other posters reminded me that the Express Scripts/Medco deal got the green light.

 

[Lubeckd]

Walgreens is 30 billions in debt, prepare for more hour cuts...
http://www.usatoday.com/story/money...rite-aid-am-only-one-who-hates-deal/74805296/

 

[Shazzy1228]

I currently work for RAD as a tech/wellness ambassador. After hearing about this, I am making plans out of here. I simply don't see any good from this. Scary times for healthcare. Everyone is merging.
I know people don't want to hear it, but I have to say it. You pre-pharms need to think long and hard. Stop listening to the pre-health advising centers at your school. There will not be enough jobs for all of you period. This is not a guarantee to 100k. Don't let them fool you. Understand the way economics works and you will see that a deal like this WILL result in job losses. I can tell you that my other role(wellness ambassador) may cease to exist if walgreens doesn't see a big need for it. Think I will sit around and wait? Hell no. You better find plan b or c now. No more daydreaming kiddies. This field is in danger...and to an extent many other areas of healthcare(how many people now want to be physician assistants? only a matter of time before that market is flooded)
I think we are now living in an era when one must have multiple avenues of opportunity/income.

 

[Lubeckd]

http://fortune.com/2015/11/02/walgreens-store-closings/?xid=soc_socialflow_facebook_FORTUNE

Walgreens selling 1000 of its store for this deal

 

[297point1]

Walgreens selling 1000 of its store for this deal

Selling, or shuttering?
My money is on shuttering.

 

[steveysmith54]

interesting article, says they will have trouble finding a buyer for them. jeez, I wonder why....

 

[group_theory]

http://consumerist.com/2015/11/05/if-walgreens-and-rite-aid-merge-thousands-of-stores-might-close/

From the article

"The firm estimates that Walgreens might have to sell 1,000 stores, but ultimately close 2,000 more."

 

[Prepharm1214]

Is there even much benefit if the net gain is only ~1600 stores and paying that upfront 17B?

 

[awval999]

Is there even much benefit if the net gain is only ~1600 stores and paying that upfront 17B?

The end game is to have an oligopoly with CVS.

 

[Corpseman]

Is there even much benefit if the net gain is only ~1600 stores and paying that upfront 17B?

Removing competition is the name of the game.

 

[maria1oh]

How is Duane Reade doing in nyc? They had stores right across from walgreens and they were acquired by them a few years ago.

 

[297point1]

Some updates:

FTC is asking questions about this merger
http://www.forbes.com/sites/bruceja...tion-on-walgreens-rite-aid-deal/#77528b3f3521

FTC blocked a proposed merger between Staples and Office Depot in May
https://www.ftc.gov/enforcement/cases-proceedings/151-0065/staplesoffice-depot-matter

Some analysts seem to be skeptical that this will be approved
http://www.investors.com/news/doubts-surface-over-walgreens-merger-with-rite-aid/

Others think the ability of Walgreens to divest some Rite Aid locations will make or break deal
http://realmoney.thestreet.com/articles/04/11/2016/walgreens-rite-aid-deal-depends-selling-stores

 

[Lnsean]

Some updates:

FTC is asking questions about this merger
http://www.forbes.com/sites/bruceja...tion-on-walgreens-rite-aid-deal/#77528b3f3521

FTC blocked a proposed merger between Staples and Office Depot in May
https://www.ftc.gov/enforcement/cases-proceedings/151-0065/staplesoffice-depot-matter

Some analysts seem to be skeptical that this will be approved
http://www.investors.com/news/doubts-surface-over-walgreens-merger-with-rite-aid/

Others think the ability of Walgreens to divest some Rite Aid locations will make or break deal
http://realmoney.thestreet.com/articles/04/11/2016/walgreens-rite-aid-deal-depends-selling-stores

This is all old news and Walgreens has repeatedly said they were expecting a second inquiry from the SEC. The Staples/Office Depot isn't a good analogy being that Staples and OD are the #1 and #2 players in their field...the majority of which are large contracts to government and corporations.

The stock is trading at a huge discount to the buyout price...there is definite risk to this getting denied by the FTC. I honestly think that this will go through. The barriers of entry aren't that great...anyone can really start up a pharmacy. Rite Aid does not sell anything exclusively or has a niche in any market. There is a #1 competitor which is CVS. Disclaimer, I am long RAD and have been for a long while; I did cover half my position though.

From a professional standpoint...I don't want this deal to go through because it's very bad for pharmacists and the overall job market but I can't see any reason the FTC would oppose this.