Impact of Walgreens/Alliance Boots/AmerisourceBergen Deal on Insurance Coverage for Generic Medications

Walgreens, the largest drug store chain in United States, AmerisourceBergen, the country’s second largest drug wholesaler, and Alliance Boots, one of the largest pharmacy chains and drug wholesalers in Europe, announced a 10-year distribution deal that creates a global, vertically-integrated partnership with total revenue of approximately $180 billion. See related blog post here.

Walgreens’s main purpose for partnering with the others is to increase its purchasing clout for generic drugs in order to extract price concessions from pharmaceutical manufacturers and lower its cost of goods sold. The company will be able to leverage the size and buying scale of AmerisourceBergen and Alliance Boots to buy generic drugs at cheaper prices. This could give Walgreens a significant advantage over its rivals.

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Walgreens Strikes Drug Distribution and Minority Equity Deal – Transforms Global Drug Market

In a game changing move, three of the major players in the prescription drug marketplace recently announced a partnership to create the largest drug purchaser in the world. The move that could transform the way medications are bought and sold globally.

Walgreens, the largest drug store chain in United States, AmerisourceBergen, the country’s second largest drug wholesaler, and Alliance Boots, one of the largest pharmacy chains and drug wholesalers in Europe, announced a 10-year distribution deal that creates a global, vertically-integrated partnership with total revenue of approximately $180 billion.

There are several market forces driving the deal, including razor-thin margins for drug wholesalers, the explosion of generic drugs due to the expiration of brand drug patents, high margins on generic drugs for PBMs and retail drugstore chains, and slow growth in the absolute number of prescriptions written per year.

Walgreens’s main purpose for partnering with the others is to increase its purchasing clout for generic drugs in order to extract price concessions from pharmaceutical manufacturers and lower its cost of goods sold. The company will be able to leverage the size and buying scale of AmerisourceBergen and Alliance Boots to buy generics at cheaper prices. This could give Walgreens a significant advantage over its rivals. Today, generic drugs make up the majority of all prescription drug fills and they are expected to total 90% of all fills within five years.
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