Walgreen and Alliance Boots have the right to buy up to 23 percent of AmerisourceBergen, starting with a 7 percent stake on the open market, now valued at about $800 million. Previously Walgreen used its own employees, transportation and warehouses to ship on a weekly basis and used Cardinal Health on a daily basis for some drugs. Walgreen will use AmerisourceBergen’s network to start daily distribution of most or all generics. “If you run more product through your network, the more you can scale the assets, the more you can scale costs, and the more bargaining power you have,” said Vishnu Lekraj, an analyst at Morningstar. The move will give AmerisourceBergen and Walgreen a boost in size that can help them negotiate better prices. Consumers have also reduced their own spending on prescriptions, making it even tougher to increase profitability in the business. There is pressure on the healthcare industry, from pharmaceutical makers to sellers, to cut medical costs, especially as millions of Americans will soon receive more healthcare coverage. Cardinal shares fell 7 percent to $42.76. In addition, it said it will have new access to more specialized drugs, like those for cancer treatment.ĪmerisourceBergen, which said the contract is worth $28 billion in fiscal 2014, will replace Cardinal Health Inc CAH.N, whose distribution contract with Walgreen ends in August. Much of what it sells now are bulk, low-profit prescriptions by combining its distribution in the United States and Europe with AmerisourceBergen, Walgreen will be able to negotiate better prices for those bulk drugs. Walgreen, the nation’s largest drugstore operator, distributes more than 80 percent of its own drugs, but over time most if not all of that distribution will be handled by AmerisourceBergen. The logo of Walgreens is seen at their Times Square store in New York December 17, 2012.
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