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2015 has been a bumper year for mergers and acquisitions in the pharmacy industry. Over the summer CVS announced its plans to buy Target’s pharmacy business for $1.9 billion, and in October came news that Walgreens Boots Alliance has agreed to pay approximately $9.4 billion for Rite Aid Corp.
So what does the healthcare industry trend of drugstore giant formation mean for the consumer?
In the case of Target, the 1,660 pharmacies that currently operate in their stores will now be CVS-branded outlets. But this is much more than a cosmetic change. According to a statement released by CVS, the buy-out will “provide consumers with expanded options and access to [CVS’s] unique health care services that lead to better health outcomes and lower overall health care costs.”
It also helps consolidate CVS’s growing position as a healthcare provider. Many think of the retailer as a convenient place to pick up household essentials, but over the years, CVS has become much more than that, and is now the US’s biggest operator of healthcare clinics. According to a report from the New York Times, out of its $140 billion in revenue last year, around 97% was from prescription drugs or pharmacy services. These figures clearly give the expanded retailer significant clout within the pharmaceutical industry, leading to discussion on how the Target acquisition will impact drug wholesalers and how the added purchasing power with drug wholesalers will trickle down to benefit consumer pocketbooks.
Proving just how active the industry has been of late, earlier this year, prior to its acquisition by Walgreens, Rite Aid bought pharmacy benefit manager EnvisionRx for $2 billion to (in part) better position them to negotiate with drug makers. Interestingly, EnvisionRx also offers fully integrated mail-order pharmacy services providing a further indication of how the industry is evolving to better meet changing consumer demands.
The introduction of the Affordable Care Act, which saw 30 million previously uninsured people finally gain coverage, has been one of the major catalysts for enormous change within the healthcare industry, and CVS and Walgreens are clearly attuned to the need to provide accessible, convenient, inexpensive service. And perhaps more than any other industry, technology has done more to disrupt healthcare at every level – from online health records to remote diagnostics to the many apps and devices that allow consumers to monitor and improve their key health metrics. Ultimately, these moves by CVS and Walgreens demonstrate beyond all doubt how the traditional model, and consumer experience, is irrevocably shifting; in the modern healthcare industry, there is no standing still.
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