Walgreens Continues Acquisitions

I remember probably five years ago observing that Walgreens didn’t typically grow by acquisition. Well, a lot has changed. They’ve continued to grow by acquisition since then recently adding Duane Reade in NY and now USA Drug Stores in Memphis. I keep thinking they’ll either go on the acquisition path around the PBM or divest of their PBM. So far, I’ve been wrong.

With continued rumors of Aetna’s PBM being on the market, Walgreens would seem an unlikely but potential buyer. I suspect that they’re waiting to see if anything ever becomes of the pressure on the CVS Caremark merger and/or whether that can successfully be leveraged to drive significant multiples. I think CVS has shown that the merger can drive retail business especially with their Maintenance Choice offering.

The other question would be who to sell their PBM to, and one has to wonder if the recent reorganization means anything in this area. [Per Dave Snow’s (CEO of Medco) comments, I think they would be the most active potential buyer right now.] All of the non-retail business which previously reported up thru the Walgreens Health Services group is now reporting up thru the retail business. I personally doubt it, but I’ve always been a big believer in the GE model of wanting to be #1 or #2 in a market or trying to clean up my business to sell it.

I personally have always thought a Prime Therapeutics / Walgreens relationship would seem pretty interesting. They both have decent size books of business and together could probably capture lots of efficiencies.

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