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Retail Trends

Power Players Drug Stores

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Rite Aid has begun remodeling stores to its “wellness” format; CVS is still enjoying the benefits of the extra business it picked up when Walgreen and pharmacy benefits manager Express Scripts were at loggerheads over contract terms. But the future of drug store retailing will be most influenced by what Walgreen has accomplished over the past year.

First there was the union with Alliance Boots, Europe’s largest drug chain and a global player in pharmaceutical sales and distribution (more than 100,000 employees in 25 countries), followed by a deal with distributor AmerisourceBergen.

Rick Hans, Walgreen vice president for investor relations and finance, outlined some of the company’s goals over the next three years: Combined adjusted earnings before interest and taxes of $9 to $9.5 billion; cost savings of another “billion in synergies” from the Alliance Boots partnership: and “a cash from operations goal of around $8 billon.”

Addressing the potential consumer benefits from lower-cost generic drug sourcing, Hans said, “Today, a combined Walgreen and Alliance Boots probably buys around $7 billion in generics. By 2016, the number should be around $10 billion.” Adding AmerisourceBergen to the equation elevates the generic purchases another $3.5 billion; Hans suggests that buying synergies could probably generate $500 million in savings.