In Walgreens-Rite Aid deal, consumers may not see a benefit
Walgreens will use its $9.41 billion takeover of rival Rite Aid, based near Harrisburg in Camp Hill, to spread its philosophy on making drugstores destinations for customers looking to stay healthy or buy beauty products.
Walgreens will use its $9.41 billion takeover of rival Rite Aid, based near Harrisburg in Camp Hill, to spread its philosophy on making drugstores destinations for customers looking to stay healthy or buy beauty products.
The nation's largest drugstore chain also is expected to flex its beefed-up negotiating muscle to wring better deals from drugmakers and other suppliers. But experts say those discounts won't automatically trickle down to consumers.
In fact, customers may not see a huge effect on their wallets if the deal announced Tuesday goes through. But they will likely see some store closures or name changes and fewer brand choices after Walgreens Boots Alliance Inc. adds the nation's third-largest drugstore chain to its portfolio.
They also may see more clinics in Rite Aid Corp. stores and more products such as vitamins and supplements aimed at keeping them healthy, as the sector continues to stretch well beyond simply filling prescriptions. There are more than 100 Rite Aid stores in the Philadelphia region, but only a handful of Walgreens stores.
All the major drugstore chains - Walgreens, CVS Health Corp., and Rite Aid - have been revamping their stores for the last few years to make them bigger providers of health-care products and other services. They're trying to appeal to customers who want to do more one-stop shopping and take advantage of the vast network of stores that the chains have built.
Drugstores also are shifting to serve the aging baby boom population and its health needs, as well as the growing number of people who are shopping around more for health care instead of simply visiting their family doctors. And they're fending off competition from grocery chains and big retailers such as Walmart that have added thousands of pharmacies to their stores and offer steep discounts on some drugs.
CVS, in fact, is partnering with the retailer Target Corp. to run its in-store clinics and pharmacies.
Rite Aid runs about 4,600 drugstores in 31 states and the District of Columbia. Its combination with Chicago area-based Walgreens would create a drugstore behemoth that runs more than 12,700 stores in the United States. That's about 64 percent more than the next largest competitor, CVS, not counting that company's still-evolving partnership with Target.
But Walgreens may have to close hundreds of stores to ease federal regulatory concerns about competition. That will depend on how the deal changes the competitive balance in individual markets.
Even if it closed no stores, there would still be a fair amount of competition in the sector. The Walgreens-Rite Aid combination would control about 23 percent of the retail drugstore market, according to an estimate from Jeff Jonas, a portfolio manager who follows the industry for Gabelli Funds.
Aside from the big chains, there are still about 22,000 independent pharmacies in the United States, according to the National Community Pharmacists Association.
Walgreens and Rite Aid expect their combination to close in the second half of next year.
