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Drug Stores

Drug Stores

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Drug Stores

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  1. Drug Stores Trevor Yerrick Section 2

  2. The Industry • Drug Stores • Well-known, established chains • In-store pharmacies • Pharmacy Benefit Managers (PBMs) • Traditional PBMs • Combination – CVS Caremark • Relationship

  3. Comparable Firms • Walgreen Co. • 2013: $72.2 B in sales, $45.5 B in prescription sales • CVS Caremark • 2012: $123 B in revenue (including PBM revenue) • Wal-Mart • 2012: $37 B in Health & Wellness revenue • Express Scripts • 2012: $93.9 B in revenue

  4. Walgreen Co. • “Nation’s largest drugstore chain” (2013 Annual Report) • 8,582 locations, including 8,116 drug stores • 1901 – Charles Walgreen opened first store in Chicago • Corporate headquarters remain in Deerfield, IL • Owned its own PBM, Walgreens Health Initiatives • Sold in 2011 to Catalyst, another PBM, for $525 M • Able to focus more on its pharmacy operations • Contract dispute with Express Scripts in 2012 • Lost significant business during 8 month dispute • Recent trend of expansion through acquisitions • Alliance Boots (45%) acquisition in 2012, • Currently trading at $60.00/share (1/14/14) • Up 53.7% from 1 year ago

  5. SWOT Analysis Strengths Weaknesses Opportunities Threats

  6. Strengths • Strong reputation and market awareness • Well-established, mature company • Established relationships with many PBMs and drug wholesalers • Investment in Alliance Boots • A leading European pharmacy, health, and beauty retail chain • Strategic partnership and investment in AmeriSource Bergen • The nation’s largest pharmaceutical supply chain company • 2013 agreement makes AmeriSource Bergen Walgreens’ primary wholesale distributor

  7. Weaknesses • Relationship with Express Scripts, the largest PBM • Do not benefit from their own PBM operation • Lost loyal customers during the Express Scripts contract dispute

  8. Opportunities • Use strong reputation as a pharmacy to expand additional product lines • Grocery and beauty products • Primary patient care services • Expansion into new markets through acquisitions • Including Europe with the investment in Alliance Boots • Creates first global pharmacy and well-being enterprise • Benefit from scale and global opportunities • Through partnership and investments in Alliance Boots and AmeriSource Bergen

  9. Threats • Consolidation of PBMs, particularly Express Scripts • Results in greater bargaining power and increased pricing pressures • Difficult relationships with Express Scripts and other PBMs • Losing Express Scripts or other PBM, including Caremark (owned by CVS), could result in a significant loss in sales