It's a new era for AmerisourceBergen Corp., which today officially became the primary supplier of branded drugs to Walgreen Co. and its more than 8,100 drug stores nationwide.

AmerisourceBergen, Walgreens, primary distribution agreement, strategic partnership, Alliance Boots, branded drugs, generic drugs, Steve Collis, Greg Wasson, generic drugs, pharmaceutical products, community pharmacy, pharmaceutical supply chain

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AmerisourceBergen begins distribution to Walgreens

September 3rd, 2013

VALLEY FORGE, Pa. and DEERFIELD, Ill. – It's a new era for AmerisourceBergen Corp., which today officially became the primary supplier of branded drugs to Walgreen Co. and its more than 8,100 drug stores nationwide.

The companies on Tuesday said their 10-year primary distribution agreement, announced in March as part of their strategic partnership with Alliance Boots, is now under way. Under the deal, AmerisourceBergen in the coming months also will take over primary distribution of all generic drugs to Walgreens.

"We are proud to launch a major operational phase of our new distribution agreement with Walgreens today," Steve Collis, president and chief executive officer of AmerisourceBergen, said in a statement.

"Our partnership with Walgreens marks the largest distribution deal of its kind within the pharmaceutical industry," Collis noted, "and we are confident our teams will execute operations seamlessly to supply the millions of Walgreens customers with brand and generic pharmaceutical products."

Collis and Walgreens president and CEO Greg Wasson will mark the launch of the landmark agreement in events on Tuesday in the greater Chicago area, where Walgreens is based. The two chief executives will make stops at the Joint Command Center in Deerfield, Ill., before traveling to the Naperville, Ill., area to visit the drug chain's Customer Care Center and a Walgreens "Well Experience" store, followed by a tour of the local distribution center.

"Today marks a significant milestone as we expand our relationship with AmerisourceBergen to form a collaborative wholesale-retail model in the U.S.," Wasson stated. "AmerisourceBergen's leadership in distribution and emphasis on community pharmacy, health systems and alternate sites of care aligns perfectly with our goal to transform the role of community pharmacy."

The three-part strategic agreement calls for AmerisourceBergen first to distribute brand-name drugs that Walgreens has historically sourced from other distributors and suppliers and then, starting in calendar year 2014, to increasingly include generic drugs that the pharmacy chain has typically self-distributed.

In the second component of the deal, AmerisourceBergen will access generics and related pharmaceuticals through the Walgreens and Alliance Boots joint venture, Walgreens Boots Alliance Development GmbH. The arrangement is expected to provide a range of opportunities to collaborate in the global pharmaceutical supply chain, the companies said.

The third part of the agreement enables Walgreens and Alliance Boots to buy an equity stake in AmerisourceBergen, for which they received regulatory clearance in May.

Specifically, the deal gave Walgreens and Alliance Boots the right to purchase up to 7% of the fully diluted equity of AmerisourceBergen in the open market as well as granted them warrants for 16% in the aggregate of the fully diluted equity of AmerisourceBergen. The warrants will be offered in two tranches exercisable for six-month periods — one starting in March 2016 and the other in March 2017 — and be allocated equally among Walgreens and Alliance Boots.

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