Walgreens Boots Alliance and AmerisourceBergen earlier this month took the next but far from final step in their long-standing partnership, when the former agreed to sell the latter most of Alliance Healthcare. Valued at some $6.5 billion, the deal will bring AmerisourceBergen’s pharmaceutical distribution and health care solutions business to 13 countries, mostly in Europe, while enabling WBA to accelerate investments in retail pharmacy and related consumer-facing services. By extending the term of their current U.S. wholesaling agreement by three years, to 2029, and committing to jointly capitalize on additional sourcing and distribution opportunities, as well as striking a similar deal in the United Kingdom, the two companies strengthened a bond that was forged in 2013, when WBA established what is now an almost 30% stake in AmerisourceBergen.

Stefano Pessina

“We have always had a good relationship with AmerisourceBergen,” says WBA executive vice chairman and chief executive officer Stefano Pessina, recalling a time when his company’s primary focus was pharmaceutical distribution. “In Europe we always worked to create synergies between the wholesaler and the retailer. In doing this deal, we have been able to preserve these synergies because we work in a symbiotic way.”

One area of concentration will be how to do a better job taking advantage of those opportunities. Pessina indicates that $150 million in synergy savings — to be divided evenly between WBA and AmerisourceBergen — already have been targeted through better buying and logistics. He sees further upside potential from AmerisourceBergen distributing nonprescription products in the over-the-counter health care and personal care categories.

“Our financial and strategic position enables this next evolution of enhancing our ability to provide health care capabilities across regions and deliver innovative solutions for our upstream and downstream partners,” notes Steve Collis, chairman, president and CEO of AmerisourceBergen.

Alliance Healthcare’s service orientation is consistent with a similar strategy at AmerisourceBergen. Such Alliance assets as pharmaceutical logistics company Alloga; Alcura, a provider of personalized patient care solutions; and Skills in healthcare, which offers brand service capabilities, will ease AmerisourceBergen’s way in the markets it is entering.

“Under co-chief operating officer Ornella Barra, we have developed over time a variety of products and services because, of course, the simple theory in business of just delivering packages is not terribly profitable,” Pessina explains. “These services are much more profitable than the basic business, and this is why Alliance Healthcare is so strong. AmerisourceBergen can take advantage of these ideas and these services that Ornella has put together and try to use them in the U.S.”

As for WBA, Pessina says proceeds from the sale will be used to repay debt and help finance ongoing improvements in the business: “We are thinking of deploying the money to do certain acquisitions or invest in areas that could strengthen our presence as a pharmacy, make our pharmacies more efficient or really improve the service. VillageMD is one example where we intend to accelerate our investment in order to help them to expand more rapidly and to create more health care offerings in our stores.”

Subsequent to my conversation with Pessina, WBA announced that it is speeding up its investment in VillageMD, a value-based primary care provider slated to open 600 to 700 clinics at Walgreens stores over the next four years. WBA has committed to investing $1 billion in VillageMD, with $750 million of that funding now in place.

“We have a lot of ideas, and you will see over time that we will make investments that will improve the quality of our business,” adds Pessina. “We are investing a lot in the online channel of our company.

“The money from this deal will be well invested. While we are likely slightly diluted — but really slightly — in the medium or long term we will be substantially accretive if we invest as planned. You will see that in the next weeks or months we will make a lot of significant announcements.”

Citing the COVID-19 crisis as a factor behind the timing of the decision to sell Alliance Healthcare to AmerisourceBergen, Pessina says the pandemic highlights the importance of community pharmacy in health care delivery, and the need for close cooperation between retailers and drug wholesalers.

“COVID-19 has been a clear demonstration of how pharmacy is important,” he notes. “It’s put pharmacy at the center of health care. You see the success we’re having with the testing and now with vaccinations. Building on that success without the network of pharmacies we have in this country would be very challenging, so I believe that COVID has shown that if we were to invest in pharmacies, well, this is not a bad thing for the future.”