WBA is not publicly speculating on how many units it will have to shutter, said chief executive officer Stefano Pessina. “We have analyzed things very carefully,” he said during a conference call. “We have tried to figure out what would happen, but of course, it has been done within the closed walls of our company.”
A review by the Federal Trade Commission is unlikely to threaten the deal, said consultant Adam Fein, CEO of Drug Channels Institute. “Even in regional markets where the combined company would have a high share, retail pharmacy competition should remain robust and barriers to entry should remain relatively low.”
While Walgreens has stores nationwide, Rite Aid has no stores in 19 states, including Texas, Florida and Illinois. The greatest overlap is in the Northeast and Mid-Atlantic regions. Rite Aid has more outlets than Walgreens in 14 states, including New York and Michigan. In Pennsylvania, its home state, Rite Aid has over 500 units, well more than triple Walgreens’ number. Rite Aid has about 60 fewer stores than Walgreen’s 630-plus outlets in California.
Two senators called for close examination of the deal. “I have fought tirelessly to promote competition in the health sector and I believe the proposed merger of two of the three largest drug store chains in the country raises serious issues,” said Minnesota Sen. Amy Klobuchar, the top Democrat on the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights. “It is critical that the proposed Walgreens-Rite Aid merger is closely examined to ensure it does not increase drug prices for consumers or reduce choice for pharmacy services.”
Utah Republican Mike Lee, the subcommittee’s chairman, said, “We hope that the antitrust agencies will closely scrutinize the merger.”
The FTC, however, has shown little appetite for interfering with megamergers, including the $29 billion acquisition of pharmacy benefits manager Medco Health Solutions by Express Scripts. That deal, announced four years ago and completed in 2012, gave Express Scripts and CVS Health’s Caremark business control of more than half of the PBM market.
With more than 12,000 stores, Walgreens-Rite Aid would have about one-fifth of the retail pharmacies in the country, pointed out B. Douglas Hoey, CEO of the National Community Pharmacists Association. “At a minimum, regulators should closely scrutinize this merger, particularly in regions of high concentration of their pharmacies,” he said.