$2-billion acquisition brings a $5-billion/yr PBM to Rite Aid's 4,600 retail stores
Taking a page from CVS, which acquired the Caremark pharmacy benefit manager (PBM) in 2008, Rite Aid, the No. 3 US retail pharmacy chain, is acquiring EnvisionRx (Twinsburg, OH) in a deal valued at approximately $2 billion. EnvisionRx is being sold by TPG, a private investment firm that had acquired it in July 2013.
From Rite Aid’s perspective, the transaction is part of the scramble that drug wholesalers, retailers and PBMs are engaged in today. The CVS-Caremark combination was highly controversial at the time, but CVS has succeeded in blending the two types of business, and sees synergies from customers picking up prescriptions at local pharmacies whose cost and reimbursement was arranged by the PBM. (PBMs are also retailers of a sort through their mail-order operations, a channel that the chain drugstores don’t want to accede to the PBMs.) More recently, Walgreens has forged a close tie to AmerisourceBergen; Cardinal with CVS, and McKesson with Rite Aid. In its announcement, Rite Aid noted that among the $25-30 million in near-term synergies to be obtained is “drug purchasing efficiencies”—i.e., getting a better deal from manufacturers via its market strength.
Another dimension to all this—cited by Rite Aid—is the growth of specialty pharmaceuticals and distribution. Rite Aid noted that it hopes to have “increased access to limited distribution drugs,” which are typically specialty products that manufacturers limit to a small number of specialty pharmacies. EnvisionRx operates Orchard Pharmaceutical Services, a specialty pharmacy; supplying drugs and a host of patient-support services (see graphic) for high-value, complicated drug therapies is driving much of the pharmacy business today.
“With the addition of EnvisionRx, we will create a compelling pharmacy offering across retail, specialty and mail-order channels,” said Rite Aid chairman John Standley, “enabling us to deliver cost-effective solutions to employers and health plans while driving growth and creating long-term value for our shareholders.” The deal is expected to close by September.