Some antitrust enforcers skeptical that sale of stores could fix Walgreens-Rite Aid deal

Rite Aid

28th September 2016.

The proposed Walgreens-Rite Aid merger has generated doubts among some antitrust officials evaluating the deal that any feasible sell-off of stores would be enough to fix its anticompetitive aspects, MLex has learned.

The US Federal Trade Commission is concerned that the $17.2 billion combination of the Nos. 1 and 3 US drugstore chains would give Walgreens too much leverage in negotiating reimbursement rates for prescription drug sales and lead to fewer consumer options in some regions for filling prescriptions.

Investigators recently have been seeking more information about whether the deal would put at a disadvantage pharmacy benefit managers, which negotiate the drugstores' prescription reimbursement fees on behalf of government, insurance and corporate healthcare plans.

The concerns have lingered despite an 11-month investigation by the FTC's staff and Walgreens' public pledge to find buyers for a divestiture of as many as 1,000 stores.

The companies' representatives are still engaged in discussions with FTC officials and supplying information in response to a 'second request' issued by the agency last year.

Ultimately, a majority of the agency's three commissioners will determine whether the FTC will sue to block the transaction or allow the deal to go through with a significant sell-off.

Spokespeople for the FTC and Walgreens declined to comment. A Rite Aid spokeswoman declined to comment.

The agency is most focused on regions such as the western US where CVS, the merging chains' biggest rival, has a smaller presence. Antitrust enforcers fear that many PBMs view the largest drugstore chains as must-have participants in their regional pharmacy networks and that combining two of those chains would give Walgreens unfair bargaining power.

The chains' representatives have argued that Walmart and supermarket operator Kroger provide vital competition for spots in PBM networks, which give pharmacies access to millions of potential customers.

Despite the agency's concerns, Walgreens is moving ahead with developing divestiture proposals and lining up buyers for the assets. The company said this month that it still expects the deal to close by the end of this year.

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