Retailing giant Walmart and global drug wholesaler McKesson ($MCK) would both like to improve their bottom lines and think that pooling their purchasing power for generic meds can help them do that.
The two, which have worked together for years, Monday announced their plan to buy generic drugs jointly and the continuation of a long-term distribution agreement but provided no details about what that might mean in terms of dollars invested or savings that might be expected.
“Expanding our relationship to include a sourcing partnership for generics makes economic and strategic sense for both of us,” Mark Walchirk, president of McKesson U.S. Pharmaceutical, said in a statement. “By bringing together our respective scale and sourcing expertise, we will make our businesses stronger and create more value for our customers and patients.”
While Bentonville, AR-based Walmart does not break out its pharmacy business separately, CNBC says that the Wal-Mart stores are estimated to do about $19 billion a year in pharmacy sales. The network says that in August Walmart reported the margins on drug sales had been shaved by lower reimbursement rates from drug plan administers and by fewer customers paying cash for their meds.
The deal comes at a key time for McKesson, which is whacking jobs to cut costs. In March, San Francisco-based McKesson confirmed it had already eliminated 1,600 jobs, about 4% of its workforce. The company said after a review in January "the company determined that reductions to our workforce would be necessary to align our cost structure with our business needs."
That comes after a couple of years of expanding. In March, the wholesaler announced it would spend $2.23 billion (CA$3 billion) to buy Rexall Health from Katz Group, picking up 470 retail pharmacies in Canada and about 8,600 employees.
- here’s the release