Walgreen last year decided to take on a more international frame of mind when it bought a 45% chunk of the Swiss drugstore chain Alliance Boots. Now the two have partnered with one of the largest supply-chain players to smooth out distribution and hopefully cut some costs. The move comes even as supply chains are getting a closer look in the industry from drugmakers who think that streamlining can net them some cost savings.
Walgreen ($WAG) and Alliance Boots are kicking off a 10-year deal with AmerisourceBergen ($ABC) that will have the drug distributor handle branded drugs for the two chains this year and pick up generics next year, the three said in statements today. Walgreen and Alliance Boots also worked the deal so they will take a minority stake in AmerisourceBergen, starting with 7%. Walgreen has more than 8,000 drugstores in the U.S. and Puerto Rico and Alliance Boots has stores in more than 25 countries. According to Bloomberg, Walgreen paid $6.7 billion last year for nearly half of Alliance Boots.
The three companies see the deal as a chance to tap the relationship each has for sourcing drugs directly from manufacturers, making it that much more efficient and making some money along the way. AmerisourceBergen over the last few years has been building up a services piece to its offering and will be marketing that business to drugmakers with which Walgreen and Alliance Boots work.
"Importantly, these agreements not only expand our U.S. business, but also provide opportunities to meaningfully grow our specialty and manufacturer services businesses internationally," AmerisourceBergen CEO Steven H. Collis said.
The deal is a blow to Cardinal Health ($CAH), because as business blog Theflyonthewall.com points out, Walgreen was one of its two largest customers, accounting for a fifth of its business.
Supply chains have become the new focus of some companies that hope they can find ways to shave costs and make their products more competitive. Teva Pharmaceutical Industries ($TEVA) wants to cut annual costs by $2 billion through changes to its manufacturing network and sourcing strategy. As part of that, it has targeted $700 million in annual savings just from ingredient sourcing and centralized purchasing. And GlaxoSmithKline ($GSK) recently identified its supply chain as being in for a revamp in hopes of getting products to market faster and saving money with lower inventory levels.
- here's the release
- get more from Bloomberg
- and Theflyonthewall.com item
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