Tag / Walgreens

by Frank Maduri

Red Nose Day 2019: Fight To End Child Poverty

Red Nose Day in the United States is today, May 23rd, and as I have done each year here on this blog, I wanted to try to spread awareness of this very important fundraising event to end child poverty.

Red Nose Day is run by Comic Relief USA in conjunction with major relief aid partners and national sponsors. The national sponsors again for the 2019 Red Nose Day event are: Walgreens, Mars Confectionary Company, Comcast NBCUniversal, and The Bill & Melinda Gates Foundation.

Since the first Red Nose Day event in the US in 2015, about $150 million has been raised to help fight child poverty. These funds have helped 16 million children in all 50 states, Puerto Rico, Latin America, Africa, and Asia. The funding has brought education to about 1 million children, essential medical services to 13 million children, and has helped 75,000 homeless children.

In addition, the funds raised by this event have provided 36 million meals to American children living in poverty, a major issue that is often overlooked because of the perception of our country’s wealth. In 2018, the Red Nose Day programs and events raised $47 million in the United States.

NBC is back as the main broadcast partner and will dedicate three hours of primetime television air time tonight to the Red Nose Day fundraising effort. The special program begins at 8 PM Eastern tonight with Kelly Clarkson and Blake Shelton among other stars that will highlight a two- hour block of coverage dedicated to raising awareness of childhood poverty. This includes a short film comedy sketch routine, and an appeals film by Milo Ventimiglia from “This Is Us”.

The network will close out the night from 10 PM to 11 PM Eastern with a special edition of “Hollywood Game Night” for Red Nose Day. Please tune in tonight to NBC for this important event.

Walgreens returns as a key sponsor of this event and the drugstore chain has sold 40 million of the iconic red noses since 2015 across their over 9,000 US locations. The healthcare retailer has made Red Nose Day a major event through store signage and advertising campaigns.

Mars Confectionary Company and their ubiquitous American brand, M&Ms have again donated $1 million to Red Nose Day in 2019. The company also raises additional money and support for the program through a month of events across their corporate locations aimed at raising awareness, funds, and volunteer hours across several communities in America.

The Bill & Melinda Gates Foundation is among the most well known in the world. Their mission is focused on children, and they provide funding and programming support for the donations raised from the event and how they are utilized to provide the maximum benefit to children in poverty.

We live in the wealthiest nation in the world. We all can do something within our means to help support Red Nose Day. The amount of children living in poverty in America is staggering 15 million, or 21% of all children in our country live in poverty according to various census related sources. The need is great both here and in underdeveloped areas of our world in Latin America, Asia, and Africa.

We can help children, who cannot help themselves, to have their basic needs met. Please support this important event today by going to www.rednoseday.org and by following @RedNoseDayUSA on Twitter, Facebook, and Instagram. Please share this with your friends and family.
The eradication of childhood poverty is the goal of Comic Relief USA and is shared by the sponsors of this event. I think we all need to share that goal, and each do our part to help this important event to succeed. Thank you all for your support of Red Nose Day 2019 and may God bless you for your efforts to help children in need.

(Background information courtesy of RedNoseDay.org, NBC.com, Walgreens.com, and the 2010 US Government Census Department)

by Frank Maduri

Follow Up: CVS Merger With Aetna Under Scrutiny

The recent developments with the Federal court system and Judge Richard Leon have the potential to rollback the $70 billion merger of CVS with Aetna. In other posts on this site, this merger has been detailed from the beginning.

The renewed scrutiny from Judge Leon centers on the condition of the sale went it was originally approved which states that Aetna would be required to sell Medicare prescription drug plans that they currently administer. That was the deal made with the anti-trust regulatory bodies involved in this blockbuster merger.

The hearing is set for Thursday, when Judge Leon plans to hear testimony from various entities including representatives of the American Medical Association (AMA), who are opposed to the merger. Judge Leon is attempting to determine whether the sale of Aetna to CVS is within the public interest.

CVS is a large retail pharmacy chain and healthcare provider that also manufactures their own product lines. Aetna is a huge health insurance company with a Pharmacy Benefit Manager (PBM) arm as well. The deal from the beginning has struck some in the general public as a conflict of interest.

Earlier this week, another prominent judge called the potential for the CVS-Aetna deal to be reversed “catastrophic” to the industry. The merger is seen as lifeline of sorts for both companies amid a changing healthcare landscape that Amazon has shifted already and is looking to tilt completely in the coming years.

The move is seen as necessary to bring a stream of steady foot traffic through the CVS retail stores which they will need to compete with Amazon. This will be achieved by funneling those with Aetna health insurance coverage to have their prescriptions filled by CVS.

In an earlier piece, I detailed the potential pitfalls to that approach and I maintain that it is unfair to limit the choice of a consumer especially with healthcare related products that might put them into a scenario that is very inconvenient for them or a family member that is covered under their policy.

The proponents of this deal moving ahead will point to the recent struggles of Walgreens and their revised earnings adjustments as well as their recent adjustments to their overall annual forecast, which was revised down due to a decrease in customer traffic through the brick and mortar locations primarily. The industry media folks and the financial analyst types were speculating that Walgreens has to do something, they have to make a move to essentially “lock in” a customer base for prescriptions similar to the Aetna – CVS agreement.

The detractors will state that the insurance providers for healthcare should not be mingled with the retail pharmacy giants because of the changes it will bring to consumer choice, potentially to pricing of medications, and a host of other concerns. They would also maintain that Walgreens would be met with resistance if they tried a similar path to CVS.

It also should be noted that Walgreens expended time, energy, and money on a long-term pursuit of merging with Rite Aid, which met with so much push back that it was eventually disbanded by Walgreens. Then, Walgreens spent money to obtain many Rite Aid locations and transition them to the Walgreens brand in order to strategically grow their presence in certain markets.

The speculation will continue around United Health Care (UHC) being one of the last major health insurance players left that could become a partner for Walgreens, though it is difficult to see that they would sink money into a merger proposal until they have the precedent of the CVS-Aetna deal to utilize to their advantage.

The implications for this hearing today and the decision that rests with Judge Leon will have far-reaching consequences in either way he decides to proceed. The approval of the merger with the conditions would set CVS up to grow their customer base and could give Walgreens the proof it needs to move forward in a new direction of their own, given their current situation.

The deal could be scuttled which would send shockwaves through the industry and potentially give Amazon an advantage for entry into the market. It will be fascinating, so stay tuned.

(some background information courtesy of Reuters, Barron’s, and Fox Business)

by Frank Maduri

Healthcare Mergers: The Impact On Patients

CVS and Aetna are just the latest in a list of healthcare M&A activity that is on the deck for the industry. The changing tide of the industry is alarming to some groups of people who see a future of less competition and patient choice. That can be a significant “red flag” for regulators, though so far it does not seem to have derailed any of these acquisitions from moving steadily forward.

The mega-merger that was long rumored between Cigna and Express Scripts was approved on Monday by the Department of Justice. This deal is set to pave the way for the CVS – Aetna proposed merger valued at $69 billion. The reports out of the financial media outlets are that CVS and Aetna would have to divest some holdings to satisfy anti-trust regulations.

Cigna – Express Scripts consolidating creates a combination of a major health insurer with a Pharmacy Benefit Manager (PBM) which they contend will make an environment to decrease costs for the patient. However, some feel that it will have the reverse effect.

Some feel that this deal and the corresponding proposed combination of CVS-Aetna will limit patient choice and force consumers into formularies where they will be faced with having to pay more for prescription drugs in the future.

This activity all comes amid the backdrop of Amazon making a concerted and deliberate push into the healthcare space with their partnership with Berkshire Hathaway and JP Morgan Chase to attempt to reinvent employer provided healthcare provisions. In a subsequent transaction, Amazon purchased the burgeoning mail order prescription provider, PillPack, for $1 billion over the summer.

Furthermore, Amazon announced a joint venture with Xealth which provides the internet shopping giant with a foothold into the healthcare services delivery system. The rest of the industry took notice, and in response Aetna entered into negotiations with CVS, Cigna began talking about synergies with Express Scripts, and Walgreens made certain deals of their own with national insurance carriers on a regional basis such as United Healthcare and Blue Cross & Blue Shield.

In my prior work in the M&A space, I have covered the premise of horizontal and vertical mergers. The vertical merger is one where the two companies may be in the same general industry space, but not in direct competition with one another. A good example of this type of merger was the AT&T – Time Warner deal. They both have business holdings in telecommunications and in television specifically (AT&T owns DirecTV and Time Warner owns multiple cable TV outlets) but they were viewed by the government as vertical in nature.

The example of a horizontal merger would be when Walgreens attempted to consolidate and merge with Rite Aid. I covered that with a series of articles and eventually, the federal regulators struck down that merger because it was between two businesses directly competing in the same industry space: retail drug store. The merger was seen, if approved, to have the effect of limiting consumer choice and potentially increasing costs to the consumer. It would have limited consumer choice in drug stores and the consolidation could have closed locations that were once part of Rite Aid, forcing people in rural areas to travel further to get to a pharmacy.

The CVS – Aetna deal hinges on the sale of Medicare Part D related plans that would most certainly need to be sold off to pass the regulatory standards in place. Some consumers feel that the deal would unfairly limit the choice of pharmacies because if they hold Aetna employer-based benefit plans, they would be funneled to CVS to fill their prescriptions. This could also be seen as giving CVS “a captive” group of consumers.

The Cigna – Express Scripts deal should help them compete against the Amazon healthcare joint venture that will continue to shape the landscape of the industry in the future. The potential impact of all of this M&A activity on the consumer has yet to be determined. Please check with your healthcare provider to make sure that you are aware of any changes this may have on your individual prescription plan coverage.

(Some background information courtesy of Bloomberg News, The Wall Street Journal, CNBC, and Reuters)

by Frank Maduri

Red Nose Day 2018: Fighting Child Poverty

The annual event known as Red Nose Day will be held for the fourth time in the United States on Thursday, May 24th. The fundraising and awareness event seeks to combat the effects of child poverty both in the U.S. and throughout the world.

The entire day features activities aimed at connecting people to both the cause and to others within their respective communities. The goal being to raise funds for trusted partner organizations that work within our neighborhoods to provide food, medical care, and educational services to children in need.

The Red Nose Day fundraising special night of programming will air once again on NBC (for the fourth straight year) which will feature special editions of primetime programs similar to their approach last year. Then, at 10 PM Eastern/ 9 PM Central the Red Nose Day Special will air with Chris Hardwick hosting for the second consecutive year. The 2017 event raised $40 million according to the press release.

In the last three years the event has raised $100 million and helped over 8 million American children living in poverty. The event sponsors from last year have all renewed their commitments for 2018: Mars Wrigley Confectionary Company (M&Ms brand is a main sponsor), Walgreens, NBC, and The Bill & Melinda Gates Foundation. Comic Relief USA is the non-profit organization behind the entire Red Nose Day operation, both in the United States, the United Kingdom, and throughout the world in 34 different countries.

This is the fourth straight year that this blog has dedicated a post for this event and that is because of the important group that it serves: children. The world is filled with disadvantaged, impoverished, and malnourished children. The streets are filled with homeless children with no means of supporting themselves.
The Red Nose campaign has provided 32 million meals to children in the United States, has provided care for 60,000 homeless children, and provided medical services to 6.7 million children globally.

The Red Nose campaign has been in existence since 1988 and continues to benefit programs in a focused and local level to reach children very effectively. The Walgreens partnership has been very strong in pushing the event to the American audience through signage in their retail pharmacy locations, their website, and through media buys in print, radio, as well as television.

Please check out home.rednoseday.org for more information about events in your local area on Thursday, May 24th. The NBC primetime special programs will air that evening culminating with the special celebrity-filled event hosted by Chris Hardwick.

Please consider donating either through the Red Nose Day website, at your local Walgreens, or during the live fundraising event on Thursday night on your local NBC affiliate.

Your donation will go toward helping the most vulnerable within our population: children. Thank you for your support of this wonderful fundraising effort.

by Frank Maduri

Amazon Targeting Expansion Into Healthcare

Amazon announced a partnership with Berkshire Hathaway and JP Morgan to provide better healthcare for the employees of the three respective American corporate giants. The details of the exact parameters of the newly formed joint venture are unclear. It appears that the partnership will not be to form a healthcare company to compete with major health insurers.

However, the announcement certainly shook up the industry: from Wall Street to Main Street, everyone was talking about this news on Tuesday. The prospect of these three companies getting involved in the evaluation of costs is a daunting set of circumstances for the healthcare industry.

In addition, Amazon is rumored to be targeting expansion into the pharmaceutical area. The online retail giant filed for pharmaceutical licenses in a handful of states back before the holidays, but it is unclear whether they were related to the medical devices which they already sell on their site.

The strategy and route for Amazon into this space is through this partnership with Berkshire Hathaway and JP Morgan. The stakes for certain retailers or interested parties in the pharmaceutical industry could be very significant. The other side of the situation is the protection of patient records should Amazon start peddling prescription drug delivery services.

The potential for misdirected prescription abuse is also at stake here should Amazon enter the prescription drug space. This is all transpiring amid the backdrop of a prescription painkiller abuse epidemic in America.

Those are just some of the ethical issues presented in this situation. The business implications are also significant with the “Big Pharma” companies falling somewhere in between the distributors and the retail drug chains. The sentiment within the pharmaceutical manufacturers is that the potential entry of Amazon into the industry would be a welcome turn of events because it would provide greater competition.

The translation there is that the pharma companies have been at odds with the PBMs (Pharmacy Benefit Managers) for years. The PBMs handle mail order prescriptions and they negotiate prices for the large insurance companies and for large corporations that have a bigger “say” in the benefits for their employees.

The insertion of Amazon into the equation is problematic for the PBMs such as Express Scripts, CVS Caremark, and United Health/Optum. They will have diminished leverage in negotiating pricing and other terms with the pharmaceutical companies because Amazon will essentially disrupt the way that game has been played. This is why the pharmaceutical companies have no problem with Amazon entering the space, the online retail behemoth is going to look to undercut the other players in the mix.

The potential entry of Amazon into prescription drugs will also hinder the prescription drug distributors, particularly the top three: McKesson, Amerisource Bergen, and Cardinal Health. Amazon is going to push back on them on price and that is going to squeeze their margins. The massive consumer base that Amazon will bring to the table and could command with greater potential for consumers to join Amazon Prime membership just for the prescription drug services will put these distributors in a tough position.

The entry of Amazon would shift the distribution paradigm as well. Their presence would shape the cost structures for that component of the industry. The benefits would definitely be reaped by the consumer because it will have a domino effect on the prescription drug pricing across the board.

The final area is the retail prescription drug channel, which if Amazon does indeed enter this part of the industry it could have a profound impact on the entire industry. The biggest players that would be at risk in that scenario are: CVS, Walgreens, and Rite Aid.

Those three companies have existed for decades by servicing customers through predominately brick and mortar operations where the customer or patient will pick up their prescription products. These companies have delivery services available in some markets as well.

However, Amazon would turn that part of the industry on its head, so to speak, and reinvent the way that patients would get their prescriptions. The concept of ordering a prescription online, or through a voice- controlled device such as the Amazon Echo, one would think would be a compelling option for consumers.

There is a definite argument for the convenience that Amazon would provide to someone who was feeling too ill to drive to the pharmacy to get a prescription. It is appealing to people with busy lives as well, who need maintenance meds for a given medical condition to eliminate having to run over to the pharmacy from their routine thereby saving that time.

The retail pharmacy chains mentioned earlier would certainly have to adapt in the advent of Amazon potentially entering that sector. The strategy to combat Amazon would be two-pronged, in my opinion, in order to create resistance to Amazon grabbing too much market share.

First, the retail pharmacy chains can tout that they can fill prescriptions in one hour or less. The order of a prescription through Amazon will take more time to fill, so if you are sick (and the fact remains that being sick is when most people see a doctor and need prescriptions filled) the traditional retail route is still the most effective method.

Next, is an adaptation of the retail pharmacy operation into a true omnichannel approach. This approach is key to the survival of essentially every traditional retailer with a brick and mortar presence moving forward. The CVS, Walgreens, and Rite Aid chains and others in a regional presence have to consider developing delivery in most every market they serve. They also have to develop some type of website portal that can handle prescription orders for delivery to the consumer. This would allow for a truly omnichannel approach.

The patient prescription history and personal data are already in their database so these chains can tout the security and trust they have established with the patient over a period of time. This could become their pathway to remaining relevant with Amazon actively competing in the channel.

The patient confidentiality issues which were raised earlier in this piece still have significance as Amazon weighs whether to enter the pharmaceutical space or not. The potential for prescriptions to fall into the wrong hands is an aspect of this situation that should be careful considered by the government with respect to Amazon.

Conversely, that argument can be made for the major retailers and PBMs that are currently active in the retail pharmacy channel currently. The way the systems function today certainly provides some openings for the potential for prescription drugs to be misused or used by someone other than the patient it was intended to help. The mail order supply could easily get into the possession of someone who has the propensity to abuse prescription pain medications, anti-depressants, or some other type of pharmaceutical product.

The “Big Pharma” companies seem at this point, from their public statements, to be largely unconcerned with Amazon entering the market. I can understand how some people might be confused by this position. However, when you consider how the industry functions, and through my professional experience in different roles within the pharmaceutical industry, I can attest that the “Big Pharma” guys only care about making money. Amazon will allow them to do that especially with the PBMs.

The PBMs must be concerned about retaining profitability should Amazon enter that area of the industry. The joint venture announced on Tuesday with Amazon, Berkshire Hathaway, and JP Morgan has the healthcare industry shaken up already.

In full disclosure, some reports have also speculated whether Amazon is announcing this partnership to “save face” because of reports that they make their employees who work there for a certain length of time and then leave the company pay back the amount that Amazon paid for the healthcare coverage for that particular employee.

This new partnership could integrate new technology into the sector with rumors that the three companies in the venture will have an employee web portal that will provide healthcare planning information to help reduce the cost of tests and other services for those on their payrolls. The other rumor is that they are going to launch a smartphone app that streamlines healthcare choices and explains the protocols for different procedures very simply.

It is clear though that Amazon wants to get into the healthcare and potentially the pharmaceutical space and that has put everyone from the major health insurers, to PBMs, to those involved in the pharmaceutical retail drugstore segments on notice that changes are coming whether they are ready for them or not.

by Frank Maduri

Gray Area: The CVS – Aetna Merger

The area of mergers and acquisitions is a key area of focus here on Frank’s Forum and that is what makes the CVS pursuit of purchasing and consolidating Aetna such significant news. The merger would be the largest transaction of 2017 (and we have had some tremendous M&A activity this year) and the largest health insurance merger in American history.

The price tag is astounding: under the terms of the current proposal CVS would obtain Aetna for $66 billion. The implications are of tremendous concern for several entities: health insurers, PBMs (Pharmacy Benefit Managers), other pharmacy retailers, drug companies, and most importantly: the consumer.

The potential combination of the second-largest retail drug chain and one of the largest health insurance providers in the nation is an alarming proposition. It has a feeling of a conflict of interest written all over it. The mainstream media and some other internet based news outlets have done an amazing job covering this emerging story and I encourage you to check out some of those related articles.

The thought process within some of the coverage in those outlets also corresponded with my first thoughts on this merger due to my understanding of the pharmaceutical network coverages through major insurance providers: higher costs for the consumer. This merger, should it clear all of the hurdles, would have tremendous implications on cost.

The consumer should have reservations because essentially this merger will translate to being given the following options: use a CVS location to fill your prescriptions for medications or use CVS mail order service for your prescriptions or end up paying a significant amount of additional money using a different option.

The retail brick and mortar locations of CVS are ubiquitous in certain areas of the country, but there will be some cases geographically where finding a CVS will be cumbersome for some consumers. That is a concern right off the top for the consumer.

The proposal clearly benefits CVS in providing them with a captive audience of consumers also has the ancillary benefit of fixing an issue most retailers are experiencing: reduced foot traffic in their stores.

Many retailers are dealing with reduced foot traffic due to a variety of factors, most notably the convenience of online shopping. This is a good segue to another driving force behind the CVS – Aetna proposed merger which is Amazon.

The online retail giant has been exploring for several weeks now whether to enter the prescription drug marketplace. Amazon has already been granted some preliminary licenses within this area, but I am not an expert on licensing requirements for prescription drug carriage across multiple states, for more information in that area I would suggest researching some of the great articles out there on the topic.

The industry experts insist that the hurdles for entry into the market are high for Amazon to attain. The ethical and procedural questions from a compliance standpoint will most certainly follow this new strategic direction for Amazon.

In addition, the recent legal changes to the policies regarding the dispensing of painkillers and opioid class narcotic drugs would be of particular scrutiny. The ramifications of Amazon carrying those types of products could potentially increase the rate of prescription drug addiction which the government is trying to curtail. Amazon has the two components needed to make this ultimately work: smart people and tons of money.

The convenience of filling your blood pressure medication from your Amazon Echo, your tablet, or your computer is enticing to some, and frightening to others. The “Amazon effect” has already impacted traditional retail channels, especially with their recent entry into the grocery channel with the purchase of Whole Foods, but where does it stop? Should Amazon be able to access prescription drug channels?

However, the case for a conflict of interest could also be made for CVS and Aetna. The merger of health insurance carriers and retail pharmacy chains also has been met with apprehension by some consumers as well. This type of arrangement essentially forces the consumer to use a particular pharmacy if they have insurance coverage from their job which is, in this case, through Aetna.

In fair balance, the other side of the argument would be made by those who have no problem with this merger by pointing out that many current arrangements are made between health insurance carriers, PBMs, and retail pharmacy chains. Some insurance carriers or their PBMs have relationships with Rite Aid, some with Walgreens, and some with CVS which create a “preferred provider” type of situation.

The implications for CVS to actually be the same company as Aetna run far deeper than just a strategic partnership. The potential for an approved bid for CVS to merge with Aetna, would have a domino effect on the retail drug business segment.

The nature of these situations and their impact on an industry segment would invariably begin the speculation of other similar potential mergers. Some examples could be Walgreens with United Health Group, Rite Aid with United or another smaller insurance carrier, and Jewel/Osco with Blue Cross Blue Shield.

The ramifications of a CVS merger with Aetna could change the way health insurance and prescription drug coverage is currently set up, it would have a dramatic impact on prescription formulary coverage, and result in potentially higher costs for the consumer.

The potential for Amazon to enter the prescription drug space is a whole other topic for debate on the potential for a wide range of potential ways that those products could be misallocated or abused.

The merger potential for the second largest retail pharmacy chains with one of the largest health insurance carriers compared to the largest online retailer getting involved in dispensing medications: in the words of the rock legend, Tom Petty, “I don’t know which one is worse”.

by Frank Maduri

The Next Chapter For Rite Aid or Is it the Last Chapter?

The past few years have featured some major mergers and consolidations across a variety of business segments. It is rare to have a proposed “mega merger” result in a change of course, but in the case of the Walgreens deal to merge with Rite Aid in the retail pharmacy space, that is exactly what transpired.

Walgreens, after repeated attempts to find ways to satisfy the anti-trust regulators, announced that they had disbanded their pursuit of a merger with Rite Aid. The most recent proposed framework of the acquisition had Walgreens and Rite Aid both selling store locations to a Southeastern based retail drug store and discount store chain, Fred’s, done in pieces through a series of transactions.

The proposed framework left regulators and industry analysts concerned that Fred’s could essentially double the size of their company overnight and not sustain any major setbacks.

The proposal also left many in the government regulatory positions feeling unsettled with the potential size of the combined Walgreens/Rite Aid chain and the impact that could have on the consumer. The combined entity would also have tremendous influence with pharmaceutical distributors regarding price and other factors, which made interested parties in the pharmaceutical area very concerned as well.

In the end analysis, Walgreens determined that it was no longer a viable pathway to grow their business, and the proposal with Rite Aid was terminated. The transactions with Fred’s never took place, and the whole deal fell apart very rapidly. The natural next question is: what is the next step for Rite Aid?

Rite Aid has sustained five straight losing quarters and their stock has lost a significant amount of value. They will receive $35 million from Walgreens in a termination fee because the merger was scuttled. Rite Aid also announced it will sell about half of their store locations in their current business footprint. Many of those stores will be sold to Walgreens, which is a strange turn of events because regulators were concerned about Walgreens getting bigger if the merger was approved.

Walgreens stands to gain more store locations in certain markets because the merger was scrapped. Some investment analysts maintain that Rite Aid could turn their business around because they will have streamlined their operations to focus on just half the amount of store locations than they have in their current footprint once the sale of the store locations becomes final.

Conversely, some investment analysts and industry experts are concerned that Rite Aid has serious issues and that the company will still fail, despite the efforts to streamline their business operations. The sale of some of these locations will relieve some of the debt load for Rite Aid, but they still have some significant hurdles to overcome.

The strategic decision by Rite Aid to sell all their locations in certain marketplaces will certainly help the company to remain focused on their core customer bases in the Northeast and along parts of the East Coast. The distribution systems should improve in this streamlined approach, and the distribution network will be far more targeted which will also provide cost savings.

Rite Aid is a staple brand in the retail drug store channel, especially in the Northeast. The future of the company is reliant upon their marketing efforts to reconnect with their core customer base in that geographic market. They will also face external pressures from much larger competitors such as CVS/Caremark, Wal-Mart, and Walgreens.

The opportunity for Rite Aid to merge with another competitor is still a possibility, but the best opportunity for their brand was to merge with Walgreens. It is going to be difficult to find another partner that would not want to just swallow them whole, and the other chains are essentially too small to make an impact on their competitive position in the industry segment.

The decision to streamline their operation will, at the very least, buy them some time to reevaluate their options. The next chapter for Rite Aid appears to be a return to their roots, and to focus on their key strategic markets in the Northeast. It remains to be seen if this change in strategy can be enough to bring the company out of the slump that they have been mired in for several months.

It remains to be seen if this next chapter is the last chapter for yet another iconic American brand in an increasingly competitive retail landscape.

by Frank Maduri

Red Nose Day: Team Up To End Child Poverty

The third annual Red Nose Day takes place today, May 25th, focusing on raising both money and awareness to the devastating effects of child poverty. The event is sponsored by several companies, notably the ubiquitous American drug store chain, Walgreens.

The fundraising telethon and special program about Red Nose Day airs again this year on NBC. However, the network will take a different approach this year with a special celebrity edition of American Ninja Warrior (8 PM, EST) then a special Running Wild With Bear Grylls where Julia Roberts will join Grylls on a trek across Kenya to deliver vaccines to sick children (9 PM, EST) , and then will air the Red Nose Day Special hosted by Chris Hardwick which features appearances by several A-list comedians and musicians (10 PM, EST).

The first two editions of this event NBC have run a special 3-hour telethon type program with performances, comedians, and clips from the field in Developing World nations as well as economically depressed areas in the United States. This will be the first year that regular series programs have been dedicated as special features to raise money for this crucially important cause.

Red Nose Day began originally in the United Kingdom, and has spread to include events throughout the world which have raised $1 billion so far for children’s poverty. The funds are funneled to trusted partner organizations, some of the most recognizable and trusted non-profit charities in the world.

The money raised in the American version of this fundraising event has benefitted children in every state in our country as well as children in about 25 other countries throughout the globe. The American event has raised $60 million since it began in 2015.
Walgreens is a prominent sponsor of the event along with their subsidiary Duane Reade pharmacies, which have a huge presence in major East Coast cities especially New York City. Those retail pharmacy locations in both chains sell red noses for $1 and offer at point of sale the ability for the customer to donate to the effort.

The difference can be made without a huge donation, any amount will help children who are living in poverty both in America and throughout the world. I have covered Red Nose Day for the past three years, it is an amazing event that makes a huge impact. I have worked in the non-profit sector and I have worked as an independent writer with non-profit organizations, and this type of event will instantly help them to have the funding capability to help so many children in need.

A donation as small as $10 can help fund after school programs. A donation of $30 could help bring water to a village in the Developing World. It is in the small steps that a journey is completed.

Some of you may recall the excursion that actor Jack Black took for Red Nose Day to Africa, where the young boy there asks him to bring him back to America with him. That was a poignant scene, the boy was in poor health and malnourished. Then last year, the viewers got the update that the boy had been adopted and sponsored by an American family and was in school and well cared for, it is an incredible testimonial to the power of this event to change lives.

In a world marked lately by some terrible and terrifying events, this is one way where we can join together and change the narrative. This is one way where we can make a difference and do something positive to lift the spirits of the most vulnerable in our society, children living in poverty. I hope you will consider a donation to Red Nose Day.

Please visit https://rednoseday.org/donate-splash to learn more about this remarkable event that helps so many children. Please tune in to NBC tonight for all the special programs they have starting at 8 PM (Eastern). Please consider helping this cause to change and save the lives of those children in need. Thank you for your support and attention. May God bless you.

by Frank Maduri

Walgreens Ups The Ante For Rite Aide Merger

In a follow up to prior pieces I have done on the proposed Walgreens – Rite Aid merger which would combine two of the largest retail drug chains in the United States, it appears that the proposal is taking another interesting twist.

In reports from Bloomberg and other sources, Walgreens has agreed to increase the number of stores it will sell to Fred’s, a Southeastern based retail drug chain, from 865 store locations to a higher but undisclosed amount. This is being done to “up the ante” to appeal to the Federal Trade Commission (FTC), which in my prior work on this topic, had demonstrated reluctance over the merger proposal.

The FTC displayed so much reluctance that myself and some others who have written about M&A activity of this type, felt that the merger may end up being blocked. That “where there is smoke, there is fire” scenario played out because Walgreens efforts with this enhancement to the deal they have with Fred’s certainly indicates that they felt the merger might get scuttled by the FTC.

In the enhanced version of Walgreens deal with Fred’s, Walgreens would also sell the southern based chain certain distribution centers, technology, and also would transfer some key executives from Rite Aid into similar roles at Fred’s. This was all done to help decrease the concerns that the FTC has seemingly held for the Walgreens-Rite Aid merger with regard to the size and scope of the acquisition.

The enhancement to the deal by Walgreens does not address the underlying cause for skepticism from the FTC in the first place: that Fred’s cannot double the size of its store footprint and survive. The stock price for Fred’s has increased about 30% with all of the renewed activity around this deal.

Walgreens-Rite Aid is currently caught in a scenario that many entities in a merger this large and far-reaching have had to grapple with in the past which is the sale of enough assets to not further dilute your own valuation, but sell enough assets to gain approval from the FTC. It can be a tricky situation and it is not always easy to find another company within your industry segment to make that type of asset sell off transpire in an expedient way.

The emergence of Fred’s in a “right place, right time” type of scenario with their business standing to increase dramatically in size, gain access to new geographic markets, and gain the use of some of the branding power of Rite Aid where the Fred’s brand name does not have the same recognition.

The FTC is reluctant, and they might remain unchanged in those sentiments, because they have been “burned” in the past with approvals of large scale M&A proposals which ended up going badly. Some of those deals ended up also damaging the third party company involved, in this case the role being played by Fred’s, where that third party company swallowed up assets which ended up bankrupting them.

The merger of Walgreens and Rite Aid would create a gigantic retail drug powerhouse that on the one hand could rival CVS, and on the other hand could end up limiting consumer choice. This merger also could have negative potential consequences for consumers with prescription drug costs being set by only a handful of companies. This is the area where some analysts close to this potential merger feel that the FTC is also concerned.

Walgreens maintains that they have grown to their capacity and that the only way that both they and Rite Aid can continue to compete and survive with stiff competition from CVS in this industry space, is to merge together. Walgreens seems intent on doing whatever is necessary to satisfy the FTC in order to consummate this deal. It could even mean involving another retail drug store chain, though I am not sure who that could be at this point. It could be a company like Safeway or Publix but those two companies have a current store geographic footprint that is much different than the Northeast heavy presence of Rite Aid.

The proposal gets complicated by the reports that some within the industry do not understand why Rite Aid is selling, basically with the thought process that being number 3, is a good place to be. Walgreens was pretty dogged in their presentation of offers for the Rite Aid business, continuing to pursue this blockbuster potential merger.

The FTC and other regulators will now review this enhanced version of the deal that Walgreens is offering to Fred’s. A determination will be made on whether the asset divestiture creates a path for the very large merger between Walgreens and Rite Aid to take place.

The exact parameters will become clear in the weeks and months ahead as we head through spring and into the summer months. The outcome is uncertain, but in the past when I have observed a company take the steps that Walgreens has undertaken to gain merger approval, that company usually gets what it wants.

by Frank Maduri

Rite of Passage: Walgreens, Rite Aid, & Fred’s Pharmacy Strike Deal

The retail pharmacy channel had an interesting week as we head toward the end of 2016, with the news that Fred’s Pharmacy chain is planning to purchase 865 Rite Aid store locations. This sale is motivated by the proposed merger between Rite Aid and Walgreens which I covered earlier in 2016.

A number of weeks ago the proposed merger was shifted to an early 2017 completion date because of some regulatory situations. The Rite Aid/Walgreens group decided to sell these locations in an effort to satisfy the Federal Trade Commission and some of their concerns over the potential monopoly the combined entity would have in certain geographic areas.

The exact locations of the Rite Aid locations being sold off to Fred’s Pharmacy has not been disclosed, and will not be disclosed until everything is finalized. The news yesterday had Rite Aid stock price jump 5% overall, and if the transaction is approved, the acquisition would vault Fred’s to the 3rd largest drug store chain in the United States.

Fred’s Pharmacy is a southeastern U.S. based regional drug store brand which also has a division of deep discount stores that compete with Dollar Tree and Dollar General. The company, according to financial news sources, is in the middle of a rebranding strategy to move away from being a discount retailer and shifting their focus to being a health and wellness focused drug store retailer. This transaction will provide them with a great opportunity to complete that type of rebranding effort. That was confirmed by the response in the stock market, with Fred’s Pharmacy shares jumping 81% at one point.

The Walgreens/Rite Aid group had to make some sort of move to divest locations to satisfy the anti-trust regulatory process. The reality in this market is that when you do a “channel check” on retail drug stores, Walgreens had just a few options to make a deal based on the current status in that market space currently. Then I read in Forbes that one of the top executives at Fred’s Pharmacy handled real estate transactions on locations for Walgreens in his most recent previous job, I started to understand the dynamics of this deal and how it was consummated.

The regulatory road has had some hurdles for Walgreens and Rite Aid because it will create a huge company of 12,000 store locations. The merger could benefit consumers because of the power they could possess for obtaining better drug prices from the pharmaceutical distribution companies. The merger could also be a negative for consumers because the company could set higher prices on other products leaving the consumer with little competitive options that could provide savings.

Fred’s is going to greatly expand their presence in the market with their investment of around $900 million to reinvigorate the company and help it to compete with larger regional and national marketplace players.

The deal makes sense for Walgreens/Rite Aid because their merger is estimated at over $9 billion and would completely reshape the retail drug store industry space in the U.S. if it is approved. The areas of health, beauty, and personal care are always in demand by the American consumer and that trend is not about to change anytime soon. Walgreens is planning on having the capability to provide all of those needs in a “one stop” shopping experience for the consumer.

This all bears watching as we will soon flip the calendar to 2017 and watch as the huge companies all get even larger through M&A activity.

(Some background information, statistics, and stock market data courtesy of CNBC, Forbes, and Yahoo! Finance)