If there’s one thing New York City doesn’t have enough of, it’s Duane Reade drugstores. They’re everywhere, more plentiful in many neighborhoods than Starbucks or Chase Bank branches, which people also like to complain about. Since drugstores can pay higher rents and also sell food, together with the arrival of 7-Elevens, they have also hurried the decline of the once-ubiquitous city bodega. The Wall Street Journal reports that Walgreens Boots Alliance — which already owns Duane Reade — is putting the finishing touches on a deal to swallow Rite Aid, too.
Never again will residents of the five boroughs be forced to choose between three separately owned major pharmacy chains — a dizzying selection that only served to exasperate our humble consumers. Now CVS Health, the nation’s largest drugstore operation, and Walgreens, the second-largest, will be all that is left for most New Yorkers.
“The pharmacy consolidation endgame has begun,” Adam J. Fein, president of Pembroke Consulting, told the New York Times. “The combined entity will have a lot more power against pharmacy benefit managers and other payers. They will be able to negotiate higher reimbursements for prescriptions.”
The benefits for the drugstore corporations themselves are plain: Since the U.S. government has prohibited itself from negotiating with drug companies over the prices paid by Medicare, one of the few mechanisms for controlling the price of pharmaceuticals in America is competition between pharmacies. Pharmacy-benefit managers negotiate with pharmacies on behalf of the members of their drug plans. In these negotiations, the benefit managers can use their collective buying power to pressure competing pharmacies into accepting lower reimbursement rates, which in turn lowers the cost of drugs for their members. That works out fine for “Big Consumer,” but it really eats into the profits of your average global pharmacy chain. If Walgreens succeeds in purchasing Rite Aid, competition will likely be reduced and profits will go up, which is just what the doctor ordered for the chains.
The only question is whether there will be a spread of the countervailing trend of hipster pharmacies.