Submitted by: Submitted by shavonthompson
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Category: Business and Industry
Date Submitted: 12/18/2015 03:37 PM
Questions
Shavon Thompson
MAN 6721
Dr. Sandra Kay Merriam
December 13, 2015
Strategy Sign-On Article File 9
Walgreens uses a vertical integration strategy. It is the largest drugstore chain in the US. Alliance Boots is one of the largest drug wholesalers and pharmacy chains in Europe. AmerisourceBergen is the second largest drug wholesaler in the US. The three companies have a ten-year distribution deal that creates an international vertically-integrated partnership (Young, 2014). The revenue will be almost $200 billion.
Walgreens’ sole purpose for partnering with alliance boots and AmerisourceBergen was to increase its purchasing power of generic drugs. It wanted to extract price concessions from pharmaceutical manufacturers. Walgreens wanted to lower its costs of goods sold as well. It will be able to leverage the size and buying scale of Alliance boots and AmerisourceBergen when it comes to buying generic drugs for less (Young, 2014). This will give walgreens a great advantage over its competitors.
Walgreens offered certain generic drugs for only $4.oo at retain in 2006. This is way below the co-pays for most insurance plans. An international partnership of this scope and size can have great results for insurance plans. If Walgreens can successfully lower its acquisition cost for generic drugs, it could continue to expand its flat-fee generic drugs. However, this may create an issue for clinical programs. These issues include drug utilization reviews (Young, 2014). These issues include drug interaction avoidance that is negative as well.
Walgreens does not have a majority stake or a huge acquisition of Alliance boots or AmerisourceBergen. This type of transaction would have been criticized greatly in Europe and the US when it comes to anti-trust grounds. If Walgreens goes any further with this vertical-integration strategy a little more, this would make the company have more purchasing power of generic drugs. Regulators...