Walgreens Reaches Deal to Acquire Rite Aid

Walgreens will acquire Rite Aid in a takeover deal that will combine the nation's second- and third-largest pharmacy chains, pending regulatory approval.

Walgreens will acquire Rite Aid in a $17.2 billion takeover deal that will combine the nation’s second- and third-largest pharmacy chains, pending regulatory approval.

Rite Aid currently operates about 4600 drugstores in 31 states. The company has worked to expand its RediClinics and built a portfolio of more than 1800 wellness stores that feature consultation rooms for discussions with pharmacists.

Walgreens currently operates more than 13,200 stores across 11 countries, as well as approximately 400 Healthcare Clinics throughout the United States.

Rite Aid will maintain its brand name for now, Walgreens said.

"Working together, decisions will be made over time regarding the integration of the 2 companies, ultimately creating a fully harmonized portfolio of stores and infrastructure," the company said in a statement.

Rite Aid CEO John Standley stated that the deal "will enhance our store base and expand opportunities as part of the first global pharmacy-led, health and wellbeing enterprise."

Both companies’ boards have approved the transaction, and the deal is expected to close in the second half of 2016.

In a statement, National Community Pharmacists Association CEO B. Douglas Hoey, RPh, noted that this merger will "create an entity with 12,000 retail pharmacies. That's nearly 20% of the brick and mortar pharmacies in the United States."

He called on regulators to "closely scrutinize" the deal to determine the impact that it may have on small pharmacy owners and the patients they serve.

"While large chain pharmacies continue to merge to increase their negotiating leverage, independent community pharmacies continue to fill gaps in patient care in rural, urban, and underserved communities," he said.

According to research firm IBISWorld, Rite Aid controls 10% market share of the pharmacy business, while Walgreens control 51%.

Pending regulatory approval, this acquisition will be the latest in a wave of consolidation in the health care industry among companies seeking to remain profitable amid pressure from the federal government to reduce costs under the Affordable Care Act, and also as drug-cost inflation continues to affect profit margins.

For instance, Aetna purchased Humana for $34 billion in July, while Anthem bought Cigna for $48 billion weeks later.

Additional reporting by Katie Eder, Senior Editor