Katz Group to sell independent, franchise businesses to McKesson
TORONTO — In an effort to strengthen its focus on its corporate-owned Rexall and Rexall/Pharma Plus store network, Katz Group Canada has signed a definitive agreement to sell its banner pharmacy business, Drug Trading, and its franchise pharmacy business, Medicine Shoppe Canada, to McKesson for about CAD $920 million in cash.
The transaction, which is subject to customary closing conditions, including the receipt of Canadian regulatory clearances, is expected to close in the first half of 2012.
As part of the deal, McKesson also is entering into other ancillary agreements with Katz Group. Both Drug Trading and Medicine Shoppe Canada offer purchasing, merchandising and other value-added programs to independent owner-operated pharmacies in Canada.
Under the terms of the agreement, McKesson substantially will acquire all of the assets of Drug Trading, the shares of Medicine Shoppe Canada and a joint ownership interest in ProPharm’s pharmacy software application. ProPharm will work with McKesson through a transition period to ensure McKesson can continue to efficiently support independent banner members and franchisees when the transaction closes and thereafter. At the closing of the transaction, the banner and franchise operations will be integrated into McKesson’s Canadian pharmaceutical distribution and services business, which is part of McKesson’s Distribution Solutions segment, McKesson said.
McKesson Canada currently operates a number of banner groups, including Proxim, Associated Retail Pharmacy and Family Health Care Pharmacy.
“This transaction unlocks significant value through the sale of two outstanding but non-core assets. We will intensify our focus on our corporately owned Rexall and Rexall/Pharma Plus store network to accelerate the growth of our Rexall brand and the value proposition that it represents to our patients and customers. We will also accelerate the growth of our related real estate interests,” stated Daryl Katz, chairman of Katz Group.
To further bolster its Rexall network, Katz Group also announced that its Rexall division has acquired Dell Pharmacies, an 18-store chain operating in southern Ontario with approximately $70 million in annual sales. Katz Group stated that the acquisition is highly complementary to Rexall’s existing store base in that market and the Dell stores will be integrated into the Rexall network.
Since 2004, Katz Group has redesigned and repositioned more than half of its more than 400 corporate-owned Rexall and Rexall Pharma Plus pharmacies, while introducing a host of customer and patient services, including medication compliance and preventive care.
Katz Group will continue to supply Drug Trading’s Guardian and I.D.A. banners and Medicine Shoppe Canada franchisees with Rexall-branded over-the-counter and health and beauty products. McKesson will continue to serve as the primary pharmaceutical distributor for Katz Group’s corporate-owned stores, Drug Trading and Medicine Shoppe Canada.
“We have every confidence that Drug Trading’s independent pharmacy members and Medicine Shoppe’s franchisees will enjoy market-leading pharmacy support and will continue to grow and prosper under McKesson’s leadership. Katz Group Canada will also continue to work closely with McKesson on a number of strategic initiatives that we believe will create significant long-term value for both companies,” Katz stated.
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Walgreens setting stage for PBM selling season with 25-year vet at the helm
DEERFIELD, Ill. — Walgreens on Monday evening named 25-year veteran Robyn Peters group VP managed market sales, where she will lead all sales and account management activities in the company’s employer, health systems, health plans, government and small and individual payer segments, along with client retention, expansion programs and sales operations for Walgreens. Peters will report to Jeff Berkowitz, Walgreens SVP pharmaceutical development and market access.
“This represents the next step we’re taking to strengthen our sales organization, as part of a focused approach to sales, contracting, pricing and marketing,” Berkowitz said. “In recent months, we’ve combined a number of functions into our pharmaceutical development and market access department, including pharmacy purchasing and supply chain, contracting and pricing, pharmaceutical development, sales shared services and [business-to-business] marketing. With a clear structure in place, we now have a strong, integrated platform to head into the upcoming PBM selling season as we support our partners and demonstrate the value Walgreens provides to payers and patients.”
“Robyn has the proven ability to drive business growth through innovative customer partnerships," Walgreens president of pharmacy, health and wellness solutions and services Kermit Crawford said. "That will help us deliver to healthcare payers the value our pharmacists and other healthcare professionals provide every day.”
Peters earned her bachelor of science degree from the University of Rhode Island. She is a member of the Women Business Leaders in the U.S. Healthcare Industry, Healthcare Businesswomen’s Association and Academy of Managed Care Pharmacy.
Peters replaces Joseph Terrion, chief client officer, who is leaving the company to pursue personal interests at this time, Walgreens said.
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Could PBM merger battle get any hotter?
Will the merger of Express Scripts and Medco go through? Not if pharmacy lobbyists can stop it. There’s nothing new about the fact that different industry groups connected with retail pharmacy or health care can hold strongly opposing views about what’s good or profitable for their own members. But for undisguised hostility and tit-for-tat charges and countercharges, nothing comes close to the long-running feud between independent pharmacy and the pharmacy benefits management industry.
It’s trench warfare. On one side: the National Community Pharmacists Association, chief lobbying and advocacy group for the nation’s 24,000 independent pharmacies. On the other: the Pharmaceutical Care Management Association, which lobbies on behalf of PBMs.
For years, NCPA has charged that the PBM industry is trying to force independent drug stores out of business through restrictive networks and rock-bottom prescription reimbursements, while engaging in deceitful, opaque and even fraudulent business practices that drive the nation’s prescription costs up, not down. PCMA counters that independents are the real culprit, keeping prescription prices artificially high, reaping big profits and hiding behind “special legislative protections” to avoid competition and the “savings” that PBMs can provide. In an ad campaign last year, PCMA billed its lobbying battle against “the drug store and drug company lobbies” as a fight by “America’s small businesses” to keep “special interests” from “KOing affordable health benefits.”
It’s an interesting argument, given the relatively high levels of profitability enjoyed by the PBM industry versus independent pharmacy.
Through NCPA and other lobbying and advocacy groups, independent pharmacists have fought a long and sometimes bitter battle to preserve an equal playing field against a sea of competitors. Threats to the survival of owner-operated community pharmacies multiplied with the rise of dominant national pharmacy chains like Walgreens, CVS and Walmart, but those challenges, while grave, are at least retail competition-driven and are dealt with on a local-market, store-by-store level.
Many independent operators have successfully coped with incursions by their better-financed multi-market competitors by playing up their personal-service capabilities, their deeply rooted connection to local customers and their powerful image as community health care resources. They’ve also gotten better at adopting the sophisticated merchandising and marketing tools offered by their wholesale suppliers to help neutralize some of the advantages wielded by a Walmart or a CVS.
Over the past two decades, however, independents have faced an even bigger existential threat to their long-term viability with the rise of managed care. PBMs that can dictate market terms to participating pharmacies – and steer millions of plan-member patients into their own mail order prescription centers or into restricted networks of pharmacies willing and able to meet those terms – have had a devastating impact on the indies in some markets, and driven down profit margins for both chain and independent pharmacy alike.
If anything, the proposed merger of Express Scripts and Medco Health Solutions has intensified the rhetoric. First announced last July, the deal would combine two of the nation’s three largest PBMs and create a pharmacy benefits giant with a network covering some 135 million members, eclipsing rival CVS Caremark as the nation’s largest PBM.
Independents, who stand to lose the most under such a scenario, are vehemently against the combination. NCPA member Joseph Lech, owner of Lech’s Pharmacy in northeastern Pennsylvania, warned that the deal would mark a “tipping point” in PBM consolidation that would “harm patients by reducing choice, decreasing access to pharmacy services and ultimately leading to higher prescription drug costs paid by plan sponsors and consumers.”
NCPA has some powerful allies in this fight. Among them: the big chain pharmacies its members compete against. A radio ad from the National Association of Chain Drug Stores warned Washington, D.C.-area commuters and policymakers that a combined Express Scripts and Medco would enjoy “unprecedented power over drug supplies, drug prices and access to … medicine” – to the detriment of health plans, employers and consumers.”
A growing chorus of lawmakers in Congress has also expressed reservations about the proposal to merge the managed-pharmacy giants. The latest development: in late January a group of seven Republican and Democratic U.S. representatives wrote to the Dept. of Defense to voice concern that costs for the military’s Tricare program could rise if the deal goes through [Tricare’s pharmacy benefits are administered by Express Scripts].
“We are concerned these limitations would undermine Tricare’s negotiating leverage and limit Tricare’s ability to demand a quality prescription drug benefit,” the congressional lawmakers wrote. “There is little evidence that increased PBM market concentration will significantly lower costs for consumers or the American taxpayer.”
What’s more, noted the representatives, the merger “would further reduce competition in the already concentrated PBM market and could lead to higher prescription drug costs, limited patient choice and inferior service.”
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