Walgreens signs on new medicine supplier

Drugs go through a sorting process at AmerisourceBergen before shipping.
Drugs go through a sorting process at AmerisourceBergen before shipping. (Inquirer file photo)
Posted: March 21, 2013

AmerisourceBergen Corp. is in and Cardinal Health Inc. is out as the wholesale supplier of medicines for Walgreens pharmacies. The Chesterbrook-based company has signed a 10-year agreement with the nation's biggest drug-store operator that is expected to provide about $400 billion in revenue during the next decade.

Landing Walgreens is a major coup for AmerisourceBergen, a middleman between companies that make drugs and those that dispense them (pharmacies, hospitals, and nursing homes).

AmerisourceBergen reported revenue of $79.5 billion for its fiscal year that ended Sept. 30. Last year, Medco Health Solutions Inc. was its largest customer, accounting for 17 percent of revenue, or about $13.5 billion.

As of Sept. 1, Walgreens and its 8,072 U.S. stores will become AmerisourceBergen's biggest customer, adding about $28 billion in revenue in its fiscal year 2014.

For Deerfield, Ill.-based Walgreens, the agreement is another major step in what it says is an effort to change the global drug and health-care distribution system. In June, Walgreens paid $6.7 billion in cash and stock to buy 45 percent of Alliance Boots GmbH, a European retailer with 3,300 health and beauty stores.

Tuesday's agreement also grants Walgreens and Alliance Boots the right to acquire a minority stake of up to 7 percent in AmerisourceBergen.

News of the deal, released before the stock market opened, was followed by big moves in the stock prices of all three companies involved. Walgreens was the biggest gainer among the Standard & Poor's 500 index companies, closing up 5.4 percent, or $2.31, at $44.74.

AmerisourceBergen, which employs about 1,100 in the Philadelphia area, was the second-biggest gainer, with shares rising 3.6 percent, or $1.76, to $50.06 - a 52-week high.

Shares of Cardinal Health slumped 8.2 percent, or $3.78, to $42.35.

The deal marked the second time in a year AmerisourceBergen has wrested a contract away from the larger Cardinal Health. In July, Express Scripts Inc. picked AmerisourceBergen over Cardinal Health for a three-year deal worth about $18.5 billion in annual revenue.

Contact Mike Armstrong

at 215-854-2980 at marmstrong@phillynews.com, or on Twitter @PhillyInc.

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