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Walgreens Open To More Deals, But Not Necessarily A PBM

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As Walgreens Boots Alliance enters the second year under the guidance of chief executive officer Stefano Pessina, many on Wall Street are expecting a flurry of deals given the Italian billionaire’s stated desire to consolidate the U.S. healthcare market.

But Pessina doesn’t seem to be in any hurry for Walgreens to buy a pharmacy benefit management company.

For now, Pessina and his management team are preoccupied with the ongoing integration of the global retail and pharmacy business of Alliance Boots, the company Pessina oversaw before merging with Walgreens. In addition, Walgreens will be preoccupied much of this year with the closing of its $9.4 billion acquisition of Rite Aid .

“Unfortunately, you have to realize that we have just done a deal,” Pessina told analysts.

“We have to digest the deal that we have done,” Pessina added. “We have done two big deals in less than one year. Give us the time to organize ourselves.”

Pessina has previously said he sees the U.S. market as ripe for consolidation as the government becomes more involved in paying for healthcare, particularly due to the expansion of benefits under the Affordable Care Act.

Some investors would like to see Walgreens buy a pharmacy benefit management firm, seeing the benefits rival CVS Health has in landing employer clients who purchase the services of the CVS/Caremark PBM and also tend to use CVS pharmacies as a preferred prescription provider.

PBMs are the middleman between drug manufacturers and patients when it comes to purchasing prescription drugs. PBMs negotiate deals on behalf of employers or government health programs like Medicare and Medicaid, helping their clients better coordinate care and manage drug costs through buying drugs in bulk and essentially negotiating better–at times exclusive–deals for lower medicine prices.

Walgreens had its own PBM, but sold it off several years ago in part because it didn’t have the size and leverage to compete against CVS/Caremark or Express Scripts .

Getting back into the prescription benefit management business would be expensive for Walgreens. UnitedHealth Group last year spent nearly $13 billion purchasing Catmaran Corp. in a move to increase the number of prescriptions UnitedHealth’s Optum Rx fills to more than 1 billion.

If Walgreens doesn’t eventually attempt to purchase a PBM, Pessina is open to other arrangements.

“You can have a merger, which of course is the perfect way,” Pessina told analysts of potential future deals. “But you can also have a commercial agreement, a very strong commercial agreement, and very strong partnerships. And as we have said many times, we are always open even for a partnership.”

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