Inside This Issue - Opinion
Globalization quickens in health care sector
November 4th, 2013
When Walgreens and Alliance Boots entered the partnership that put them on the road toward a full merger, it was all but certain that other major players in retail pharmacy and drug distribution would respond to the deal and the global vision and aspiration it embodies.
CVS Caremark subsequently made its initial international foray, but the transaction was relatively modest. It acquired Drogaria Onofre, a 44-store drug chain based on São Paulo, Brazil.
Now, 14 months after the Walgreens-Alliance Boots tie-up, McKesson, the largest pharmaceutical wholesaler in the United States, has answered with a move whose scope and ambition rival those of the initial deal. McKesson will acquire Celesio, a drug distributor based in Stuttgart, Germany, in a complex transaction valued at $8.3 billion. The merger will give the combined entity a presence in more than 20 countries — in North America, Europe and South America — and annual revenue of some $150 billion.
In addition to pharmaceutical wholesaling, health care technology and business services, the company will have a large retail presence, with 11,000 pharmacies that are either owned or part of a franchise or strategic banner network. McKesson runs Health Mart, whose 3,159 franchised stores make it the fourth-biggest drug chain in the United States; Celesio owns 2,200 pharmacies, including the Lloyds chain in Great Britain, and has brand partnerships with more than 4,000 others.
Those numbers put McKesson-Celesio on par with Walgreens-Alliance Boots. The thinking behind the two deals is also similar. The creation of a global platform is intended to improve supply chain efficiency, increase purchasing power for pharmaceuticals and other products, and foster the exchange of best practices.
As McKesson chairman and chief executive officer John Hammergren noted when announcing the Celesio acquisition, "The health care industry is evolving rapidly, marked by a convergence between segments and increased globalization."
In light of those changes, the question that now confronts other companies in the health care sector — including CVS Caremark and pharmaceutical distributor Cardinal Health — is whether they need to make a stronger commitment to operating on a global level or find themselves at a competitive disadvantage.