Walgreens announces deal to buy Rite Aid for $9 a share | Hacker News Reader

Walgreens announces deal to buy Rite Aid for $9 a share

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63 pointsskhatri1174 comments

I don't understand why this purchase was not turned down for on grounds of anti-trust. There will be less competition for lowering drug costs. How is this a good thing for American health care?

There are four large pharmacy chains in NYC and now Walgreens owns three of the four. Not long ago Walgreens purchased Duane Reade. Now the competition is limited to Walgreens and CVS.

This is just an announcement that the two companies plan to merge. Following this announcement, the government will analyze the deal and decide whether or not to oppose it.

That's still "competition". Coke or Pepsi, Comcast or Time Warner, Everything is condensing down to two options.

btw... I'm not arguing with you. It sucks.

Hearing rumbles that this deal isn't going to go through. But I will say from experience that when companies announce such deals they have already done their homework and generally feel pretty good about anti-trust issues. We'll be interesting to watch. Either way - Wall Street is selling Walgreen's on the news.

> I will say from experience that when companies announce such deals they have already done their homework...

Well, not always. https://en.wikipedia.org/wiki/Attempted_purchase_of_Time_War...

I think you just defined generally.

Generally :)

AT&T / T-Mobile is another good example; and lots of megamergers that are approved are only approved with substantial modifications, divestitures, etc. to avoid anti-competitive effects. So, sure, generally, people have done their homework with multibillion dollar deals. But sometimes, that homework doesn't get a passing grade.

I don't see the anti-trust thing. In addition to the "drug store" chains, there are pharmacies embedded in (many|most|all?) Wal*Mart stores, Target stores, Publix stores, Kroger stores, Harris Teeter stores, etc. I would guess there are other grocery chains that have pharmacies as well. Plus there are still independent pharmacies. I don't know what the situation is like in NYC specifically, but just to share an anecdote from where I live - there are two "indy" pharmacies within walking distance of my office on Main Street in Durham, NC.

The grocery stores are agglomerating as well.

Not to mention the airlines, and I just paid a month's rent to visit my parents for Thanksgiving, which I was forced to do because, you know, grandparents have an expiration date, and Thanksgiving is practically a holy day in our family.

I'm tired of it. Monopolies are real, and they tend to be bad for the people they purport to serve. But this is a power feedback loop that has tipped over the edge and probably gotten past control. Where are our checks and balances?

Airline prices aren't exactly going through the roof.

http://www.rita.dot.gov/bts/airfares/programs/economics_and_...

To add to this point. My wife just got a ticket from Atlanta to Indianapolis for 49 dollars round trip. . . You can't drive from Atlanta to Indy for 49 dollars.

Atlanta's a major air travel hub, so extra-cheap flights are partially a result of that. If the poster above you has parents that are off the beaten path, it's very likely those $49 deals don't exist for the flight she or he needs.

Atlanta is a hub for many airlines. However, this was Southwest which uses point to point and not hub and spoke.

I'm talking American to Charlotte, a huge US Airways hub. US Airways was just acquired by American making it the world's largest airline.

It's simply demand in the holiday case, but it's still ridiculous. At other times, high demand does not necessary apply and they do all kinds of things to generate demand and compete for butts in seats, especially when fuel prices are low.

But with a high-demand holiday, at a hub almost entirely monopolized by one airline, there is no ceiling to how high they can raise price in response to that demand.

Weird thought -- did you look into flying to GSO? It's ABSURD, but last time I looked, flights from GSO and RDU through CLT were way less than from CLT itself.

I've tried several flight hacks to get there, but they actually live in Charlotte so I'd have to bail on the second leg, which means booking two legs separately and still taking a chance on getting the return one-way cancelled on me for skirting the rules. It's maybe $100 cheaper, not big enough a difference to really make it worth it.

Not to just talk about low fares, but I was amazed recently with a $38 fare from Los Angeles to Chicago. Was with Frontier so there are other fees involved, but still pretty awesome.

Norwegian has incredible fares also, many I've seen for less than $400 round trip Los Angeles to various destinations in Scandinavia.

Competition is important here, but I think low oil prices are driving customer savings.

Depends on the route. Transatlantic flights cost more this past summer than when the oil was > $100/barrel.

Sounds like high demand driven by the slumping Euro.

No way. The tickets were more expensive in Euros too. It's simply a fixed supply of seat demanded by more people than a year ago.

Yeah, more people traveling from US to Europe because the cost of a European vacation has gone down in USD due to the slumping EUR.

Also note the recent beer giant announcement, that will see the new company own all or part of 15 of the top 20 beers in the US.

That's AB InBev and SABMiller. Rumor is if it goes through many of the American brands in SABMiller will be spun off as this is more a purchase for the global presence of SABMiller.

That's just economics. Demand in the US for thanksgiving travel goes through the roof. Airlines don't magically have more planes to fly during the holiday (i.e. supply is fixed). The result: prices adjust upwards and force more people to spread out travel over different dates, find alternative arrangements, or forgo travel.

Flights actually cost that much - most airlines don't make much money on the flight itself [0]. A flight with an airline like Spirit or Frontier charge the bare minimum for flights without any extra frills.

[0] http://freakonomics.com/2011/06/24/why-do-airlines-always-lo...

Some data on the largest retail pharmacies [pdf]: http://www.drugstorenews.com/sites/drugstorenews.com/files/P...

It has figures for total stores and stores with pharmacies, and it looks like it is either most or all.

Target pharmacies were bought by CVS. No Walmart in NYC, nor the other chains that you mention. NYC is dominated by Walgreens, Rite Aid, Duane Reade, CVS.

The ability to open a pharmacy in an area isn't restricted the way Internet and television providers are. Nothing stops a new store or chain from opening.

Except for market saturation. E.g, Walgreens, Duane Reade, and two CVS stores within two or three (short) blocks. Walgreens at 97th & Broadway, Duane Reade at 94th & Broadway, CVS at 93rd & Broadway, CVS at 96th & Amsterdam (which is one block from Broadway).

Pharmacies operate in large share through health plans. Larger pharmacies == more negotiating power == higher drugs prices. Smaller / start-up chains don't have that advantage, and hence start with several strikes against them.

This is misleading. Most independent pharmacies operate through coalition or coops in the exact same way small grocery stores do. Often times the sales of coops are on par with, or can easily exceed, the annual sales of major chains.

You aren't going to match Walmart on $4.00 generics and have success, but often times independent chains get better discounts on everything else than many of the major chains.

And Duane Reade is Walgreens nowadays

Target pharmacies were bought by CVS.

Aaah, that I did not realize. But still, it seems like there's a fair amount of competition among pharmacies in the general sense. I suppose that in specific geographic locales that may not be as true though.

And I'm not saying that this merger is unilaterally a "Good Thing" or anything. It just doesn't strike me as a place where anti-trust specifically comes into play.

Duane Reade was bought by Walgreens several years ago

CVS owns the target pharmacies just FYI.

Gotcha. I had not heard that until just now.

I agree that less competition is bad, but isn't the primary reason for expensive drugs is because of the Pharmaceutical companies who discover them, not the pharmacies that distribute them? Regardless, this change certainly won't help.

> I don't understand why this purchase was not turned down for on grounds of anti-trust. There will be less competition for lowering drug costs. How is this a good thing for American health care?

Numerous other pharmacy chains exist. Many major stores have pharmacy departments. This merger would hardly creates a monopoly or anywhere near one, nor will it reduce competition to a degree that one company will be in an abusive position.

Well, in certain regions of the country such as NYC it effectively does create a monopoly and it may be true of other regions as well.

The government will often require divestitures in specific areas as a condition to approving a deal, so that there are not local monopolies.

Pharmacies have zero to do with drug costs.

Try pharmaceuticals, insurance companies, the FDA, and trade policies if you want to find the culprits or actual structure behind the prices of drugs.

If you want to get pissed about a lack of competition in the pharmacy market then look at the two large PBMs. They set the prices of drugs that every drug store pays. If they choose to raise prices and the insurers don't move in lockstep then you're stuck filling prescriptions at a loss.

Oh, and one of them is owned by CVS.

http://www.npr.org/sections/health-shots/2015/10/22/45060056...

PBMs don't set the price that drug stores pay, they set the reimbursement that drug stores get when they fill a prescription.

You could say so about so many mergers. The simple fact is that since the days of bush the son, there's much less anti-trust enforcement in the u.s. ,and you see it in many areas.

> I don't understand why this purchase was not turned down for on grounds of anti-trust.

For one thing, the deal was just announced. This happens before anti-trust scrutiny begins. Various sources have indicated that the deal is likely to be closely scrutinized by the FTC (though some predict it will be approved as-is). [0]

[0] http://www.reuters.com/article/2015/10/27/us-rite-aid-m-a-wa...

A bigger Walgreens affords it more bargaining power against drugs/pharma companies, which could lead to them cutting drugs' cost to consumers. As it is now, there are times the Walgreens (and independents and the rest) have to swallow the bitter pill of drugs price adjustments because the reimbursement schedule does not adjust as drugs prices adjust. A drug they pay $10 for today might be $60 next week and if they want to keep their patients coming, which they do, most of the time they take the loss on those drugs --till the price schedule from the feds is readjusted.

That would be because antitrust and antimonopoly policies are all but forgotten and discarded. I don't have a paper to share, but my off the cuff analysis is that markets and industries acroos the board are in merger and aquisition mode, with a side of sellout and bankruptcy. Media is one of the best examples of this in my opinion.

Also, who would be responsible for such antitrust moves? DOJ? The legislative? Both are corrupt to the core, and don't think I'm not counting SCOTUS in that.

And Walmart and Costco and your local grocery and etc.

The problem with drug stores is they literally don't need to exist in most places anymore because there's so much overlapping competition.

You do realize that there are so many sources of low cost drugs that the one thing holding back many is that no one has really put effort in to gathering all that data and making it easily accessible to the public.

most grocery chains, warehouse chains, and big box retailers, have pharmacies, all with heavily discounted drugs and some are even free. Since many have insurance they don't feel the effect so the drug stores stay in business as some don't like the idea of going to the grocery store for their medicine.

When I write for the Onion I will do an article, "Comcast acquires itself, raises rates"

There is always more monopoly where that came from.

Knowing these two companies, the transaction is going to be printed on a receipt with one line per share and a few hundred feet of legal disclaimers

A 17.8 billion dollar deal yet every time I go in I'm asked to donate to 'the troops' which are not a charity to begin with.

There are charities that support the troops

all taxpayers are donors to the unwanted war

"the point of public relations slogans like support our troops is that they don't mean anything... you don't want people to think about the issue, that's the whole point of good propaganda..." - Noam Chomsky https://www.youtube.com/watch?v=G7DdWmWUa_8

%40 of the US federal budget goes to the military.

Beyond that broad number what do the charities do and how much of the donation goes to the things that impact troops' lives. Most charities have a dismal percentage of the money going to their cause.

I don't know much about Wallgreens, but didn't like how they've been opening stores across the street from RA here in Los Angeles, instead of the next deserving block.

Also hope they don't get rid of the Thrifty (drug store) ice-cream, it is one of the only places to get a decent scoop at a low price for families. Not to mention lots of good memories.

The Thrifty ice cream was sadly overpriced these days at the RA I last went to. I could have bought a half gallon of ice cream at the grocery store right next door for the same price as two scoops at RA.

But you could probably have bought a half-gallon of Thrifty ice cream at RA for the same price or less as the grocery store. :) You're paying a big premium when you're buying it per-scoop.

I know part of Thrifty's original schtick was being low prices and still high quality, and if they were still keeping in line with that the price would be more like 50¢/scoop rather than $1.79 -- but AFAIK, the ice cream mostly went away after RiteAid bought the original Thrifty drug store and they've only started bringing it back over the last few years, at least in the SF Bay Area.

I do hope they keep the ice cream, though, just on general principle: the bigger retail chains get, the less character they seem to retain. It was sad for me to see CVS buy Long's Drugs a few years back -- Long's stores tended to be bigger and just a little more charmingly eclectic.

It's one or two bucks for a very large hand-scooped ice cream, compared to ~$6 at a parlor. I'm not sure what you two are expecting--any less and they might as well be giving it for free. Also they're at all the RAs I've been to in SoCal.

I did always love Rite Aid though Walgreens is good as well. CVS is the only one of that type of store that I routinely avoid. I wonder if Rite Aid and Walgreens will follow suit in not selling cigarettes anymore.

CVS at my college never had my drug, so i avoid them in order not have my time wasted.

Out of curiosity... where did you grow up?

I grew up in Chicago (where Walgreens is from) and I routinely avoid CVS and shop at Walgreens if I have the choice. My girlfriend is from NY so she never saw Walgreens until her 20s so she avoids Walgreens and goes to CVS.

East Coast, Virginia. I actually didn't have Rite Aid until highschool but CVS mostly dominates in my hometown which is odd because everyone I know from every socioeconomic background prefers not to shop there.

Odd. Chicagoan here too.. I find staff at Walgreens to be some of the most miserable employees I run into in the retail sector, whereas CVS employees generally try to be helpful and seem to not hate their life.

I think once you cross the white pharmacy curtain, regulatory concerns and negotiated insurance rates pretty much make them exactly the same, but the rest of the store.. I pick CVS since they took over Osco. I was an Osco loyalist too.. and totally pissed when that happened.

Yes CVS sucks. I can't put my finger on why exactly. It just feels cheap. Like the paper bags they give me (which I have to pay for directly in California) are so thin as to be nearly unusable. They're like barely thicker than tissue paper making them not reusable.

I don't know if that's the only issue that set me off on CVS.

Walgreen annoyed me because they started replacing everything with their "NICE" brand which is about the lowest quality possible. That displaced brands of various things that were higher quality. I can't remember what I bought. Might have been cotton swabs (ie q-tips) because they stopped carrying q-tips and they were basically unusable. Plastic sticks that broke. Sticks that poked through the cotton.

I can only hope enough people care to either vote with their wallet or complain (I sent them a letter in the hopes to have some influence).

I agree with the cheap feeling. It seems like they either don't have what I'm looking for or they have a cheaper version. When they do have what I want it always seems to be one of the items that didn't pass QC but wasn't to broken/ruined to avoid selling.

Duane Reade has "NICE" brand as well now.

CVS is good for busy NYCers because of self-checkout. Really fast, no lines which is great. None of the other pharmacies have self-checkout and never hire enough clerks during the busy hours when people have time to go.

CVS not only feels cheap, it is cheap by comparison to the other drug stores. So I'm happy to go there.

Wallgreens and Rite-Aid feel too corporate, too removed. Bartell's is much better.

I've never been to one. It feels irrational to put so much interest into particular drug stores but for some reason I refuse not to compromise.

As a former smoker, current nicotine gum addict, I'm surprised CVS hasn't advertised its massive price difference on it and nicotine patches in addition to their not selling tobacco. I can buy (generic CVS branded) nicotine gum for half of what Walgreens branded generic goes for, in basically the same form factor, same strength, etc.

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