CVS keeps consolidating in the retail drug industry
CVS Caremark, the US #2 retail pharmacy chain, has struck again, this time buying Longs Drug Stores Corp. for $2.9 billion, including debt. Longs is a serious player in the US West and would make CVS #1 in the lucrative California market.
The Longs acquisition would add over 600 new outlets for CVS, which would have a total of over 6,800 stores, almost exactly the same as industry leader Walgreen with around 6,850 locations.
The hidden value may be in bringing in 8 million Longs customers to CVS's Caremark pharmacy benefits management (PBM) group. Longs's current PBM group is called Rx America. PBM combined with retail drugs allow big retailers to hold on to loyal customers and work out arrangements with major insurers. CVS just lat year bought out Caremark RX.
For CVS, the acquisition is the tenth in the last decade, including snatching up a major share of Eckerd Pharmacy and also is getting into the mini-clinic business
Walgreen plans to expand by over 200 stores by 2010. For both companies, it is a struggle against Wal-Mart, which has continued to expand its low-cost generic drug pricing plans.
