Ready for globalization of drug retailing?

CVS Caremark is looking to acquire an 80% stake in Onofre, the eighth-largest pharmacy chain in Brazil, according to published reports.

Are you ready for the globalization of drug store retailing? DSN is. And we expect it to continue. Why? That's where the Rx growth is. Expect more of these deals. Where? Follow the money (i.e., emerging markets where Rx growth is still in high single- to low double-digits).

There are no substantial retail acquisitions left to make within the United States, so CVS could opt to grow organically in places like the Pacific Northwest, where it has no presence, or set its sights on emerging international markets where pharmacy growth is still robust.

What’s interesting about the deal — aside from the obvious fact that it marks the retailer’s first major expansion outside of the United States — is its simplicity and sensibility. Snapping up the 44-store Brazilian retailer enables CVS to expand its core retail pharmacy business via a manageable platform without the hassle of any complex financial arrangements, a fact that Pembroke Consulting's Adam Fein also made note of Friday morning in his blog Drug Channels.

In fact, this is precisely the type of deal that some industry observers anticipated that CVS might make, as exporting the PBM model could prove quite challenging. Perhaps the PBM model would prove difficult to export but with all the growth in markets such as Brazil there is still plenty of profit to be made filling scripts at retail and selling merchandise on the front-end in these emerging markets.

Meanwhile, Walgreens expects to continue to expand throughout Europe, Asia and eventually will look to enter South America, company executives have noted.
 

Comments

- 9:55 AM
afein@pembrokeconsulting.com says

Actually, further European pharmacy expansion will be difficult for Walgreen or Boots. In most EU countries, pharmacy chains are either prohibited or severely restricted. Many countries require pharmacist ownership, e.g., France, Greece, Italy and Spain. Most EU countries also restrict the number of pharmacies under common ownership, or limit ownership to minority stakes beyond the first one. For example, Italy prohibits ownership of more than one pharmacy, while France limits chain size to 5 pharmacies. Boots already has a strong presence in the minority of EU countries that permit unlimited pharmacy chains (UK, Ireland, Norway). Adam Fein Drug Channels

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