Rite Aid’s leadership team is highlighting the drugstore chain’s growing pharmacy benefit management company and other assets amid buyout rumblings for the U.S. drugstore chain.
As speculation swirls the drugstore chain could be a target for a merger or buyout, Rite Aid chief executive Heyward Donigan is telling shareholders the company remains “focused on the continued transformation of Rite Aid into a leading full-service pharmacy company,” she wrote in a letter being sent to stockholders as part of the company’s preliminary proxy. Rite Aid began its fiscal 2023 at the end of February of this year and holds its annual shareholders meeting July 27.
Rite Aid is in the process of closing 145 stores it says are “unprofitable” in ongoing cost-cutting moves designed to help the pharmacy chain be more competitive. Rite Aid, which has struggled in recent years to compete with larger rivals Walgreens, CVS Health and Walmart pharmacies, in April announced plans to “significantly reduce costs” through a “closure of a total of 145 unprofitable stores.”
Meanwhile, Rite Aid a month ago rebuffed a private equity firm’s takeover attempt and executives maintain the drugstore chain has the tools and assets to compete in today’s hotly competitive and growing market for prescriptions.
“We have a deep bench of assets to address the trillion-dollar pharmacy market, which is growing by $40 billion per year according to IQVIA and iIBISWorld, healthcare analytics and industry market research companies,” Donigan said in her letter.
Key among the assets, aside from the more than 2,350 Rite Aid drugstores, is the company’s pharmacy benefit management company, Elixir, which has been rebranded and repositioned under Donigan’s three-year reign as CEO.
“A new Elixir leadership team is driving their turnaround through more competitive pricing, engaging clients and their consultants with new go-to-market plans and a repositioned Health Dialog,” Donigan said in her letter to shareholders. “Our Elixir account and sales teams are gaining momentum, and we are executing more efficiently by consolidating functions. And the market is noticing—we have added 34,000 individuals covered by Elixir’s PBM services since January 1, 2022, with many more in the pipeline. And we just won the renewal of our largest health plan client in a very competitive bidding process.”
The future of Rite Aid’s Elixir comes as rival PBMs are getting bigger and competition is fierce. Cigna’s Express Scripts PBM, purchased in 2018, continues to aid the health insurer’s profits under the Evernorth umbrella. Meanwhile, Anthem has successfully rolled out its own PBM, IngenioRx and the nation’s largest health insurer, UnitedHealth Group, owns OptumRx. CVS Health, which owns the Caremark PBM, also has more clout after it bought the health insurer Aetna in late 2018.
Rite Aid board chair Bruce Bodaken told shareholders in a letter that was also a part of the preliminary proxy filed with the Securities & Exchange Commission May 20 that the company has “continued the momentum of RxEvolution, the Company’s strategy launched in March 2020, to build a full-service pharmacy company with the existing assets of Rite Aid, Elixir, and Health Dialog.”
“Through strategic integration of these assets, we provide high quality pharmacy services across the country,” Bodaken told shareholders in his letter. “We look to further enhance performance through these assets in fiscal year 2023.”