Need a topic for small talk with your pharmacist when they’re refilling your prescription? This story has you covered.
Driving the news: If you’re in the market for ~400 pretty successful Canadian pharmacies, U.S. medical distribution giant McKesson has put up the ‘for sale’ sign on its pharmacy chain Rexall, aka, that place you pop into when there isn’t a Shoppers nearby.
- McKesson is hanging on to its other Canadian pharmacy brands, though, like Guardian, I.D.A., and Remedy’sRx, which it franchises to independent pharmacists.
Why it’s happening: McKesson bought Rexall in 2016 from Edmonton’s Katz Group for $2.9 billion as it expanded its international footprint. It turns out that was a massive overpay.
- Not long after closing the deal, various challenges arose for drugstores, including cuts to generic drug prices and a pullback on subsidies for pharmacist services.
Zoom out: Stores have recouped lost drug money by focusing more on products like food and cosmetics. That’s easier for chains like Shoppers — owned by a grocer with in-house brands — but harder for Rexall, owned by a drug distributor without genuine retail chops.
Why it matters: Drugstore ownership in Canada has become increasingly consolidated. At the start of the 2010s, under 30% of pharmacies were controlled by the Big 5 — Loblaw, Empire, McKesson, Walmart, and Metro. By decade’s end, that had ballooned to 60%.
- A 2019 TMU study found this trend has hurt competition in the drugstore space. Depending on Rexall’s buyer, this tendency could be clawed back or exacerbated.
What’s next: McKesson looks willing to swallow its pride and sell Rexall at a loss just to get it off the books. While the company won’t kiss and tell about potential buyers, rival chains and private equity firms looking for a reclamation project are interested.—QH