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Article
Mergers and Acquisitions in U.S. Retail Pharmacy
Journal of Health Care Finance
  • PengCheng Zhu, University of San Diego
  • Peter E. Hilsenrath, University of the Pacific
  • M. Joseph
  • J. Thomas
Document Type
Article
Publication Date
10-1-2015
Disciplines
Abstract

The retail pharmacy industry is the primary source of prescription medication for Americans. It has transformed away from a cottage industry of independent pharmacies and consolidated toward chain drug stores and mail order. This trend, its causes and consequences, are not fully understood. We use secondary data to study a sample of 87 large acquisitions in the industry. Findings indicate that in spite of rapid growth, profitability eroded. Stock investors respond positively to merger and acquisition announcements for both acquiring and acquired firms and negatively for rival firms not party to such transactions. We also show that the concentration of the retail pharmacy industry is negatively correlated with producer prices and positively correlated with profitability. Our findings are consistent with a view that retail pharmacies are merging to create countervailing power for bargaining leverage with other parties in the supply chain. The capital market perceives these mergers positively and shareholders benefit from these transactions.

Citation Information
PengCheng Zhu, Peter E. Hilsenrath, M. Joseph and J. Thomas. "Mergers and Acquisitions in U.S. Retail Pharmacy" Journal of Health Care Finance Vol. 41 Iss. 3 (2015) p. 1 - 20 ISSN: 1078-6767
Available at: http://works.bepress.com/peter-hilsenrath/209/