McKESSON HBOC: Wholesaler Inks Mega-Deal with Safeway
Drug distribution giant McKesson HBOC Inc. has added Safeway Inc. to its growing network of pharmacies, inking a five-year deal that makes it the main supplier for Safeway's 733 pharmacies. The company is the product of a much-anticipated $14 billion merger last fall. The Safeway deal is McKesson HBOC's largest distribution contract to date, and although neither company would reveal its "enormous" value, the distributor has gobbled up $100 million deals "by the handful" over the past year. Last year, the distributor signed deals to supply Rite Aid's 4,000 stores and American Drug Stores' 1,100 pharmacies. And just two weeks ago, McKesson HBOC signed similar deals with Wal-Mart and Sam's Club. The arrangement re-unites San Francisco-based McKesson and Safeway -- the two companies had partnered until four years ago -- and calls for McKesson HBOC to supply a "full range of prescription and nonprescription drugs dispensed by Safeway pharmacies, including generics and brand- name products." McKesson HBOC's Jack Fragie said that the key to the company's explosive growth is its "information and automation technology" (prior to the merger, HBOC was the nation's largest information technology firm), which allows pharmacies to connect with third parties for payments. Analysts predict the company will post 38% growth for the year that ended in March (Bole, San Francisco Business Times, 4/19 issue).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.