The article by Sharon Terlep and Joseph Walker examine the trends in the pharmaceutical sector, which are affecting not only the pharmaceutical business but also the general market. In essence, the article highlights the shrinking profits, which are being witnessed from the sale of generic drugs that are negatively impacting the leading pharmacy chains in the nation. The article further notes how Walgreens Boots Alliance Inc. cut its profit projections after experiencing what it termed as its most challenging quarter since the two companies, Alliance boots and Greens, merged. Indeed, this is not surprising considering other companies in the pharmaceutical industry also issued profits warnings, a good example being CVS Health Corp.
The authors mention how the two pharmaceutical firms are facing problems as they try to come into a consensus with pharmacy benefit managers who decide the drugs they are going to cover and consequently fight for lower prices from the firm through rebates. The fact that Walgreens does not own PBMs, unlike CVS, compounds the firm’s problem making it susceptible to unrealistic demands. According to Ross Muken, an Evercore ISI analyst, the prices that insurers are paying for generic drugs are falling exponentially, especially when compared to the cost that pharmaceutical firms like Walgreens incur when buying (Terlep & Walker, 2019). In essence, this is what leads to a reduction in profits.
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Despite the profit warnings, politicians from both the political divide have emphasized the need to lower the prices of prescription drugs. Notably, it must be noted that the prices of these drugs, which are equivalent to 80% of US prescriptions have been reducing over the years (Terlep & Walker, 2019). In addition, pharmacies gain more profits from generic drugs than highly-priced drugs. Amid the trouble Walgreens Company is facing, its CEO defended the strategy the firm has taken, which involves tie-ups with other companies such as LabCorp and Microsoft Corp. in an attempt to urge the customers to buy more from the stores and boost its revenue.
Business strategy can be defined as a company’s blueprint formulated towards achieving a firms vision and objectives so that it can compete effectively and enhance its financial performance. There is, therefore, a nexus between what the article is relaying and business strategy. In particular, the article has outlined the approach Walgreen has adopted to turn around its fortunes amid the pressures it faces at the moment. Such measures include cost-cutting efforts to minimize spending as well as being more aggressive with regards to the dynamic trends of the market.
Reference
Terlep, S., & Walker, J. (2019, April 02). Generic-Drug Trends Squeeze Walgreens Profit. Retrieved from https://www.wsj.com/articles/walgreens-cuts-earnings-guidance-after-a-challenging-second-quarter-11554204891
