People walk by a Walgreens store in San Francisco. The pharmacy industry thinks bigger is better to find cost savings.
People walk by a Walgreens store in San Francisco. The pharmacy industry thinks bigger is better to find cost savings. - 
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Chicago-based pharmacy giant Walgreens is getting bigger, announcing a deal to buy competitor Rite Aid for more than $9 billion.

The deal comes just a few months after CVS acquired Target's pharmacy business. Late last year, Walgreens merged with the European drug chain Alliance Boots.

"Folks are all competing to get a bigger share of the newly insured from the Affordable Care Act," said Brian Owens, director of drug channel research at Kantar Retail. "So, there's more competition for low-cost prescription drugs."

To compete on cost, pharmacy chains are consolidating, said analyst John Boylan of Edward Jones. 

"A bigger company can get bigger discounts from people that they purchase from," he said. It can also negotiate better deals for prescription reimbursements.

The merger between Walgreens and Rite Aid is likely to get close scrutiny from federal regulators, who want to maintain competition in the marketplace. Walgreens may have to sell some stores in certain markets, said Owens.

Meanwhile, Wal-Mart might be the next big chain to consider acquisitions, he said.

"We know that Wal-Mart wants to be the No. 1 health care provider in the United States."

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