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Walgreens deal offers no lasting relief to Rite Aid

A sign marks a Rite Aid pharmacy in Somerville, Massachusetts, U.S., June 29, 2017. REUTERS/Brian Snyder

A slimmed-down Rite Aid Corp (RAD.N) could lose much of its bargaining heft with insurers and makers of branded drugs at a time when it is trying to turn around its flagging pharmacy business, analysts said.

Rite Aid said on Thursday it would sell nearly half its U.S. stores to larger rival Walgreens Boots Alliance Inc (WBA.O) after the drugstore operators agreed to scrap a whole-sale merger.

Wall Street showed its displeasure at the new deal, pushing Rite Aid's shares down 30 percent to a near four-year low after the announcement. The stock added to its losses, falling 7 percent on Friday.

Rite Aid has been struggling with eroding profits in its pharmacy business, which sells prescription drugs, as increases in branded drug prices have slowed while reimbursement pressure for generics has intensified.

"I think Rite Aid is going to struggle to remain relevant in the pharmacy industry," said Adam Fein, president at Pembroke Consulting, which tracks the drug distribution industry.

"The pharmacy industry has become hyper...


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