Rise In Generics Takes A Toll On Rite Aid Corporation (NYSE:RAD)’s Pharmacy Sales

Drugstore operator, Rite Aid Corporation (NYSE:RAD), managed to post sales improvement last month compared to the same month a year earlier. However, sales in the pharmacy segment were down by more than a percentage point in the month because of the impact from new generic drugs. Overall, drugstore operators have continued to show their appetite for pharmacy-benefits managers with RAD announcing a deal to buy EnvisionRx.

Technical analyst have identified strong buy signals in RAD.

Sales up YoY

February 2015 total drugstore sales at Rite Aid Corporation (NYSE:RAD) were up 1.7% to $2.56 billion. That was higher than $2.51 billion in the same month in 2014. Coming to same-store sales, Rite Aid registered 3.3% uptick in sale while pharmacy sales were up 4.1%. The front-end sales also rose 1.6%.

While last month’s sales rose against a year ago, the growth was slower than in the prior month. Overall drugstore sales in January rose 4.3% and same-store sales went up by 4.8%.

As for the pharmacy sales, Rite Aid Corporation (NYSE:RAD) noted that sales declined 1.44%, primarily due to the impact of new generic drugs.

Acquisition into benefits services

Meanwhile, Rite Aid Corporation (NYSE:RAD) is moving to match its larger rival CVS Health Corp (NYSE:CVS) with the acquisition of into the pharmacy-benefits services. The company announced a $2 billion buyout deal for EnvisionRx, a step that the management of Rite Aid said would enable them to expand their pharmacy offering. Additionally, RAD expects the acquisition to enable to deliver cost-effective solutions to health plans and employers.

The financial benefits of acquiring EnvisionRx are also obvious. The pharmacy-benefits manager generates annual sales of about $5 billion and earns about $160 million in EBITDA. The acquisition of EnvisionRx is expected to make Rite Aid Corporation (NYSE:RAD) the third-largest U.S. benefits provider. The company’s income is also expected to get a boost from the acquisition.

Push for lower drug prices

Express Scripts Holding Company (NASDAQ:ESRX) remains the industry heavyweight in the benefits services. Both CVS and Express Scripts have been heaping pressure on drug companies to lower prices. Their latest targets are the manufacturers of a new class of expensive drugs known as biologics.

About the Author

Erica is a graduate of New York University's school of Journalism. She joined US Markets Daily as a general assignment reporter in January of 2008.

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