Why Walgreens Wants To Buy Boots

Even in the era of globalization, retailing remains a fairly segmented industry with different chain stores in different places. But trends are pointing in the other direction, and Walgreens buying a huge share of Alliance Boots Limited, a big European drug store chain, certainly points toward global consolidation.

What’s interesting here is that Walgreens’ motive seems to have relatively little to do with the idea that there are some important synergies between managing a drug store in Birmingham, Ala., and managing one in Birmingham, UK. Instead the thinking is that by building a larger global chain, Walgreens gains more leverage over pharmaceutical companies in terms of negotiating what kind of markups get paid. Following that thread as a policy matter quickly gets you back to the root of patents and whether granting time-limited monopolies is really the best way to encourage innovation in this field.