Walgreens Announces Distribution Agreement With Valeant (NASDAQ:WBA)

Walgreens Boots Alliance has inked a deal with Valeant Pharmaceuticals International to distribute drugs from the company through its stores. Under the terms of the deal, Valeant would ship drugs directly to Walgreens, which in turn would be paid dispensing and distribution fees. The new arrangement is supposed to last for 20 years. The companies announced the deal on Tuesday, the day before Valeant had a big scheduled meeting with investors.

The distribution deal was meant to reassure investors about the company’s ability to replace its reliance on a mail-order pharmacy that Valeant recently cut ties with. Valeant severed ties with Philidor Rx Services in October after questions arose about its practices. Information revealed that Philidor had been taking actions to prevent insurers and corner drugstores from substituting less expensive alternatives for Valeant’s high-priced dermatology drugs. Now reportedly shutting down, Philidor accounted for about 7 percent of Valeant’s revenue.

Investors were worried about how Valeant would fill the gap in sales created by the closing of Philidor. Some investors had expressed skepticism that Valeant would be able to replace Philidor quickly. The news about the Walgreens deal was positively received by investors. After the announcement of the deal, Valeant shares rose to almost $110, an increase of more than 16 percent. Valeant shares have plummeted from a high above $260 a share, recorded in early August.

The new distribution agreement could lead to lower prices for some of Valeant’s drugs. Valeant has been facing criticism of its practice of buying the rights to old drugs and then immediately raising their prices. To ease concerns, Valeant said it would reduce the wholesale list prices of its brand-name prescription drugs by 10 percent over the next six to nine months. That price reduction appears to apply across the board. Valeant also said that it would sell 30 of its brand-name drugs that have generic competition at the prices of the generics.

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