Retailing giant Wal-Mart Stores (WMT) and U.S. drug distributor McKesson (MCK) said on Monday they would expand an alliance for jointly procuring generic medicines in an attempt to lower costs.
Walmart, which has been sourcing generics with McKesson for several years, has been looking to strengthen its health-related business as well as cut costs in its pharmacy operations, which emerged as a significant drag on earnings last year.
The deal is aimed at “using our combined size and scale to drive efficiencies,” George Riedl, senior vice president and president of the health and wellness division at Walmart in the U.S., said in a statement.
No details on the scale of the deal, which includes an expansion of a long-term distribution agreement, were disclosed.
Walmart said in August that margins in its pharmacy business were being pinched by reduced reimbursement rates from drug plan administers as well as fewer people paying in cash, significant because cash transactions fetch higher margins.
Walmart does not disclose the size of its pharmacy business, but the retailer ranks as one of the largest drugstores in the U.S., with some $19 billion in annual revenue, according to an estimate last year by Evercore ISI.