Walgreens Boots Alliance is struggling to sell medicines

Walgreens Boots Alliance isn’t selling enough prescription medication to make a notable profit. That’s according to a Barron’s report in which the company told investors last week about the struggle. It may also underscore how drug prices are causing concerns across healthcare.

Drug companies have been raising the costs of their prices in the U.S. for a long time without repercussion. With increasing political pressure, this is changing as many have reduced price hikes or delayed them, resulting in distribution problems and getting needed supply drugs to consumers.

Walgreens executives during an investor’s meeting, according to Barron’s, said the difficulties stem from reimbursements from health insurers and lower prices on branded drugs. Generic drugs are also dipping but at a slower pace.

“Of course, the pharmacy trends are not only impacting our business,” said CEO Stefano Passino on the company’s conference call with analysts. “They are impacting the overall market and will likely continue to do so over the coming months.”

Morgan Stanley analyst Ricky Goldwasser expects that drug distributors  - which include Cardinal Health (CAH), AmerisourceBergen (ABC), and McKesson (MCK) - are vulnerable because of the new pressure on reimbursement rates. 

Barron’s reported that Goldwasser wrote that he doesn’t think the pressure will abate anytime soon. “Our cautious thesis on distributors stocks is predicated on the risk of future deterioration of profit pool from independents and regional retail pharmacies, which represent distributors’ most profitable custom segment.”