Walgreens: From Pharmacy Powerhouse to Private Equity Play

In a significant financial reckoning, Walgreens Boots Alliance is set to pay out over $2.85 million to resolve claims of Medicaid overbilling, highlighting the company's current fiscal turbulence and competitive challenges. The iconic pharmacy chain, recently acquired by Sycamore Partners for $10 billion, is poised to retreat from the public stock market after nearly 100 years, signaling a profound transformation.

Walgreens will pay over $2.85 million to settle allegations that it overbilled Medicaid programs in Georgia and Massachusetts. This settlement with the U.S. Department of Justice comes as the pharmacy giant is grappling with various financial challenges. The allegations, which cover a period from 2008 to 2023, involve claims that Walgreens submitted inflated prices for generic medications, resulting in undue payments from state Medicaid programs.

End of an Era

Just three weeks after its acquisition by Sycamore Partners, Walgreens Boots Alliance is preparing to leave the stock market, a platform it has graced for nearly a century. The acquisition, valued at $10 billion, signifies the conclusion of Walgreens' long-standing public trading history. 

Over the past decade, Walgreens has seen its market value tumble from an impressive near $100 billion to just over $9 billion. This decline can be attributed to the shrinking margins on drug prices and stiff competition from retail giants such as Amazon and Walmart. Additionally, Walgreens recently settled with Everly Health Solutions for $595 million over a contract dispute concerning COVID-19 testing services.

Recent Struggles

Walgreens' history dates back to 1901 when Charles R. Walgreen Sr. founded the first store. By 1926, the company had expanded to 100 stores and went public in 1927. Through the 20th century, Walgreens continued to innovate, introducing self-service stores in the 1950s and launching an online pharmacy in 1999. The 2014 merger with Alliance Boots marked the creation of Walgreens Boots Alliance, establishing a global presence in health and beauty.

The recent years have not been kind to Walgreens, with the company facing a myriad of challenges. It scrapped a proposed acquisition of Rite Aid in 2017 and was removed from the Dow Jones Industrial Average in 2024, with Amazon taking its place. In response to financial pressures, Walgreens has initiated cost-cutting measures, including the closure of 1,200 stores over the next three years and a reduction of its dividend payout by half to preserve cash.

As Sycamore Partners takes the helm, Walgreens aims to address its financial difficulties out of the public spotlight. This transition marks a pivotal moment for the company, which now must focus on reinventing itself.