There will be more downward pressure on the shares of Rite Aid Corp. (RAD) - Get Report Friday, June 23 after reports that the Federal Trade Commission's likely challenge to the drug's store chain's $15 billion merger by rival Walgreens Boots Alliance Inc. (WBA) - Get Report is moving forward.
The Capitol Forum reported Friday that the head of the FTC Competition Bureau is recommending that commissioners vote to challenge the merger. A vote could come as early as next week. The agency faces a July 7 deadline but the two sitting commissioners are expected to want the decision off their plates before the July 4 holiday.
The latest big issue issue for the Federal Trade Commission as it wraps up the merger investigation is whether preferred pharmacy networks, like an exclusive arrangement Humana Inc. (HUM) - Get Report has with Walmart Stores Inc. (WMT) - Get Report , are viable competitors to broad networks that include all the major pharmacy chains.
That issue is central to a dispute between the FTC and Humana Inc. over a subpoena the commission issued to the health insurer. The FTC is seeking documents regarding a preferred pharmacy network Humana offers in some insurance plans that calls for Walmart Stores Inc. to be the sole preferred provider of prescription drugs. The arrangement with the Walmart is one of three preferred plans Humana offers for folks who rely on Medicare Part D for prescription drugs.
Rite Aid shares were up 0.7% to $3.10 in afternoon trading on Friday, June 23.
The FTC said it needs the information because it is trying to discern whether narrow or preferred pharmacy networks like the Walmart RX plan would be viable if they exclude the combined Walgreens-Rite Aid.
The biggest issue for the FTC is whether Walgreens' plan to address antitrust concerns is sufficient. Walgreens has offered to sell as many as 1,200 Rite Aid stores to Fred's Inc. (FRED) .
But the FTC, burned previously by retail merger divestitures that didn't work out, is concerned that Fred's doesn't have the market presence or financial strength to replace the competition that would be lost with the removal of Rite Aid from the pharmacy chain sector. TheStreet on June 6 reported that Rite Aid and Walgreens have acknowledged the deal's long odds.
Fred's shares rose 3.7% to $10.24.
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