Do you live within five miles of a Walgreens? If you’re like almost 80 percent of the U.S. population, the answer is yes. The Walgreens Boots Alliance has grown its pharmacy chain into a massive conglomerate since Walgreens’ founding in 1901. Less than a decade ago, it officially became America’s largest drugstore chain with more than 13,000 stores all the way from Norway to Chile, Alaska to Thailand. Its stock was so successful that the Dow Jones Industrial Average chose it as one of the 30 major U.S. companies it measures, taking the place of legacy firm General Electric. At its height, Walgreens had a market cap of $106 billion. 

But things changed once Walgreens’ competitors started partnering directly with insurance companies. For example, CVS bought the health insurance company Aetna for $70 billion in 2018. The acquisition lowered business costs by managing prescriptions, insurance, and basic care under one company. Most importantly, it gave CVS an edge when negotiating reimbursement rates with insurers, which meant it got more money than other pharmacies for filling the same prescription. Walgreens tried a different strategy: Instead of linking up with an insurance company, it beefed up its stores so customers could buy groceries and electronics while picking up prescriptions. Walgreens’ strategy bombed as people started shopping online, and CVS recently surpassed Walgreens as the nation’s largest drugstore chain.

Now Walgreens has a new owner, the private equity firm Sycamore, who bought the pharmacy giant for only $10 billion — a staggering 91 percent reduction from its peak. The purchase ranks as one of the largest leveraged buyouts in the past decade, which means the deal is funded by Walgreens’ debt more than Sycamore’s assets. The result isn’t promising for Walgreens, which was recently replaced by Amazon on the Dow Jones. Experts predict Sycamore will sell the company off in pieces in order to maximize returns for its private equity investors. Similar buyouts have been the downfall of many once-dominant retailers such as Toys ‘R’ Us, Sports Authority, RadioShack, Payless, and Sears. “From a historical point of view, most of these deals result in the company circling the drain,” said Mark Cohen, the former head of retail studies at Columbia Business School.

Questions:

1. Why did Walgreens fall behind its competitor CVS?
2. Do you think Walgreens will be able to return to its former glory after being bought out by a private equity firm? Why or why not? 

Sources: Chris Isidore, “Walgreens Is Heading Down a Risky Path,” CNN, March 10, 2025. Joseph Walker, “Walgreens Goes From $100 Billion Health Giant to Private-Equity Salvage Project,” The Wall Street Journal, March 7, 2025.