Walgreens, FedEx Team Up On Next-Day Prescription Drug Deliveries

Walgreens Boots Alliance Inc WBA and FedEx Corporation FDX last week announced the launch of a nationwide next-day delivery service under which FedEx will deliver prescription drugs from Walgreens' pharmacies to patient locations.

Walgreens has begun a same-day delivery pilot program in select cities using a range of delivery contractors. The program is being piloted in Dallas, Chicago, New York City, Gainesville, Miami, Tampa, and Fort Lauderdale, Fla. The company said it will expand the same-day delivery program next year. It did not offer specifics. The announcements were made yesterday.

The next-day delivery service, which carries a $4.99 fee, utilizes Memphis-based FedEx's air and ground delivery network, Walgreens said. The service will leverage an infrastructure put in place last year when FedEx began regular pick-ups and deliveries at 7,000 Walgreens locations, the pharmacy chain said.

The venture builds upon "our existing platform where FedEx team members are in our stores multiple times per day, so the handling and delivery of prescriptions will be a very efficient and fast process, consistent across the nation," said Morry Smulevitz, vice president, business and operations communications for Walgreens, in an e-mail.

Smulevitz would not comment on the market potential of the service.

The move follows a similar initiative announced in mid-June between Walgreens rival CVS Health Corp CVS and the U.S. Postal Service. Pharmaceutical delivery gained visibility earlier this year when Amazon.com, Inc. AMZN said it was weighing plans to serve the segment, potentially breaking the dominance in drug distribution held by providers like Cardinal Health Inc CAH and Mckesson Corporation MCK.

Amit Mehrotra, transport analyst for Deutsche Bank, said in a note today that Amazon could be the catalyst to significantly change how prescription drugs are delivered. The Walgreens venture is an "encouraging development for [FedEx] to gain exposure to what we expect to be a fast growing market in the near- to medium-term," Mehrotra wrote.

Separately, FedEx announced that Raj Subramaniam has been named president and CEO of FedEx Express, the company air and international unit, effective January 1. He succeeds David L. Cunningham, who will retire at the end of the year.