Walgreens, FedEx team up on next-day prescription drug deliveries

Pharmacy giant Walgreens and FedEx Corp. (NYSE: FDX) have launched a nationwide next-day delivery service under which FedEx will deliver prescription drugs from Walgreens’ pharmacies to patient locations.

In addition, 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 Deerfield, Ill.,-based pharmacy chain, which is part of the Walgreens Boots Alliance (NASDAQ:WBA), 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 Corp. (NYSE:CVS) and the U.S. Postal Service. Pharmaceutical delivery gained visibility earlier this year when e-tailer amazon.com, Inc. (NASDAQ:AMZN) said it was weighing plans to serve the segment, potentially breaking the dominance in drug distribution held by providers like Cardinal Health, Inc. (NYSE:CAH) and Mckesson Corp. (NYSE:MCK).

In a note this morning, 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 Jan. 1. He succeeds David L. Cunningham, who will retire effective the day before.

Subramaniam, a 27-year FedEx employee, began his career in Memphis and subsequently moved to Hong Kong, where he oversaw marketing and customer service for the Asia Pacific region. He then took over as president of FedEx Express in Canada before returning to the U.S. as senior vice president of international marketing. In 2013, he was named executive vice president of marketing in 2013 at FedEx Services, the company’s shared-services operation. He was tapped for his current post in 2017.

Cunningham began at FedEx in 1982 in operations at the FedEx Express World Hub in Memphis. He held top positions at the unit at corporate headquarters and in the Asia-Pacific region.

Brie Carere, a 17-year company veteran, will succeed Subramaniam, FedEx said.