Magazine article Drug Topics

FTC Challenges Purchase of PayLess by TCH Corp

Magazine article Drug Topics

FTC Challenges Purchase of PayLess by TCH Corp

Article excerpt

The Federal Trade Commission and TCH Corp., the parent of Thrifty Drug Stores, have settled an FTC challenge to TCH's purchase of the PayLess chain. TCH also owns Bi-Mart membership discount stores.

The FTC alleged that the purchase would consolidate the retail pharmacy business in some markets now served by competing Thrifty, PayLess, or Bi-Mart stores. Government investigators said the consolidation would significantly reduce competition in certain markets, resulting in increased pharmacy prices or reduced service by retail outlets selling prescription drugs.

The challenge was settled by a consent agreement requiring TCH to sell five small-town drug outlets in California, Oregon, and Washington within 12 months. In return, the FTC has dropped opposition to TCH's purchase of PayLess Drug Stores Northwest from Kmart Corp.

The agreement remains open for public comment until mid-April. Comments can be directed to the FTC's Bureau of Competition in Washington, D.C.

FTC attorneys conducted a private investigation into the PayLess purchase, which was announced last December. Sources close to the investigation told Drug Topics that the FTC examined competition in more than a half-dozen locales. Investigators eventually focused on Bishop, Mount Shasta, and Taft in California; Florence, Ore.; and Ellensburg, Wash. Thrifty, Bi-Mart, and PayLess controlled most or all of the Rx business in each area.

It is widely assumed that PayLess will become part of the Thrifty chain. TCH has not revealed its plans but has referred all questions on the acquisition to Thrifty executives for several months. The combination of Thrifty and PayLess will create the second-largest drugstore chain in the country after Walgreens in terms of sales volume.

"Thrifty would have controlled a majority of the prescription drug market in the five towns," explained an FTC attorney. "The combined Thrifty/Bi-Mart/PayLess presence would have created a significant impact on competition."

FTC investigators issued a complaint alleging that the PayLess purchase would violate federal antitrust law. The agency relied heavily on information supplied by NARD and by pharmacy groups in California, Oregon, and Washington.

NARD spends a significant amount of time and effort funneling information to FTC and other government investigators, said John Rector, NARD v. …

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