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Walgreens Forms Alliance With Prime Therapeutics

Walgreens Boots Alliance has struck a partnership with Prime Therapeutics to help it capture a greater share of the prescription-drug market and better compete with CVS Health.

Walgreens Boots Alliance Inc. WBA 1.21 % has struck a partnership with Prime Therapeutics to help it capture a greater share of the prescription-drug market and better compete with CVS Health Inc. CVS -0.19 %

On Monday, Walgreens announced it is partnering with Prime, a St. Paul, Minn.-based pharmacy benefit manager owned by 14 leading Blue Cross and Blue Shield health plans. The two companies will combine their specialty and mail-service businesses, and Walgreens will become the preferred pharmacy where Prime’s members could pay less to fill their prescriptions.

The deal is the second partnership that Walgreens made with a pharmacy-benefits manager in recent months that could help it process more prescriptions and give it more muscle to compete against CVS Health’s integrated model that combines a retail pharmacy chain with a large PBM.

Since taking over the nation’s largest drugstore chain, formed through the 2014 merger with the European retailer and drug wholesalers Alliance Boots, Walgreens Chief Executive Stefano Pessina has been open to partnering with a variety of companies in the tangled health care system to grow scale and lower costs.

Pharmacy-benefits managers, which include companies like Express Scripts Holding Co. ESRX 1.12 % and CVS Health’s Caremark, operate as middlemen between insurance companies, corporations that pay for health coverage, drugmakers, and pharmacies. They help process claims for prescriptions drugs while also negotiating with drugmakers and insurance companies over the price of medications.

Under terms of the partnership with Prime, Walgreens would become the core participant in Prime’s national preferred pharmacy network starting next year. That would mean Walgreens will offer lower prices to Prime members who are in preferred networks at its more than 8,000 drugstores.

The partnership also includes data sharing between the sides that can allow them to better control costs and manage the health of patient.

The combined central specialty and mail services company, which will be jointly owned by the two companies, would give Walgreens more power to negotiate purchasing drugs and cut costs. That entity will have its own board and executive team, jointly chosen by Walgreens and Prime.

Financial terms of Walgreens Boots deal with Prime weren’t disclosed. It’s expected to close in the first half of 2017.

In March, Walgreens formed a partnership with UnitedHealth Group Inc. UNH 0.48 % ’s OptumRx, which manages prescription drug insurance for more than 66 million Americans. That deal saves OptumRx members money when they fill certain 90-day prescription at Walgreens or through its mail order service. The deal also includes data sharing.

Walgreens also is in the midst of buying smaller drugstore chain Rite Aid Corp. RAD -0.13 % in a deal that also would give Walgreens control of Rite Aid’s small pharmacy benefits business, EnvisionRx. The $9.4 billion transaction is scheduled to closed this year, pending federal antitrust review.

Write to Paul Ziobro at Paul.Ziobro@wsj.com and Tess Stynes at tess.stynes@wsj.com

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