Walgreens 2015 Annual Report Download - page 19

competition, changes in the industries in which we compete, unanticipated costs or charges, loss of key personnel
and other factors described herein, could have a material adverse effect on our businesses, financial condition and
results of operations.
Disruption in our global supply chain could negatively impact our businesses.
The products we sell are sourced from a wide variety of domestic and international vendors, and any future
disruption in our supply chain or inability to find qualified vendors and access products that meet requisite
quality and safety standards in a timely and efficient manner could adversely impact our businesses. The loss or
disruption of such supply arrangements for any reason, including for issues such as labor disputes, loss or
impairment of key manufacturing sites, inability to procure sufficient raw materials, quality control issues,
ethical sourcing issues, the supplier’s financial distress, natural disasters, civil unrest or acts of war or terrorism
or other external factors over which we have no control, could interrupt product supply and, if not effectively
managed and remedied, have a material adverse impact on our business operations, financial condition and
results of operations.
We use a single wholesaler of branded and generic pharmaceutical drugs as our primary source of such
products for our Retail Pharmacy USA division.
On March 19, 2013, Walgreens, Alliance Boots and AmerisourceBergen announced various agreements and
arrangements, including a ten-year pharmaceutical distribution agreement between Walgreens and
AmerisourceBergen pursuant to which Walgreens sources branded and generic pharmaceutical products from
AmerisourceBergen; an agreement which provides AmerisourceBergen the ability to access generics and related
pharmaceutical products through WBAD, a global sourcing enterprise established by Walgreens and Alliance
Boots; and agreements and arrangements pursuant to which we have the right, but not the obligation, to purchase
a minority equity position in AmerisourceBergen and gain associated representation on AmerisourceBergen’s
board of directors in certain circumstances. As of the date of this report, AmerisourceBergen distributes for our
Retail Pharmacy USA division all branded pharmaceutical products that Walgreens historically sourced from
suppliers and distributors as well as substantially all generic pharmaceutical products that Walgreens previously
self-distributed. Consequently, our business in the United States may be adversely affected by any operational,
financial or regulatory difficulties that AmerisourceBergen experiences. For example, if AmerisourceBergen’s
operations are seriously disrupted for any reason, whether due to a natural disaster, labor disruption, regulatory
action, computer or operational systems or otherwise, it could adversely affect our business in the United States
and our results of operations.
Our distribution agreement with AmerisourceBergen is subject to early termination in certain circumstances and,
upon the expiration or termination of the agreement, there can be no assurance that we or AmerisourceBergen
will be willing to renew the agreement or enter into a new agreement, on terms favorable to us or at all. If such
expiration or termination occurred, we believe that alternative sources of supply for most generic and brand-
name pharmaceuticals are readily available and that we could obtain and qualify alternative sources, which may
include resuming self-distribution in some cases, for substantially all of the prescription drugs we sell on an
acceptable basis, such that the impact of any expiration or termination would be temporary. However, there can
be no assurance we would be able to engage alternative supply sources or implement self-distribution processes
on a timely basis or on terms favorable to us, or effectively manage these transitions, any of which could
adversely affect our business operations, financial condition and results of operations.
The anticipated strategic and financial benefits of our relationship with AmerisourceBergen may not be
realized.
Walgreens entered into the arrangement with AmerisourceBergen and Alliance Boots with the expectation that
the transactions contemplated thereby would result in various benefits including, among other things,
procurement cost savings and operating efficiencies, innovation and sharing of best practices. The processes and
initiatives needed to achieve these potential benefits are complex, costly and time-consuming. Many of the
anticipated synergies and expenses that will be incurred, by their nature, are difficult to estimate accurately at the
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