Target will be buying CVS Health for $12.5 billion, which it says is in line with its acquisition strategy.
The deal will allow Target to make its own medicine, and the company will have access to the company’s massive supply chain.
The deal is expected to close by the end of the year.
Target has been in talks with CVS over a number of years.
Target’s pharmacy business has been a focus of recent scrutiny from drug regulators and the Centers for Disease Control and Prevention.
Target has been trying to ramp up its pharmacy business in recent years.
Its pharmacies in the United States are under pressure to reduce costs and diversify.
Target CEO Brian Cornell said in September that Target would focus on making medication accessible to underserved populations.
In its most recent earnings report, Target reported that it expects to spend $3.2 billion to $4.4 billion on its pharmacies in 2020.
The company reported that the pharmacy business generated $6.3 billion in profit last year, up 11% from a year earlier.
Target is already in the process of rolling out an app that will let customers see prices for their medications.
CVS has been battling a number major pharmacy chains including Walgreens and Rite Aid.
“Target is one of the most innovative companies in the world and has positioned itself to provide our customers with the very best possible access to health care,” CVS said in a statement.
“Our company will continue to build on its strong track record of leading the industry in innovation and innovation-driven growth.”
“We have a strong and proven commitment to our patients and will continue our mission of empowering them to get the care they need,” Cigna CEO Scott Hockett said in the statement.
Target will continue operating its existing pharmacy operations in the U.S., as well as expand its drug acquisition program, Target Health Ventures said in an email.
As part of the deal, Target will also be acquiring CVS’ drug business.
The pharmacy business, which has been on a downward trend in recent months, was already valued at $7.5 million when the deal was announced.
Target will retain its existing operations in Canada and Mexico.