News Walgreens Boots Alliance is considering the sale of its Shields Health Solutions specialty … [+]
News Walgreens Boots Alliance is considering the sale of its Shields Health Solutions specialty pharmacy business would mean unloading a lucrative operation with huge growth potential.
The embattled drugstore chain is “exploring options including a sale of Shields Health Solutions, the specialty pharmacy business it acquired a majority of three years ago,” a three-byline Bloomberg News story Tuesday said. The business could be valued at more than $4 billion, Bloomberg reported, citing “people familiar with the matter.” If Walgreens wants the money from Shields to pay down debt, it should get a good price.
But if Walgreens is serious about pursuing fast-growing businesses with long-term potential, it would seem keeping Shields would be a winner.
Specialty pharmacies are an increasingly important player in the U.S. health system given the flood of expensive drugs on the market derived from biotechnology. Such medicines are more complicated than pills and capsules picked up at the corner drugstore and often require specialized administration, refrigeration, packaging and patient instructions.
Meanwhile, taxpayers, government health insurers and companies are spending more on pricey specialized prescription drugs than pills and capsules that have busted budgets for drugs historically.
These days, it’s not uncommon for specialty pharmacy to be less than 5% of an employer’s prescription claims yet they account for 50% to 60% or more of a company’s total drug spend because specialized drugs are far more expensive. In 2022, for example, specialty prescription spending for U.S. employers was 49% of total pharmacy costs, according to the big benefit consultancy Mercer.
On Walgreens first quarter earnings call earlier this month, Walgreens chief executive Tim Wentworth acknowledged Shields growth and said specialty pharmacy figured in the company’s turnaround. Shields works with hospitals and health systems to set up and run their own on-site specialty pharmacies.
“Shields is another example of our strength serving hospital systems and has consistently delivered strong margin- accretive results ahead of plan,” Wentworth said. “Sales were up 27% in the first quarter, driven by meaningful growth at existing customers, as well as new partner contract signings. We expect Shields to continue to leverage and benefit from the rapid growth in the broader specialty market and our intense focus on accelerating hospital-owned specialty pharmacy programs.”
In comparison to Shields’ double-digit percentage growth, Walgreens U.S. Retail Pharmacy segment had first quarter sales growth of 6.4 percent from the year-ago quarter.
Talk of a sale of Shields comes as rival drugstore chains as well as other retailers and grocers are transforming with more pharmacy services – from infusion suites to state-of-the-art cold storage – to accommodate the increasing number of specialized drugs patients are prescribed.
Companies say pharmacies – from those run by corner drugstores and grocers to outpatient clinics and big box retailers – are becoming more equipped to serve a variety of complex patient prescription needs.
Walgreens, too, seems headed to greater investment in specialty pharmacy rather than a divestiture as reported by Bloomberg.
“Our specialty pharmacy assets will be an important focus going forward, and while we have work to do, we are pleased to be executing our next steps with gene and cell therapy,” Wentworth told analysts on the first quarter earnings call. “The FDA anticipates approval of more than 20 gene and cell therapies by 2025, and this is an exciting opportunity for patients with rare conditions and for Walgreens specialty pharmacies. In the coming months, you will hear more from us on our initiatives in specialty.”