Walgreens' $1.67-Billion Specialty Pharmacy and Home Health Play

On August 24, 2022, Walgreens lost a court case where it, and two other retail pharmacies, were ordered to pay $650.5 million to two Ohio Counties for their role in the opioid epidemic. One week after that ruling, the company announced it had completed its majority share acquisition of CareCentrix worth $330 million. Two weeks later, it was revealed that the company would purchase 100% of Shields Health Solutions for $1.37 billion.  

Before this acquisition, the company increased its stake in primary care provider VillageMD to 63%, opening 40 new primary care clinics in one year. 

The aggressive expansion Walgreens is pursuing is a part of the brand's strategy to reach beyond retail pharmacy sales into all elements of the healthcare experience. The rapid succession of purchases also closely mirrors those of Walgreens' main competitor CVS Pharmacy which recently snapped up several specialty pharmacy units and one home-health provider.  

In 2018 CVS agreed to buy a smaller specialty pharmacy outfit called Entrust Rx for $40 million, one of five specialty pharmacy acquisitions completed by the company that year. In 2020, CVS made a more significant acquisition, purchasing 99 of Schuck's midwestern specialty pharmacies. Then, after winning a 2022 bidding war with Amazon and UnitedHealth Group, CVS bought home health provider Signify Health for $8 billion in cash. 

Home health services represent nearly $75 billion in annual healthcare costs, one of the industry's fastest-growing segments. On the other hand, specialty pharmacy sales are quickly becoming the dominant force behind the US pharmaceutical market and likely already account for more than half of US drug spending.  

Shields Health Solutions is a large and well-connected specialty pharmacy brand whose acquisition gives Walgreens a leg up in its competition with CVS for specialty pharmacy dominance. The company has partnered with nearly 1,000 hospitals and 80 health systems in the US, providing their complex patients with cutting-edge products, including high-cost biologics, injectables, and therapies.   

"Our full acquisition of Shields will complete another major milestone as part of our consumer-centric healthcare strategy to drive sustainable long-term growth, and we are very pleased with our partnership and integration with Shields," said Walgreens CEO Roz Brewer in a public statement announcing the buyout. "We can now make further progress on our strategy through Shields' integrated model, increasing our value to health systems, expanding access to payor partners, and supporting improved outcomes and lower costs."