A few weeks ago, a press release from Shields Health announced that it had obtained accreditation from URAC…… not as a dispensing specialty pharmacy but, rather, as a non-dispensing pharmacy(yes, there is such a thing). That was going to be the lead for today’s Report but, as things would have it, that news pales by even bigger news about Shields.
The headline of greater significance is that Walgreens, which had already bought 71% of Shields for just under $1 billion, had plunked down yet another $1.37 billion for the remaining 29%!!! Yes, a grand total of about $2.3 billion.
We’ve rerun our Report issued in September 2021 (below) as it says all that needs be said about this latest bonanza for Shields. Bottom line, they are still not a pharmacy and they don’t seem to own any tangible assets. So, “Where’s the beef?” to warrant such a huge payday? That $2 billion is approximately 100% of total Rx revenue forecasted to be billed by all their contract hospitals in 2022…… not EBIDTA!
From Anton Rx Report September 23,2021
Frequent readers of this report know that one of our favorite topics is health-system-owned specialty pharmacies. So, it was with great interest that we read the press release detailing that Walgreens (WAGS) has increased its stake in Shields Health Solutions to 71% for a total of $970 million.
Readers should recall our January 2021 report detailing Shields’ acquisition of ExceleraRx for an undisclosed amount. ExceleraRx, like Shields, had built a large network of 25 healthcare-system-owned specialty pharmacies. In combination, the expanded Shields network topped 65 hospitals and was forecast to reach $2 billion in specialty network revenue this year….. enough volume to really start impressing payors and manufacturers.
We continue to be puzzled about both the earlier WAGS investment and this week’s doubling down. So, the big question is…. “Where does Shields earn the kind of $$$s to justify nearly a $1 billion investment?”
Shields (as with ExceleraRx) only offers hospitals a service. They build, operationalize and optimize integrated specialty pharmacies. They then can be hired to provide day to day management of the pharmacy. They also promote the SP network to payers to gain pharmacy provider contracts and to manufacturers to gain access to LD drugs.
Shields Health is not listed as a pharmacy license holder by the several state Boards of Pharmacy which we checked today. Rather, the hospitals that they represent in those states hold the community retail pharmacy licenses. So, the money paid for prescriptions dispensed by these hospital pharmacies goes to the hospitals, not Shields.
Little is known about the Shields financial model. Hospitals have a huge advantage as they can acquire drugs under the least expensive hospital-class-of-trade rates. We already know about the price advantages they have under 340b. So, there is a boodle of $$s that a hospital can pay to Shields for managing their specialty pharmacy and running the national network on their behalf. Consider that the valuation of a PBM is calculated in a not too dissimilar fashion.
What does Walgreens see in Shields?
In 2019 WAGS likely saw the writing on the wall….. that hospitals would eventually wise up and open their own specialty pharmacies to recoup lost revenue. WAGS has a history of working with hospitals opening a number of on-campus pharmacies in recent years. The Shields model fit that strategic mindset…. which likely prompted the initial investment. The ExceleraRx acquisition gave the model some serious traction, so this week’s move is less surprising. Last thought…. tactically, WAGS has ensured that they will be at the table with many very influential hospitals, payers, and manufacturers. That’s a good place to be. Just sayin’
Walgreens Boots Alliance is buying the rest of the specialty pharmacy company Shields Health Solutions for $1.37 billion.
September 20, 2022 — The nation’s largest drugstore chain said it has “entered into a definitive agreement to acquire the remaining 30% stake” of Shields from equity holders in the specialty pharmacy company that include private equity firm Welsh, Carson, Anderson & Stowe and the company’s founder and board chairman Jack Shields. The deal is expected to close by the end of the 2022 calendar year.
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 specialty administration, refrigeration, package and patient instructions.
“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,” Walgreens chief executive Roz Brewer said Tuesday. “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.”
Shields has nearly 80 health system partners representing approximately 1,000 hospitals nationwide that serve more than 1 million patients, the companies said. Walgreens made its initial investment in Shields in 2019.
“Shields will continue as a distinct business and brand within Walgreens,” Walgreens said in a statement. “John Lucey, co-founder and current president of Shields, will lead the organization as CEO of Shields, and current Shields CEO Lee Cooper will take on a new executive role within WBA. Lucey partnered with Jack Shields 10 years ago to start the business and has led its operations for most of that time.”
And, if you are interested in the footnote story related to Accreditation, here it is……
Shields Health Solutions Earns URAC Accreditation in Specialty Pharmacy Services
STOUGHTON, Mass., August 17, 2022–(BUSINESS WIRE)–Shields Health Solutions, the premier specialty pharmacy accelerator in the country, is proud to announce that it has earned URAC accreditation in specialty pharmacy services. URAC is the independent leader in promoting health care quality by setting high standards for clinical practice, consumer protections, performance measurement, operations infrastructure and risk management. By achieving this status, Shields Health Solutions demonstrates commitment to quality care, enhanced processes, patient safety and improved outcomes.
Shields currently partners with more than 70 health systems around the country and has helped their patients reduce co-pays, promptly receive medication delivery, often within two days, and improved medication adherence greater than 90 percent on average.
“Shields Health Solutions has a deep commitment to excellence in specialty pharmacy and the URAC accreditation marks another milestone in recognizing our high quality of care,” said Kate Campagnola, Director of Accreditation. “By continuing to improve patient access to care and supporting complex patients through an integrated care model, we are excited to continue our mission to improve health outcomes and decrease costs for complex patients.”
“Pharmacies and related pharmaceutical services play a critical role in the health care delivery system now more than ever. Given the complicated nature of chronic disease, organizations like Shields Health Solutions do much more than simply fill a prescription. As trusted experts at the frontline of care delivery, they often provide targeted patient support and education to ensure proper medication management,” said URAC President and CEO Shawn Griffin, M.D. “By achieving URAC accreditation, Shields Health Solutions demonstrates excellence in quality care delivery and their long-term commitment to ensuring patient safety and improving outcomes.”
About Shields Health Solutions
Shields Health Solutions is the premier specialty pharmacy accelerator in the country. The Shields Performance Platform, an integrated set of solutions, services and technology, is intentionally designed to elevate payer and drug access for specialty pharmacies, elevate health outcomes for complex patients, and elevate growth throughout the entire health system.
CLICK HERE to view Standards for the Specialty Pharmacy Services (non-dispensing) Accreditation