Walgreens Ponies Up Nearly $1 billion for Shields Health


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 makes $970 mm investment in specialty pharmacy company Shields Health

Sept 21 (Reuters) – Walgreens Boots Alliance is spending roughly $970 million to acquire a majority stake in Shields Health Solutions to expand its specialty pharmacy business, the companies said on Tuesday.

The investment brings Walgreens’ total stake in Shield to 71%, and the company has an option to acquire the remaining equity interests in the future. The Illinois-based company had taken a minority stake in Shields in 2019.

Founded in 2012, Shields Health Solutions helps hospitals provide specialty pharmacy services.

Specialty pharmacies are designed to deliver medications with unique handling, storage and distribution requirements, often for patients with complex conditions such as cancer, multiple sclerosis or rheumatoid arthritis.

“We’re continuing to make strategic investments in pharmacy and healthcare solutions that can build on our core pharmacy business… The Shields model has shown to improve patient care, and will be complementary to our existing specialty pharmacy offering,” Chief Executive Officer Roz Brewer said in a statement.

The transaction is expected to close by the end of the fiscal second quarter of 2022 and is projected to be modestly accretive in the first full year after completion.


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