Two years after exiting the long-term care pharmacy business, Walgreen Co. is getting back into senior care with plans to launch a national platform targeting hospice providers and cutting out the pharmacy benefit management “middlemen,” reports Crain’s Chicago Business.
Like much of the long-term care industry, the hospice pharmacy industry is very fragmented and therefore attractive to a large national company such as Walgreens. It’s also more lucrative to provide medications to dying patients compared to retail sales, according to the Crain’s article.
Additionally, the industry isn’t dominated by pharmacy benefit managers, possibly giving Walgreens the ability to negotiate directly with hospice providers.
The company “ultimately wants to cut out that middleman,” Steve Morton, CEO of Menasha, Wis.-based Morton Long Term Care Pharmacy Solutions, told Crain’s, as “there isn’t as much of a squeeze on the margins” in the hospice business because of less involvement from PBMs.
Plans for a national hospice platform were disclosed about two months ago according to a complaint filed by a Chicago-area hospice pharmacy that’s suing Walgreens in relation to a two-year distribution agreement that ended this past October.
When Walgreens left the long-term care business in September 2010, it cited unwillingness to make a “significant additional investment” to become a market leader in the industry, says Crain’s. Making a move into the hospice pharmacy business “seemingly signals a change in strategy” for the company, the article says, considering Omnicare is the industry’s current “dominant player” with about $174 million in revenue in 2011 from the specialized field.
The institutional pharmacy industry sells drugs to assisted living communities and nursing homes along with hospice providers and is worth about $14 billion a year. By focusing on hospice, says Crain’s, Walgreens will have a much more targeted approach this time around.
Written by Alyssa Gerace