Walgreens Will Launch New Specialty Pharmacy With ‘Significant’ Cell and Gene Therapy Offering

On April 24, Walgreens Boots Alliance Inc.’s Walgreens revealed that it will launch Walgreens Specialty Pharmacy on Aug. 1. The company is touting the new division, which will include AllianceRx Walgreens Pharmacy and four central specialty pharmacies, as being able to swiftly serve patients without being invested in a PBM. And that could mean enhanced opportunities for contracting with payers and manufacturers, according to one expert.

The new unit will also feature nearly 300 community-based specialty pharmacies across the U.S. and a new 18,000-foot Gene & Cell Services Pharmacy and Innovation Center in Pittsburgh. The division will have more than 1,500 specialty-trained pharmacists, 5,000 patient advocacy support staffers and 10 Specialty360 teams. It also has access to more than 240 limited distribution drugs, including 40 narrow networks and 12 exclusive limited distribution agents.

“We celebrate our independence as not being PBM affiliated and truly agnostic,” said Patrick Lupo, group vice president of pharmacy trade and specialty at Walgreens, during an April 22 media call, who touted the new organization as the “largest independent specialty pharmacy in the U.S.”

“As the largest non-PBM-owned specialty pharmacy, Walgreens is uniquely positioned to redefine how specialty medications are delivered,” Tracey James, R.Ph., chief operating officer of Walgreens Enterprise Specialty, tells AIS Health, a division of MMIT. “We can flexibly work with any payer to fill any prescription for any patient. Being unattached to a PBM makes us nimble, allowing us to work on behalf of the patient, provider and manufacturer to help ensure that prescriptions are filled quickly, with no delay in therapy.”

According to Lupo, “We see ourselves as occupying the sort of middle ground as an alternative to partner with PBMs and health plans on payment and service models so that they can differentiate themselves and their member engagement. We see our purpose as being a connector in the specialty ecosystem, being a conduit between the patient and our B-to-B partners so we can provide specialty services to pharma, payers and health systems.”

The company’s press release said the new Gene & Cell Services Pharmacy and Innovation Center will offer “services and capabilities for these emerging therapies, including innovative solutions for managing the complexity of the supply chain, logistics and financing as well as clinical and social needs management to ensure success for patients and partners.”

During the call, James noted that the cell and gene therapy space is a “$15 billion industry and expected to reach five times that in the next 10 years,” with more than 1,500 products in clinical trials currently. “With our footprint and our scale, we’ve got a unique solution, one that is really unmatched in the industry. Our center of excellence, with our touchpoints across the country, gives this a unique distribution model — assets that will help us conduct long-term follow-up — and it’s really going to differentiate us.”

The new center will be able to “store, handle and maintain the quality of medications and track them to the patient’s site-of-care,” James explains. “The innovation center is also the heartbeat of patient care, showcasing innovation such as telehealth suites to address the clinical and social needs of each patient and their caregivers. It is really the culmination of a long-term vision of meeting with our partners for collaboration to bring new products and services to the market.”

In addition, the center “will be directly involved in the supply chain process,” she says. “In partnership with pharmaceutical manufacturers, health plans and providers, Walgreens Specialty Pharmacy will accelerate patient access to medications and provide critical adherence support — leading to better health outcomes for all. With a wide-reaching network that includes flexible distribution models, we can deliver specialty medications anywhere in the U.S.”

The company is not able to disclose any agreements it has with manufacturers, she says.

“We are focused on providing treatment and clinical support for ultra-rare and complex diseases including in oncology, gene and cell therapy, pulmonary, immune disorders, fertility and women’s health, among others,” explains James. “We are also continuing to expand our specialty pharmacy pipeline and have emerging expertise in neurology and metabolic dysfunction-associated steatohepatitis (MASH)/liver disease. We are still finalizing our cell and gene therapies and/or conditions.”

Shields Will Remain Separate Unit

Walgreens’ wholly owned subsidiary Shields Health Solutions will remain separate but connected with these specialty pharmacy assets. The health-system owned specialty pharmacy integrator — which recently was the subject of sales rumors that CEO Tim Wentworth later addressed — partners with health systems to help them create and grow a hospital-owned specialty pharmacy program. It works with more than 1,000 hospitals across 45 states.

Asked if there would be any collaboration between Walgreens Specialty Pharmacy and Shields, James replies that “Shields is an important asset as we expand our offerings in the rapidly growing specialty pharmacy area. Shields builds on our existing network of community-based, on-site hospital and specialty retail services to best meet the needs of health system partners and their patients, while improving patient outcomes and lowering costs of care.”

Walgreens, she explains, “works with Shields on solutions and product development that enable closer relationships and integrated care with our health system partners. We will continue to explore opportunities to scale the Shields business model by adding complementary provider-based services to the portfolio.”

“While payer and manufacturer business relationships loom large in the specialty pharmacy ecosystem, IDN [integrated delivery network] specialty pharmacy business units are also significant,” observes Ira Studin, principal at Stellar Managed Care Consulting, LLC. “IDNs have specialty pharmacy units because they generate considerable revenue. Walgreens Specialty Pharmacy will likely need to have a strategy for that market component in their overall business strategy.”

Walgreens Specialty Pharmacy Is ‘Logical’

The creation of Walgreens Specialty Pharmacy “seems to be a logical business play to strengthen their position in a high margin growing therapeutic segment where they had not leveraged their size,” says F. Randy Vogenberg, Ph.D., principal at the Institute for Integrated Healthcare.

“It was a necessary move to compete with scale in the complex and capital-intensive specialty pharmacy space,” adds Studin, who points to two strategic factors. “First, it enables Walgreens Specialty Pharmacy to lean into the 80/20 rule in the pharmacy market, where roughly 2% of prescription volume is tied to roughly 50% of total spend. Since top management had earlier ruled out any large acquisitions, absent this move, it’s unlikely they would be able to effectively compete in this technically challenging market with super-sized requirements for information technology, specialized clinical staff and purchasing power.

“Second, there may be a differentiating opportunity with the new enterprise being able to claim it is the largest and most fully integrated specialty pharmacy — as their management put it, ‘not vertically aligned with a pharmacy benefit manager,’” he continues. “This could give them an edge in contracting with health plans on the one hand and manufacturers with products that require limited distribution on the other.”

The specialty pharmacy will benefit Walgreens as a whole, claims Studin, because “it represents a reengineering move for business survival in the specialty space and, given the failure of its VillageMD investment, a necessary move to generate much-needed new revenue. With this move, the company now has the consistent revenue stream of Walgreens retail plus the potential for a powerful growth generator in a more formidable Walgreens Specialty Pharmacy 2.0. Whether top management can drive this new enterprise to produce meaningful revenue growth in a complicated market with entrenched competitors and heavy cost containment pressure is an open question.”

An array of potential challenges with Walgreens Specialty Pharmacy exists, claim the sources. Vogenberg points to “competition within the specialty pharmacy space” — including hospitals and provider groups — “and unknowns around coverage or reimbursement for cell and gene therapies or services.” In addition, he cites “what changes may occur in the marketplace regarding benefit design, reimbursement (commercial or government) and allowable fees for services. That along with potential congressional legal or regulatory rule changes could undermine the strategy.”

Studin says that multifaceted integration will be a challenge, including “across various logistics functions from storage, handling and distribution. It also includes integration across insurance-related functions from verifying benefits, as-needed involvement with prior authorization and ensuring availability of optimal financial support for patients. And it includes patient-related oversight functions involving potentially provider administration, patient monitoring and ongoing engagement to maximize adherence.”

Switching costs could also pose an issue, he says. “Customers have their specialty pharmacy arrangements in place. And those arrangements include entrenched financial as well as patient care factors. Walgreens Specialty Pharmacy will more likely be in a position where it has to win over existing business from competitors rather than capture new business. Closely related to this is the need to develop a compelling value proposition. At the very least, that means demonstrating some degree of superiority for both now and in the future across all three critical performance dimensions: quality, service and savings.”

Innovation Center Is ‘Very Significant’

Walgreens Specialty Pharmacy’s Gene & Cell Services Pharmacy and Innovation Center “keeps them in the game versus competitors and could allow for better mitigation of supply chain and logistical issues,” maintains Vogenberg.

The center, declares Studin, is “very significant. It dramatically strengthens Walgreens Specialty Pharmacy capabilities at the leading edge of medical science, creating potential for a competitive advantage in this one extremely complicated, high-cost area with this new business line or justifies a more comprehensive business relationship with customers opting to use Walgreens Specialty Pharmacy across all business lines.”

Vogenberg points out that “self-insured employers and commercial insurance plans continue to struggle with the issue of costly cell and gene therapies. All these plans are focused more on the financial impacts to their plan and members (patients). Supply and logistics have not factored into their benefit coverage or not decisions for the most part.

“The other aspect is curative vs. chronic care management value propositions for these new therapies,” he continues. “For the most part, these are not curative and/or have not shown durable responses over time from longer term, larger cohort REMS/post-marketing studies. This will likely contribute to growing coverage concerns by plans, along with risk-based contracting growth with manufacturers if any coverage is offered by a plan.”

This article was reprinted from AIS Health’s monthly publication Radar on Specialty Pharmacy.