Walgreens to Buy Option Care for $850 Million

DEERFIELD, Ill.–Walgreen Co. said last week it will acquire
specialty pharmacy and home infusion provider Option Care in a
transaction valued at $850 million, the largest in Walgreens’
history.

Buffalo Grove, Ill.-based Option Care runs a network of more
than 100 pharmacies, 61 of them company-owned, in 34 states. The
company has contracts with more than 400 managed care organizations
representing 75 million people.

The acquisition “dramatically expands our specialty pharmacy and
home infusion footprint and makes us a national player in both
areas,” said Walgreen CEO Jeffrey Rein in a conference call.

The specialty pharmacy and home infusion markets are estimated
at $60 billion a year, with a projected annual growth rate of 20
percent. “This acquisition puts us in a sweet spot for that
growth,” Rein said, noting that the two markets are getting tied
closer together as more biopharmaceuticals are delivered through
infusible drugs.

According to Walgreen President Greg Wasson, growth in both
markets is being driven by “cost-containment pressures, a strong
pipeline of new therapies and an emphasis on care management and
compliance monitoring to improve outcomes.” He added that with more
than 3,000 providers across the country, the infusion market is
fragmented. But the new acquisition will give Walgreens a 6 percent
share and the No. 2 position in the industry, behind market leader
Coram, which has an 11 percent share.

Wasson said the deal is another step in positioning Walgreens to
provide a variety of patient-focused health services with a series
of recent acquisitions, including:

–Take Care Health Systems, which operates convenient care
clinics;
–Medmark Specialty Pharmacy Solutions, a specialty pharmacy
company;
–SeniorMed Pharmacy, which provides prescription services to
residents in assisted-living, specialty care and independent
communities; and
–Schraft’s A Specialty Pharmacy, which provides fertility
medications and services.

Walgreens’ Health Services division includes Walgreens Health
Initiatives, a pharmacy benefits manager, Walgreens Mail Service,
Walgreens Home Care and Walgreens Specialty Pharmacy. Walgreens
Home Care currently operates 45 facilities–including 20 home
infusion pharmacies–in 18 states, and Walgreens Specialty Pharmacy
operates six locations, including Medmark and Schraft’s.

“We’re moving beyond traditional pharmacy in ways that are
beneficial to our patients and will help payers better manage their
overall medical and pharmacy spend,” Wasson said.

Walgreen Co. had 2006 sales of $47.4 billion. As of May 31, the
company operated 5,751 stores in 48 states and Puerto Rico.