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Walgreens embraces home IV

Walgreens embraces home IV

DEERFIELD, Ill. - Walgreens looked to its own backyard in late June, buying Buffalo Grove, Ill.-based Option Care, a specialty pharmacy and home infusion provider, for $850 million cash--the largest transaction in Walgreens' history. The deal gives Walgreens a national footprint in the specialty pharmacy and home infusion markets, estimated at $60 billion annually, with a projected annual growth rate of 20%. "It is our biggest step yet to expand," said Walgreens President Greg Wasson, during a July 3 conference call. Wasson said the company believes the move will position Walgreens as No. 2 in the fragmented home infusion market with a 6% market share, behind industry leader Coram, with an estimated 11% share. As diseases like cancer become chronic rather than fatal and more new drugs are infusible, the specialty pharmacy and home infusion have become more integrated. Overall growth in both is driven by cost-containment pressures from payers, new drug therapies in the pipeline, increased utilization and an emphasis in the healthcare industry on care management and compliance monitoring. With the deal, Walgreens will pick up 400 existing managed care contracts representing 75 million people. Industry watchers were not surprised by the deal. "Walgreens historically has been more about providing prescriptions but their margins are made on the front-of-store (items)," said Alan Brochstein, president of Houston-based AB Analytical Services. "Now they are realizing the landscape has changed dramatically and they do have a good brand and market position." The deal underscores the upswing that the mergers and acquisition market for infusion has enjoyed over the past 18 to 24 months, said Dexter Braff. "This is a high-profile deal with a high profile company, buying at substantial premiums above what the stock was trading at," Braff said. "It sends optimism through the industry." Option Care operates more than 100 pharmacies nationwide--61 are company owned. The company has been decreasing its number of franchises in recent years and Walgreens plans to continue on that path, company executives said. Option Care reported first quarter 2007 revenues of $213 million and its sales are expected to double over a three-year period, ending in its current fiscal year.

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