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Walgreen returns to hospice care

Looking to bolster sagging revenue, Walgreen Co. plans to launch a national platform targeting hospice providers as soon as next year, an about-face after jettisoning its long-term care pharmacy business two years ago.

A Walgreen senior executive disclosed plans for a “national hospice platform” two months ago, according to a complaint filed by a north suburban hospice pharmacy, which is suing Walgreen over a two-year distribution deal that ended in October. The scope of the new endeavor could not be determined.Even if Walgreen moves aggressively, hospice pharmacy is likely to make up just a fraction of the billions in revenue the company lost this year due to a protracted dispute with pharmacy benefit manager Express Scripts Holding Co. that ended in mid-September. Omnicare Inc., the dominant player in hospice pharmacy, generated about $174 million in revenue in 2011 from the specialized field.

Now, Walgreen is apparently coming back with a more focused approach, targeting just one part of the $14 billion annual institutional pharmacy industry, which sells drugs to assisted-living facilities and nursing homes as well as hospice providers.

“They learned a good lesson (from the old long-term care business), and from that time forward they've been searching for another, smarter way to get back into that business,” says James Schrager, a professor at the University of Chicago's Booth School of Business.

In 2010, Walgreen traded the long-term care business to Omnicare in exchange for the Covington, Ky., company's home-infusion business.

But the relationship turned rocky, and at an Oct. 5 meeting with OnePoint Chairman and CEO James Otterbeck, Walgreen Divisional Vice President Jack Cantlin said his company was starting a “national hospice program,” according to a Walgreen meeting agenda attached to OnePoint's complaint, filed Dec. 3 in Cook County Circuit Court. A Walgreen spokesman declines to comment, and a OnePoint spokeswoman declines to comment on Walgreen's plans.

Walgreen “ultimately wants to cut out that middleman,” says Steve Morton, CEO of Menasha, Wis.-based Morton Long Term Care Pharmacy Solutions. In the hospice business, “there isn't as much of a squeeze on the margins because the PBMs aren't as involved.”

Claire Bushey contributed.
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