PHARMACY

Walgreens buys McKesson specialty unit

BY Jim Frederick

DEERFIELD, Ill. In hot pursuit of a bigger stake in the fast-growing specialty pharmacy market, Walgreens today announced an agreement to buy McKesson Corp.’s specialty operations for an undisclosed sum. The purchase, expected to close in 60 days, will “further strengthen Walgreens’ position as the fourth-largest specialty pharmacy in the country,” the company reported.

The acquisition includes the McKesson specialty pharmacy in Pittsburgh, Pa.;?and IVPCARE, based in Frisco, Texas, with operations in Torrence, Calif.; Wilmington, Mass. and St. Louis.

“The acquisition of McKesson?s specialty pharmacy operations offers the opportunity to grow our own specialty pharmacy business with preferred payer agreements,” said Stanley Blaylock, president of Walgreens Health Services. “This transaction will broaden access for patients and clients in?the fast-growing oncology area and other specialty areas including multiple sclerosis, rheumatoid arthritis and reproductive health services.”

Added Michael Nameth, executive vice president of Walgreens Health Services, “Both organizations complement each other with disease-focused care teams and enhanced clinical and therapy management programs.”

Citi Investment Research analyst Deborah Weinswig, who covers Walgreens, called the deal “another example of how the company is continuing to look outside of its traditional retail drugstores for sales and earnings growth.

“We are not surprised by the announcement, as we been of the belief that WAG would continue to grow its specialty pharmacy business through acquisitions following its July 2007 acquisition of OptionCare,” she observed in a report issued today.

Weinswig estimated that specialty pharmaceuticals generate approximately $200 million in annual sales for McKesson’s specialty business, “since the majority of revenues in its specialty division come from the distribution portion of the specialty value chain.” As a result, she noted, the impact on Walgreens’ overall business will be modest. “We expect specialty pharmacy to contribute about $0.18/share to Walgreens’ 2008 [estimated] EPS [earnings per share], or about 8.5 percent,” Weinswig said.

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PHARMACY

FDA approves Teva application for fentanyl patch

BY Alaric DeArment

JERUSALEM The Food and Drug Administration has approved Teva’s application for its fentanyl transdermal system, the Israeli drug maker announced Monday.

The patches, which will deliver the medication at rates of 25 to 100 micrograms per hour for treating pain, are a generic equivalent to Johnson & Johnson’s Duragesic patches.

Combined sales of the branded and generic versions of the drug were $1.2 billion during the 12 months ending June 30, according to IMS Health data.

Teva said shipment of the patches had begun already.

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Medicaid cost hikes ‘unsustainable,’ HHS secretary warns state budgeters

BY Jim Frederick

WASHINGTON Spending for Medicaid is rising to “unsustainable” levels, and the program’s rapidly rising costs are threatening access to health care for poor and lower-income Americans, Health & Human Services Secretary Mike Leavitt warned Friday.

The U.S. Centers for Medicare & Medicaid Services is projecting that the Medicaid program will spend $4.9 trillion over the next 10 years. That marks an average annual increase of 7.9 percent annually, according to federal budgeters, significantly outpacing the U.S. economy’s growth rate.

CMS released its report Friday, prompting a grim warning from the HHS secretary at a meeting of state budget directors. “This report should serve as an urgent reminder that the current path of Medicaid spending is unsustainable for both federal and state governments,” Leavitt said. “If nothing is done to rein in these costs, access to healthcare for the nation’s most vulnerable citizens could be threatened.”

Combined, Medicaid and Medicare are expected to gobble up 6.9 percent of the gross domestic product by 2017 at current growth rates, according to HHS. This year, Medicaid will see its rolls swell to a projected 50 million beneficiaries, at an average annual cost per person of more than $6,100.

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