Walgreens announced that it is expanding its specialty pharmacy offerings. Experts think that this move could yield several strategic benefits, given the higher profit margins associated with specialty medications compared to traditional drugs. They also think Walgreens’ move could lead to greater competition, consolidation and innovation within the broader pharmacy industry.

By Katie Adams on April 25, 2024

Walgreens announced this week that it is expanding its specialty pharmacy offerings to include cell and gene therapy services. The move could allow Walgreens to play a bigger role in a growing market — research shows that specialty medications now account for more than half of the country’s prescription drug spend, despite making up a small percentage of total prescriptions.
With the announcement, the pharmacy giant introduced a newly integrated business unit called Walgreens Specialty Pharmacy. The unit encompasses most of Walgreens’ assets in the specialty pharmacy space, including specialty pharmacy subsidiary AllianceRx.
This unit will fall under Walgreens’ core retail pharmacy division. On the other hand, Shield Health Solutions — Walgreens’ subsidiary that supports health system pharmacies — will remain under Walgreens’ U.S. healthcare division.
As a newly rebranded business unit, Walgreens Specialty Pharmacy will include an 18,000-square-foot innovation center in Pittsburgh, nearly 300 community specialty pharmacies, four central specialty pharmacies and more than 1,500 specialty-trained pharmacists. The unit also has a growing roster of 240 limited distribution drugs, according to Walgreens’ news release.
Industry experts weren’t shocked by Walgreens’ announcement, saying that it makes sense that a huge pharmacy company would want to deepen its presence in the fastest growing segment of drug spend.
Joy Liu — CEO of Plenful, a company that provides automation tools for pharmacies — noted that healthcare is evolving, and Walgreens, just like any other healthcare company, needs innovative strategies to stay competitive.
“Specialty pharmacy services are lucrative and in high demand given medical advancements and an aging population,” she wrote in an email. “This is an exciting step for both Walgreens itself and the patients under their care.”
By expanding its specialty pharmacy services, Walgreens can diversify its offerings. This could lead to the company enhancing its value proposition and relationships with patients, payers, providers and pharmacy benefit managers, Liu explained.
In her view, success will depend on how well Walgreens can “align its goals across business units and utilize the best tools to streamline its workflows and capture growth.”
Another industry leader — Rick Ratliff, CEO of MedAdvisor Solutions, which provides patient engagement solutions to pharmacies — said he wasn’t surprised about Walgreens’ announcement given the company’s massive scale and the impressive number of people it engages each day.
“Walgreens is very well positioned to help patients access specialty medications faster, which will have significant positive impact on healthcare outcomes,” he declared.
Many individuals who are prescribed specialty drugs have to navigate a complicated process to even access their medication, Ratliff noted. This process often involves prior authorization, verifying benefits coverage and determining options for financial support.
This means that specialty pharmacy services aren’t always accessible to the patients who need them, Ratliff explained.
“If people have an ability to go through these processes with [a brand] they know and trust, such as Walgreens, the value proposition for those individuals increases significantly — in addition to the fact that they will get on therapy faster and be successful in their medication journey,” he said.
Like Ratliff and Liu, Coresight Research CEO Deborah Weinswig also thinks that Walgreens’ decision to go deeper into the specialty pharmacy market could yield several strategic benefits.
Entering this market offers substantial revenue opportunities due to the higher profit margins associated with specialty medications compared to traditional drugs, she pointed out.
“Considering the recent challenges presented to some in M&A, launching versus acquiring might be the best direction to go right now,” Weinswig wrote in an email. “As we look at trends within healthcare, there is a clear shift toward providing more integrated healthcare solutions.”
She noted that this expansion positions Walgreens to better compete with key industry players that have already established specialty pharmacy services, such as CVS and Cigna’s Express Scripts.
Walgreens’ move could also help the company diversify its customer base, Weinswig added. By providing specialty pharmacy services, Walgreens might enable itself to both retain existing customers and attract new ones who require these complex treatments, she explained.
And Weinswig believes Walgreens’ expansion in the specialty pharmacy segment is likely to influence a few broader trends in the industry.
She thinks the addition of Walgreens in the specialty pharmacy market could intensify competition, which could lead to more competitive pricing and improved service quality. Greater competition could put pressure on smaller specialty pharmacies, which could potentially lead to a consolidation within this niche of the market, Weinswig pointed out.

She also predicted that a more competitive specialty pharmacy market might spur innovations in medication management and patient care programs — which would improve treatment outcomes for patients, as well as boost efficiency for the greater healthcare ecosystem.
“Walgreens’ move to establish a specialty pharmacy business is a strategic initiative that not only seeks to capitalize on a lucrative segment but also positions the company for enhanced competitive leverage and customer engagement within the evolving healthcare landscape,” Weinswig wrote. “This development is poised to have profound implications on the industry, promoting competitive dynamics, fostering innovation and possibly catalyzing market consolidation.”
Photo: Joe Raedle, Getty Images