Healthcare firms turn to drugmaker executives as businesses converge
Healthcare companies are tapping executives from drugmakers as they seek out finance and other critical skills found outside their core business to help navigate a recent wave of consolidation. A flurry of mergers is transforming care as patients increasingly get their medical services outside of hospitals, in smaller venues including drugstores.
CVS Corp. is acquiring Aetna Inc. for $79 billion. United Group Inc. announced plans for the $4.9 billion purchase of DaVita Inc.’s doctor group in December. And last month, Walgreens Boots Alliance Inc. made a takeover approach to drug distributor AmerisourceBergen Corp.
At the same time, these companies have made three high-profile executive hires from the pharmaceutical industry so far this month. CVS named Derica Rice, a former finance chief for drugmaker Eli Lilly & Co., to run its pharmacy benefit business. Walgreens appointed James Kehoe, formerly CFO of Takeda Pharmaceutical Company Ltd., its new global finance chief. United named Andrew Witty, the former chief executive officer of drugmaker GlaxoSmithKline PLC as the new CEO of its Optum -services businesses. All three begin their new positions within the next few weeks and months.
Deals that aim to integrate previously disparate businesses, as well as a push by Amazon.com Inc. to become a major medical products supplier to U.S. hospitals and outpatient clinics, will stoke demand for executives with broad experience, recruiters and consultants said.
“To have a CFO or key executive who has a better understanding of how these businesses operate more holistically, it’s an underlying indicator of some of these broader trends,” said Per Hong, a partner at global management consulting firm A.T. Kearney.
Companies are looking for executives who can add outside expertise, in an effort to keep costs down while integrating, said Tim Dietlin, a partner at executive recruitment firm Heidrick & Struggles International Inc. “This is a very nascent trend…the hope [is] that cross-pollination of talent and leadership will help inform the entire value chain and bring improvement to the industry,” he said, adding that the healthcare sector had been known for its insular hiring practices. There has been a notable shift in the last two to three years, Dietlin said.
Rice worked at Lilly for about 27 years, serving as finance chief from 2006 until his retirement in December. He was interim CEO at the Indianapolis drugmaker for a few months in 2013 when then-CEO John Lechleiter took a medical leave. He will join CVS as head of its pharmacy benefit management, or PBM business, which acts as health-care middleman and helps select which drugs are covered for insured patients and negotiates discounts with drugmakers.
Witty, who will join UnitedHealth’s Optum unit in July, retired from GlaxoSmithKline in 2016 after more than 30 years at the company. Witty “brings more than three decades of healthcare system strategic thinking and knowledge from around the globe, a record of fostering innovation and partnerships,” said David Wichmann, chief executive of UnitedHealth in a statement. “Critically, he has deep experience with how data and analytics and new technologies can be used to improve patient outcomes, better serve consumers, lower costs and drive value across the system.”
Meanwhile, at Walgreens, Kehoe brings his experience as finance chief of Takeda and the consumer goods industry, including Mondelez International Inc. and Kraft Foods Group Inc.
The frenetic pace of deal-making in the healthcare sector in recent months underscores the emerging sea change in how Americans seek medical care. There is a decline in hospital use underway sending companies scrambling to strengthen their position amid the shifting landscape.
