On the heels of several high-profile acquisitions, Walgreens aims to be a point of entry for consumers for healthcare services ranging from urgent care to specialty care and even in-home health.
Walgreen's VillageMD unit recently announced it was buying another urgent and primary care chain, Summit Health-CityMD, in a deal worth close to $9 billion. The VillageMD-Summit Health deal will expand Walgreen's reach into primary, specialty and urgent care. Combined, VillageMD and Summit Health will operate more than 680 provider locations in 26 markets.
Walgreens Boots Alliance and VillageMD have 52 co-located primary care practice locations currently open and will have more than 80 open by the end of this calendar year. Last year, Walgreens invested $5.2 billion in VillageMD, becoming the majority owner, and said it planned to open at least 600 Village Medical at Walgreens primary care practices across the country by 2025 and 1,000 by 2027.
The retail drugstore chain also plans to accelerate acquisitions of two other companies: post-acute and home care company CareCentrix and specialty pharmacy company Shields Health Solutions. CareCentrix currently manages care for more than 19 million members through over 7,400 provider locations.
"As soon as we were looking at life beyond the [COVID-19] vaccination period and getting into this endemic role in our lives, it was important to think about what's the next growth venture for this company because dispensing of pharmaceuticals is not going to be our long-term growth avenue," said Rosalind "Roz" Brewer, Walgreens Boots Alliance CEO, during an onstage interview at the HLTH 2022 conference.
"We have the ability to take that relationship between the pharmacist and consumer, combine that with the primary care that VillageMD delivers and then think about the in-home care of CareCentrix and you can almost patch together a continuum of care," Brewer said.
"For us, we have been very aggressive and will continue to be to set up a healthcare continuum and deliver healthcare services through a brand that everyone knows and trusts," she told the HLTH audience.
Walgreens wants to become a healthcare destination for consumers at a time when statistics show as many as 25% of Americans do not have a primary care provider.
Walgreens operates 9,100 stores in the U.S., and 75% of Walgreens stores are within five miles of every household in the U.S., according to Brewer.
"[Walgreens'] real estate and footprint across the U.S. is pretty strong and we can provide that access in our stores. We can have health corners in our stores to do more of the simple things that people need so they don’t have to go to the doctor. The whole idea is to localize it and bring access closer to home," she said.
Brewer also sees the potential for what's called "hybrid care" or the combination of virtual care and in-person services.
"There is going to be a part of healthcare delivery and healthcare services that's always going to be person-to-person, but I do think who is going to win is that company or entity that can meet in the middle between physical and digital. I think it’ll be both," she said.
Walgreens is currently testing store models that expand the square footage of the VillageMD primary care clinic with a smaller footprint for the drugstore, Brewer said.
"One of the stores here right here on the [Las Vegas] strip doesn’t have a pharmacy, but the one two doors down has a pharmacy. It's that kind of thing to say, first, let the consumer help us to understand what we need to do and we’ll build it. I think you’re going to see a blend of virtual and in-person," she noted.
Retail health shaking up primary care, home health
"Companies like CVS and Walgreens are preparing to move from episodic acute-based care to more long-term care," Natalie Schibell, vice president and research director at Forrester, said in an interview when the Summit Health deal was announced.
"Walgreens Boots Alliance is graduating up from being a drug retail store to owning the life-cycle of members' health," David Larsen, healthcare IT and digital health analyst at financial services firm BTIG, wrote in a recent analyst note. "We view this transaction as being a statement by the market that primary care continues to be one of the key drivers of healthcare long-term."
As part of the deal, Cigna's healthcare unit Evernorth will become a minority owner in VillageMD with a $2.5 billion investment in the combined company.
By using Evernorth's care coordination and pharmacy care solutions, Walgreens should be able to steer traffic into its own clinics and increase the use of medications that are beneficial to the member and to the company, Larsen noted in the analyst note.
The Summit Health-CityMD deal not only expands Walgreens' healthcare market footprint but should also help its healthcare business turn a profit by year-end 2023, the company stated.
As a result of the transaction, Walgreens Boots Alliance expects to raise its adjusted EBITDA from negative $50 million to positive earnings of $25 million by the end of the 2023 fiscal year. Previously, Walgreens Boots Alliance stated that its healthcare business would not turn a profit until 2024.
Walgreens' Brewer also noted that the company is open to partnerships rather than outright acquisitions.
"When you think about the full healthcare landscape, there are partnerships absolutely to be had. I don’t want to invest in and buy everything," she said, adding, "we’re not a tech company, but we’re going to depend on technology so I could see us having a really strong technical partnership at some point."