Walgreens Bets Future on Health Care and New Leadership

Walgreens Bets Future on Health Care and New Leadership. A Walgreens sign hanging from the front of an urban building.

Walgreens Boots Alliance is raising the stakes as the drugstore chain increased a long-term sales target for its expanding health care business and outlined its plans to become a leader in the U.S. health care system.

The company has been aggressively building out the business it calls U.S. Healthcare, a division created for all its health care assets, including the services it provides through its majority ownerships in VillageMD, Shields and CareCentrix.

In an Oct. 13 earnings call, Walgreens CEO Rosalind Brewer told investors that the company is “well underway in our transformation to a consumer-centric health care company.”

Consumer Health Trailblazer

According to a plan outlined with the launch of its U.S. Healthcare division, the company announced that it will:

  • Accelerate the path to become a leading provider of local clinical care services.
  • Leverage a consumer-centric technology and pharmacy network to deliver and enable others to deliver value-based care.
  • Strengthen partnerships with payers, providers and patients.

Walgreens began to shift its focus toward primary care, post-acute care and home care in 2021, when it acquired a majority stake in VillageMD. The move made Walgreens the first national pharmacy chain to offer full-service doctor offices co-located at its stores at a large scale. Walgreens operates 342 clinics and 152 co-located clinics, and is well on its way to achieving its goal of opening as many as 1,000 clinics by 2027.

The company rapidly expanded its health care footprint by acquiring controlling stakes in CareCentrix, a provider of home-health services, including nursing, infusion and palliative care services, and Shields Health Solutions, a specialty pharmacy that services health systems.

Last week, Walgreens announced that it had entered into a $392 million agreement to acquire the remaining 45% stake of CareCentrix, which will give it full ownership of the home-health services company if the sale closes as expected in March 2023. Walgreens also recently announced plans to buy the remaining stake in Shields by the end of 2022.

CareCentrix manages care for more than 19 million patients in nearly 7,500 provider locations. It offers home nursing, home infusion, medical equipment and in-home palliative care. During its 2021 fiscal year, CareCentrix delivered $1.5 billion in sales. Shields, which serves more than 700 health systems, also is a revenue driver — experiencing a 57% sales growth in the first nine months of this year.

Big Changes in Top Leadership

Walgreens also made major changes in its executive leadership. In November, John Standley will step down as Walgreens president and the business will be reorganized under two leaders. Lee Cooper, CEO of Shields, is taking over pharmacy operations, and Tracey Brown, president of retail products and chief customer officer, will lead retail operations. CareCentrix CEO John Driscoll was named executive vice president and president of U.S. Healthcare at Walgreens.

“We’re creating a nationally scaled health care business, which will leverage our entire portfolio to deliver better care at lower costs,” Driscoll told investors.

What’s Next?

The pandemic opened new opportunities for retail businesses to expand into areas of the U.S. health care system. The explosion in telehealth demonstrated that patients are increasingly comfortable seeking treatment in nontraditional settings. Walgreens and many of its competitors capitalized on this opportunity to expand into uncharted areas.

CVS Health Corp. — the largest provider of retail health services in the United States and owner of the health insurer Aetna — recently beat out Amazon to acquire home-health provider Signify Health for $8 billion and is considering an acquisition of Bloomberg: CVS Is in Exclusive Talks to Buy Cano Health”>Cano Health Inc., another home-health provider.

Retail giants Best Buy, Walmart and Amazon also are accelerating efforts to serve the health care needs of consumers. In the past year, Best Buy purchased a patient-monitoring tech vendor, Current Health, for $400 million; Walmart acquired telehealth provider MeMD (now Walmart Health Virtual Care); and Amazon entered into an agreement to acquire One Medical, a membership-based primary care provider.

Walgreens, CVS and Walmart all have announced plans to use their stores and clinics as clinical-trial sites soon. In addition, industry experts anticipate that retailers will ramp up their investments in key technologies and tackle issues like social determinants of health and data sharing to provide personalized health care experiences to their customers.

https://www.aha.org/aha-center-health-innovation-market-scan/2022-10-25-walgreens-bets-future-health-care-and-new-leadership