Walgreens doubles down on VillageMD investment, plans broader health strategy

Walgreens is plotting a big, multiyear expansion of its health services with primary care company VillageMD. Photo credit: Walgreens

Walgreens Boots Alliance plans to take an ownership stake in primary care company VillageMD, as it looks to invest $5.2 billion. The deal would give Walgreens a 63% stake, up from its original plans to buy 30% of the company for $1 billion.

The two companies struck a deal last year to open hundreds of primary care clinics co-located with Walgreens pharmacies. The idea was to more closely coordinate care between patients’ primary care physicians and pharmacists.

So far, the model seems to be paying off. In an email to MedCity News, a VillageMD spokesperson said the integrated model resulted in better medication adherence for cholesterol, diabetes and hypertension. They also found that hospital admissions were 28% below the Medicare benchmark and emergency department visits were 46% below the benchmark.

“Over the past two and a half years, we have worked side-by-side with Walgreens to create an integrated primary care and pharmacy model that accomplishes one primary goal: better patient care. WBA’s investment supports our ongoing commitment to providing the highest quality healthcare to all patients, including many people who don’t currently have convenient access to a primary care provider,” VillageMD CEO and Chairman Tim Barry said in a news release.

Walgreens and VillageMD currently have 52 co-located primary clinics, and plan to have 80 by the end of the year. By 2025, they plan to expand to more than 600 co-located clinics, and more than 1,000 by 2027.

Chicago-based VillageMD currently operates 230 primary care practices in 15 markets. Its clinics offer same day appointments, primary care visits, and some basic diagnostic tests. It also offers at-home and virtual visits.

The company expects to bring in revenues of $1.3 billion at the end of the year, an increase from $217 million in 2017. Earlier this year, the company was rumored to be planning an IPO that would value it at up to $10 billion. It plans to go public next year with Walgreens as a majority shareholder, according to an investor presentation.

VillageMD plans to use some of the funds from the deal to expand into more service lines, though it didn’t specify which ones. Even with Walgreens’ stake, it will still operate independently, keeping its own management and board.

Walgreens’ broader health plans
 The investment is part of a broader healthcare strategy that Walgreens rolled out on Thursday. It plans to make consumer health a “growth engine,” through its plans acquisition of VillageMD and several other health bets. Like competitor CVS Health, it also plans to emphasize more health and wellness products in the retail portion of its stores.

The company launched a new division on Thursday called Walgreens Health, which will serve as the umbrella for VillageMD and its other clinical services. As part of those plans, Walgreens also bought a 55% stake in CareCentrix for $330 million. The Hartford, Conn.-based company  builds technology and analytics to help manage the transition from hospital care to home care, and other health services provided in the home.

It’s also rolling out a new service called Walgreens Health Corner. This includes a physical space in its stores where patients can talk to licensed health advisors and get education about over-the-counter medications and devices. It also included an app component where people can access support for medication management, chronic conditions, remote patient monitoring and other digital health services.

Walgreens expects its earnings per share will grow 4% over the next three years as a result of its healthcare strategy. It saw a 7% bump in its stock Thursday morning as its profit beat estimates.

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