Walgreens new chief executive officer Roz Brewer announced Oct. 14, 2021 the company would make a ... [+]
Walgreens Boots Alliance will invest another $5.2 billion into VillageMD to escalate the rollout of hundreds of doctor-staffed clinics at its drugstores under a new “Walgreens Health” business.
The investment will give Walgreens a 63% stake in VillageMD ahead of an initial public stock offering the primary care company plans next year. Walgreens currently has a 30% stake in VillageMD, a standalone company that landed a $1 billion investment from the drugstore giant last year.
The announcement of the $5.2 billion investment came Thursday as Walgreens new chief executive officer Roz Brewer outlined more of her strategy for the iconic drugstore chain during the company’s annual investor day when she stressed primary care as critical to a future that will be “open and connected.”
Brewer said the company is launching a new “Walgreens Health” business segment and strategy that will be run by a yet-to-be named executive as the company pushes deeper into the healthcare business. “Our strategy leverages an ecosystem including our trusted brands, exceptional assets, healthcare expertise and scale, integrated with a range of new talent, capabilities, resources and an intensified focus on operational excellence to drive long-term sustainable profit growth,” Brewer said.
As part of this new strategy, Walgreens also announced a $330 million investment in post acute and home care company CareCentrix, which will also be operated under Walgreens Health. The CareCentrix investment is for an initial 55% stake with an option to raise the stake in the future, Walgreens executives said Thursday.
“The best healthcare is deeply rooted in local communities, and Walgreens is committed to expanding convenient access to high-quality and affordable healthcare services to our patients and customers in our neighborhood locations,” Brewer said.
The larger investment will allow Walgreens to “accelerate the opening of at least 600 Village Medical at Walgreens primary care practices in more than 30 U.S. markets by 2025 and 1,000 by 2027, with more than half of those practices in medically underserved communities,” the company said. Walgreens and VillageMD have more than 50 primary care practices located adjacent to or part of Walgreens stores and will have more than 80 open by the end of this year.
“VillageMD is a leader within the fast-growing, value-based primary care segment with high rates of patient satisfaction and a talented management team who share our strategic vision of the central role that primary care can serve to improve patient outcomes and lower costs,” Brewer said.
Walgreens launch of Walgreens Health and the primary care expansion come as rivals roll out their own healthcare expansions. CVS Health is opening hundreds of HealthHub store formats with more healthcare items and medical services to complement its established MinuteClinics staffed by nurse practitioners while Walmart is opening more “Walmart Health” centers that feature an array of primary medical services, dental care, and behavioral health services as part of a new model.
Aside from the clinics located at Walgreens stores, VillageMD operates physician practices across the country. VillageMD, which operates more than 230 practices in 15 markets, this year will generate $1.3 billion in revenue, which is six times the $217 million in revenue the company generated in 2017.
“Walgreens 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 chairman and chief executive Tim Barry said. “This expanded partnership helps us accelerate our mission to deliver the best healthcare in the world.”
Walgreens reported $627 million in profits for its fiscal fourth quarter ended Aug. 31 compared to $373 million in the year-ago period as the company benefitted from increased traffic into its stores from people getting vaccinated against Covid-19. Sales rose 12.8% to $34.3 billion in the year-ago period.
