Walgreens Begins Executing New Health Care Strategy

With an influx of cash from the recently completed $6.5 billion sale of its Alliance Healthcare wholesale pharmacy and related businesses, Walgreens Boots Alliance is wasting little time executing its strategy to integrate primary care and retail pharmacy services.

The nation’s second-largest retail pharmacy chain behind CVS Health has begun identifying locations for the first of 600 on-site clinics adjacent to its stores in 30 markets that will open in partnership with VillageMD over the next four years. Houston, El Paso and Austin are among the Texas cities that will be home to 29 Village Medical at Walgreens practices this year.

The moves are part of Walgreens’ commitment announced in January to invest $1 billion in VillageMD, which will provide primary care physicians to the clinics. Walgreens believes having physicians (as opposed to physician assistants or nurse practitioners) staffing its clinics could be a differentiator compared with other retail pharmacy urgent care centers. The investment will give the retailer about a 30% stake in VillageMD.

Walgreens also will use some of the sale proceeds to eliminate $3.3 billion in debt from its balance sheet, which will give the retailer more flexibility to invest in its strategic health care and pharmacy priorities, Walgreens Boots Alliance CEO Rosalind Brewer said in a statement.

Priority #1 for now is a successful launch of primary care services. Village Medical locations will offer preventive care, treatment for illness and injury, chronic conditions and telehealth services. VillageMD employs or has partnership agreements with 2,800 physicians across 13 markets. The companies also have expanded their model to allow Village Medical patients to access the same type of pharmacy services (e.g., between-visit prescription refills, medication substitutions and comprehensive consultations) from select Walgreens locations that do not have a co-located Village Medical practice.

3 Questions Loom on Walgreens' Primary Care Strategy

1. Can stores become a health care destination?

Even during the height of the pandemic, Walgreens fared better financially than most retail pharmacies, largely due to stronger sales of nonhealth care consumer products. The question is whether it can get large numbers of consumers to see its locations as a preferred option for primary care.

2. Will the company be able to scale primary care services?

Village Medical practices have the potential to do this, but it remains to be seen whether VillageMD can recruit enough physicians to serve the 600 clinics, and perhaps beyond, that Walgreens wants to establish. Pharmacist-physician coordination also will be a critical success factor.

3. How will tech define Walgreens’ consumer strategy?

In a Q1 earnings call, Brewer alluded to an upcoming “tech-enabled” initiative that will make it easier for consumers to access care. She had previous success implementing technology to improve the consumer experience in her prior role as chief operating officer at Starbucks. However, Walgreens’ digital strategy has yet to be articulated.