Where Are Amazon, CVS and Walgreens Headed in Health Care?

The forecasts of health care increasingly being delivered by large, privately held or publicly traded retail pharmacies and other companies have taken a detour. Many of these companies are now rethinking their health care strategies.

Some once-ballyhooed health care disruptors are licking their financial wounds after multibillion-dollar investments in primary care outlets and other businesses didn’t pan out as planned. As a result, some are significantly scaling back or exiting delivery of primary care services altogether.

Three of the largest players in this space — Amazon, CVS Health and Walgreens — still grab plenty of headlines as they continue to reshape their respective health care visions. Where are they headed? Recent developments with each company offer some insights.

Amazon’s 3 Health Care Priorities

The e-commerce giant has several priorities for this year, including:

1. Expanding Amazon Pharmacy.

The company plans to add same-day delivery to 20 more cities by the end of the year, more than doubling its current reach. This expansion will make same-day delivery of prescription medications available to nearly half (45%) of U.S. customers by the end of 2025, according to Amazon.

2. Growing One Medical.

These brick-and-mortar and virtual care operations provide same- or next-day appointments through Amazon. One Medical is partnering with Cleveland Clinic and Hackensack Meridian Health in New Jersey to open primary care facilities in their areas. The new locations also will offer each system’s patients on-site lab services and wraparound virtual support for members. The Hackensack location, which opened in March, will expand access to comprehensive care, including chronic disease management.

3. Further developing artificial intelligence (AI) for health care.

Amazon and Nvidia are collaborating by combining Amazon's cloud infrastructure (AWS) and health care services with Nvidia's AI and accelerated computing capabilities. This wide-ranging partnership is helping to accelerate drug discovery, support AI infrastructure and computer power, while delivering enhanced AI-powered medical imaging.

Takeaway

Effectively tying together its health care-related businesses and partnering with more hospitals and health systems will be critical to Amazon’s long-term growth prospects in the field. If successful, Amazon can make good on its plans to deliver a sustainable approach to offering retail primary care and wraparound services at a low price point with easy access — even if it ends up being on a less grand scale than it once hoped.

CVS Health Targets Cost Cutting While Refocusing Aetna

Although committed to keeping all its health care businesses, CVS Health has been busy over the past year working to reduce costs, adjusting the focus of its Aetna insurance division and strengthening its pharmacy benefits manager (PBM) business Caremark.

CVS stated earlier this month that it again will stop offering plans for individuals on the Affordable Care Act exchanges in 2026. The move will enable CVS to focus on more profitable business lines. The news came after the company projected significant losses in the business line this year. Aetna had exited the ACA market entirely in 2017 but returned in 2022 as the exchanges settled down.

CVS, like its peers, also has faced rising costs across its Medicare plans, but the hit was more pronounced because the company enrolled the highest number of new members under the plans, Reuters recently reported.

Addressing these and other rising expenses is part of CVS’ plans announced last August to reduce costs by $2 billion in the coming years. The company’s plans also call for strengthening its Caremark PBM business through CVS CostVantage and TrueCost.

These programs aim to increase transparency in pricing, provide more stable access to the national pharmacy network and offer clients flexibility in choosing pharmacy benefit models.

Takeaway

Despite CVS Health’s recent strong Q1 financial results, some analysts believe all aspects of the company’s business have become more challenging. Investors will be watching closely over the coming year to see how CVS executes on its efforts to streamline its health care operations.

Walgreens Tries to Reposition Its Health Focus

Speculation has been rampant about how the retail pharmacy ultimately will recast its lot in health care. A report in March by the Financial Times stated that Walgreens’ parent company, Walgreens Boots Alliance, would divide into three businesses.

This would involve selling or spinning off Boots UK, which has more than 1,800 stores overseas ranging from local community pharmacies to large destination health and beauty stores.

Walgreens’ U.S. retail pharmacies would be separated into a second company. A third company would include its fast-growing specialty pharmacy business, which the company highlighted last year as a $24 billion enterprise.

The Financial Times report came on the heels of the private equity firm Sycamore Partners entering into an agreement to acquire Walgreens Boots Alliance for $10 billion. The sale is expected to close later this year.

Meanwhile, after investing more than $6 billion to take a controlling stake in primary care provider VillageMD, Walgreens has scaled back dramatically on this enterprise and reportedly has been seeking a buyer for the business. Walgreens also has scaled back its stake in the drug distributor Cencora from 10% to 6%, which generated about $300 million in proceeds.

Now, as Walgreens continues to close less-profitable stores and take aggressive cost-cutting measures, it along with CVS Health have been purchasing some of the more than 1,000 pharmacies Rite Aid sold as it undergoes bankruptcy for a second time.

Takeaway

It seems clear that Walgreens’ future in health care will center more narrowly on its pharmacy business, health and wellness, and being a resource for its customers’ health needs outside of being a provider of primary care services. But unlike CVS Health, Walgreens does not have a PBM or an insurance company to help steer business to its pharmacies. The next year will be revealing as to how large an impact Walgreens will have in health care going forward.