Walgreens doubles stake in provider network VillageMD with $5.2B investment



Dive Brief:

  • Walgreens is doubling its ownership stake in value-based medical network VillageMD with an additional investment of $5.2 billion, the pharmacy chain said Thursday.
  • The major investment should accelerate the opening of 600 “Village Medical at Walgreens” primary care practices in more than 30 U.S. markets by 2025, and 1,000 by 2027. More than half of the clinics will be in medically underserved communities, according to the companies.
  • Walgreens expects the deal to close by the end of this year, pending regulatory approval. VillageMD, which will remain a standalone company with its own management and board, plans to conduct an IPO in 2022.

Dive Insight:

Walgreens first announced the partnership two and a half years ago with a trial of five practices in the Houston area, as retail pharmacies began to build out medical networks in earnest, elbowing to become consumers’ primary point of access to the healthcare industry.

Following a brief pilot, the companies expanded the partnership in July last year, when Walgreens pledged a $1 billion investment in Chicago-based VillageMD, before accelerating its investment in January.

Currently, Walgreens and VillageMD have 52 co-branded primary care practice locations operational, and plan to have more than 80 open by the end of 2021.

Eight-year-old VillageMD currently operates more than 230 practices in 15 markets, with plans for a national expansion. The company has grown rapidly, increasing revenues from $217 million in 2017 to $1.3 billion expected this year.

Thursday’s investment hikes Walgreens’ stake in VillageMD from 30% to 63% as the major pharmacy operator looks to increase its presence in the red-hot primary care sector.

Walgreens has been jockeying with other health-focused retail behemoths like CVS Health and Walmart for a slice of the market. Such companies have been hurrying to build out their clinical footprints as consumers, facing skyrocketing healthcare prices even before COVID-19, look for convenient and inexpensive care close to the home.

Retail clinics also have the added benefit of leading to higher script-writing and front-store sales for their owners, data shows.

Walmart last September partnered with primary care startup Oak Street Health to bring its value-based clinics to Walmart supercenters in the Dallas-Fort Worth area, as the major retailer continues to expand its network of massive “health superstores” in underserved regions.

Meanwhile, CVS Health is on track to run a network of 1,500 HealthHUBS, stores allocating a fifth of floor space to health and wellness products and services, by the end of 2021.

But Walgreens stresses it’s the first national pharmacy chain to begin building a primary care infrastructure in its retail locations using doctors, as opposed to nurse practitioners, as a key differentiator for its VillageMD partnership. The company said its clinics accept most major insurance, and will have an out-of-pocket option and sliding price scale for uninsured individuals.

Also on Thursday, Walgreens posted quarterly results for its fourth quarter. The Deerfield, Illinois-based operator beat Wall Street expectations for both earnings and revenue, though its topline was down just slightly year over year to $34.3 billion.



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