Why Your Next Doctor's Visit May Be a Trip to the Pharmacy

Next time you make a doctor's appointment, it may be with your local drugstore. As if Obamacare hasn't caused enough of a shakeup in health care, convenient care clinics across the U.S. now promise to diagnose, treat, and monitor patients with chronic illnesses. In fact, drugstore companies including Walgreen (NYSE: WAG  ) and CVS Caremark (NYSE: CVS  ) are at the forefront of this trend.

This could further disrupt an already rattled health care industry -- particularly because the services provided by drugstore clinics are often more convenient and affordable than a doctor's visit.

A dose of convenience
Walgreens is aggressively expanding the scope of services offered at its in-store Take Care Clinics. Last week, the country's largest drugstore chain said it would begin treating patients with chronic conditions including asthma, diabetes, and high blood pressure.

This is a smart move for Walgreen at a time when the U.S. is facing a shortage of doctors. Not to mention, Obamacare will have a big impact on the health care industry next year as millions of previously uninsured people will gain coverage.

Meanwhile, rival pharmacy chain CVS is also putting a greater emphasis on treating patients at its walk-in clinics. CVS, which currently operates around 640 MinuteClinics, expects to have as many as 800 MinuteClinics by year's end. While Walgreen's footprint is a bit smaller with just 372 clinics now in operation, the company plans to open more locations in the year ahead. Of course, there's a catch.

The doctor won't see you
One thing to keep in mind are that these convenient care clinics, as they're called, are not staffed by doctors but instead manned by nurse practitioners and physician assistants. While this may deter some customers, there's something to be said about the flexibility of care clinics -- most of which, are open extended hours and weekends.

With chronic care accounting for about three-quarters of health care spending, Walgreen's push into this niche market should be a profit driver for the company down the road. It may even help Walgreen recover some of the customers it lost last year after the fallout with pharmacy benefits manager  Express Scripts (NASDAQ: ESRX  ) .

Express Scripts, which provides a variety of pharmacy services including patient care and benefit management care, contributed about $5 billion in annual sales for Walgreen. However, when Walgreen dropped its contract with Express Scripts, it saw that revenue disappear along with tens of thousands of customers in the Express Scripts network. Fortunately, Walgreen settled the dispute with Express Scripts last year and inked a new multiyear deal with the company. Still, it's been a slow climb for Walgreen as the pharmacy chain attempts to win back lost customers.

Moreover, by expanding the scope of services offered in its Take Care Clinics, Walgreen could see some of these lost customers return to its pharmacies. Going forward, Walgreen's investment in its in-store clinics should start to pay off as more people ditch the doctor's office for convenient care.

Do lower costs = profits for your portfolio?
In 2011, a massive shift began. With the first of the baby-boomer generation reaching Medicare age, America's health care landscape was forever changed. Combine the aging population with the impact of Obamacare and the need for innovative solutions for skyrocketing health care costs is as clear as ever. Express Scripts is part of that solution, and in this brand new premium report on the company, we clearly lay out the opportunity in front of this misunderstood stock. Claim your copy by clicking here now.


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12/18/2014 12:16 PM
WAG $73.30 Up +1.31 +1.82%
Walgreen Company CAPS Rating: ****
CVS $94.50 Up +0.33 +0.35%
CVS Health CAPS Rating: ****
ESRX $80.13 Up +0.19 +0.24%
Express Scripts CAPS Rating: *****

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