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Why work with someone when you can put them to work for you?
On Thursday, Walgreens adopted that philosophy when it turned a partnership into ownership — agreeing to plunk down $5.2 billion for a majority stake in primary-care provider VillageMD as it chases the healthcare ambitions of rivals CVS and Walmart.
The Doctor, Ordered
Walgreens — the second-largest drugstore chain in the U.S. behind CVS — has more than 9,000 locations, and over 75% of Americans live within 5 miles of one. With that enormous footprint in mind, executives have embarked on a quest to turn their stores into health-care hubs, where customers can also visit doctors for what ails them (and to get prescriptions that Walgreens can then fill. Cha-ching!).
Last July, Walgreens cemented those plans when it inked a deal with VillageMD to open hundreds of clinics in its drugstores over the next five years. But on Thursday, the retail pharmacy giant decided that rather than be partners, it would prefer to run the whole show:
- Walgreens and VillageMD have 52 primary-care clinics already up and running, with 33 more to open before the end of 2021. They're now aiming for 600 in more than 30 U.S. markets by 2025 and 1,000 by 2027.
- Pending regulatory approval, Walgreens' stake in VillageMD will jump from 30% to 63%. As a first order of business, plans are to prioritize clinics in underserved urban neighborhoods and rural communities (where there are lots of potential customers for sliding scale, out-of-pocket doctor services for the uninsured).
Third Out of the Gate: Walgreens' two major rivals already have a head start: CVS has turned several stores into clinics where customers can get vaccines or be seen for urgent walk-in appointments. Walmart has already launched low-cost primary clinics, but is so far focused on Georgia, Florida, and Chicago. Walgreens could always try and up its profile with a soulful rebrand.