As the pharmacy chain tries to reimagine itself as a healthcare provider, it will pay $5.2 billion to control its primary care network, Village MD.
VillageMD operates over 200 clinics and employs or employs its own doctors and medical staff. Walgreens said the investment would allow it to open more than 600 in drugstores by 2025 and more than 400 clinics by 2027.
The drugstores already have shares in Village MD after agreeing to pay down $1 billion in shares and debt over three years last summer in exchange for a 30% stake in the Chicago-based startup Growth. Under the deal announced Thursday, Walgreens will own a 63% stake in Village MD.
The deal is the first major strategic move under Walgreens CEO Rosalind Brewer who moved to the company from Starbucks in January. Shortly before joining the company, the company signed an agreement to sell its pharmacy wholesale division to AmerisourceBergen. Ltd.
At $6.5 billion, it showed its revenue could be used to push it deeper into health care.
“The main reason we started this partnership in the first place is because they focus on all patient populations,” Brewer said Thursday. Insured by private and government schemes. He said that he would serve patients who were ill and who were not insured. “For pharmacies to better care for them, the ability to provide care through ownership and partner assets is critical.”
Walgreens said Village MD plans to go public in 2022. It will remain an independent company with its own board of directors and management team.
Walgreens and Rival CVS Health Ltd.
There is competition to become a reliable treatment center, especially for patients with chronic diseases that are expensive and difficult to manage. They also aim to go beyond retail to provide more health care services such as mental health counseling and chronic care.
Both chains are looking for new ways to counter the decline in revenue from prescription drugs, which drive the majority of sales. They’re also fighting Amazon.com. Ltd.,
We pulled shoppers away from physical stores and started an online pharmacy.
Also on Thursday, Walgreens has Care Centrix Holdings Inc., a home health care benefits manager based in Hartford, Connecticut. announced that it would acquire a majority stake in the company. Walgreens said it derives 85% of its revenue from about 35 million customers who suffer from chronic diseases such as diabetes and heart disease.
Brewer said increased investments in Care Centrix and Village MD will help the company manage cost increases for high-risk patients. “These are the same patients who frequent our stores and visit our pharmacists,” she said.
The chain dives into a business segment called Walgreens Health and invests in making prescriptions cheaper and easier. The plan involves adopting a strategy called microfulfillment, which is becoming more and more popular in the retail industry for the pharmacy business. This model aims to accelerate the delivery of goods to consumers by complementing a larger, centralized distribution center with smaller, more abundant operations.
Walgreens has two micro-fulfillment centers in the Dallas and Phoenix areas, serving more than 1,000 of its approximately 9,000 locations. By the end of next year, we plan to add 9 more stores and serve 3,900 stores. Another 22 locations will be servicing 8,500 stores by 2024. The company announced that the center will reduce working capital costs by $1.1 billion by 2025.
In the latest quarter, Walgreens reported increased revenue from the administration of the Covid-19 vaccine and trials. According to the company, it has been vaccinated 13.5 million times in the three months to August 31, and more than 40 million times since the pandemic began.
The company’s fourth-quarter sales stood at $34.26 billion, up from $30.37 billion in the same quarter a year ago and higher than Wall Street estimates. Profit rose to $627 million from $373 million last year.
write to Sharon Terlep ([email protected])
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