Picture: REUTERS/MOHAMMAD KHURSHEED
Picture: REUTERS/MOHAMMAD KHURSHEED

New York — Walgreens Boots Alliance plans to open as many as 700 doctors’ offices in its drugstores over the next five years and invest $1bn in primary-care provider VillageMD over the next three, the company said on Wednesday.

The pharmacy plans to start building the clinics later this year, said co-COO Alex Gourlay, who oversees its US drugstores. The VillageMD partnership began last year with five Village Medical clinics in Houston. Walgreens decided to expand that based on positive feedback and initial results, Gourlay said.

Drugstores are under pressure to re-invent themselves as e-commerce companies such as Amazon gobble up sales of everyday items, and digital pharmacies threaten the prescription drug business.

Adding doctors offices could help bring more people into stores. It also gives the pharmacy chain a stronger foothold in healthcare, a space its largest competitor has plunged into. CVS Health acquired insurer Aetna for $68bn in 2018 and plans to open 1,500 HealthHUB stores by the end of 2021.

Walgreens, based in Illinois, intends to open between 500 and 700 Village Medical clinics over the next five years in more than 30 markets, with more than 50% of the sites located in areas designated as medically under-served. The size will vary, though most will occupy about 25% of the store’s footprint, Gourlay said.

Connecting Walgreens’ pharmacists with Village Medical’s primary-care doctors has improved patient adherence to medications at the pilot locations, VillageMD CEO Tim Barry said on the phone interview with Gourlay.

Clinics will be installed in stores where pharmacy sales tend to be strong and sales of products in the front of the store, such as toothpaste and sweets, lag, Gourlay said. The five pilot locations have seen rising prescription and health-product purchases while sales of convenience items fell, he said.

Retailers have for years tried figuring out how to make clinics that treat minor ailments such as ear infections profitable. Walgreens said last October it would shutter its money-losing retail clinics and focus on partnerships.

“I’m a pharmacist. We’re a team of pharmacists,” Gourlay said, adding that Walgreens wants to help create new models of care with doctors rather than trying to do it alone.

Walgreens will invest $1bn in equity and convertible debt in VillageMD over the next three years, including a $250m equity investment it made earlier this week. Assuming the debt is converted, Walgreens will hold a 30% stake in VillageMD, which will use 80% of the funds on building clinics and improving digital offerings.

Bloomberg

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