Walgreens to invest $5.2 billion in VillageMD, becoming majority owner
Walgreens Boots Alliance is making a major investment in the delivery of value-based primary care, a $1 trillion, fast-growing segment of the health care industry.
The drug store retailer will invest $5.2 billion in VillageMD, increasing its ownership stake in the company from 30% to 63%. Walgreens said the investment will accelerate the opening at least 600 Village Medical primary care clinics at Walgreens locations in more than 30 U.S. markets by 2025, with a goal of1,000 by 2027. More than half of the practices in medically underserved communities. Currently, Walgreens and VillageMD have 52 co-located primary-care clinic locations. An additional 33 are on track to open by the end of the calendar year.
Walgreens made the announcement the same day it said that it was launching a new business segment, Walgreens Health. Walgreens described the segment as a “technology-enabled care model powered by a nationally scaled, locally delivered healthcare platform.”
VillageMD will remain an independent company with its own management and board. The company plans to conduct an IPO in 2022.
Through its partnership with VillageMD, Walgreens said is the first national pharmacy chain to offer full-service primary care practices with primary care physicians and pharmacists co-located at its stores all under one roof at a large scale. The companies first announced their partnership in 2019 with the trial launch of five co-located practices in the Houston area. Following the successful pilot, the companies expanded the partnership in July 2020, followed by an announcement in January of this year when Walgreens accelerated its investment.
Walgreens is not alone in diving deeper into health care. Rival CVS Health offers walk-in, urgent care services through its in-store MinuteClinics. The chain is also transforming more of its locations to its HealthHub format, which offer expanded MinuteClinic services. And Walmart is expanding its freestanding health care format, Walmart Health.
“The best healthcare is deeply rooted in local communities, and Walgreens is committed to expanding convenient access to high-quality and affordable healthcare services to our patients and customers in our neighborhood locations,” said Roz Brewer, CEO, Walgreens Boots Alliance. “VillageMD is a leader within the fast-growing, value-based primary care segment with high rates of patient satisfaction and a talented management team who share our strategic vision of the central role that primary care can serve to improve patient outcomes and lower costs.”
VillageMD currently operates over 230 practices across 15 markets, with plans to expand nationally over time. The company has experienced rapid growth, increasing revenues from $217 million in 2017 to $1.3 billion expected in 2021.
“Over the past two and a half years, we have worked side-by-side with Walgreens to create an integrated primary care and pharmacy model that accomplishes one primary goal: better patient care,” said Tim Barry, CEO and chairman, Village MD. “WBA’s investment supports our ongoing commitment to providing the highest quality healthcare to all patients, including many people who don’t currently have convenient access to a primary care provider. This expanded partnership helps us accelerate our mission to deliver the best healthcare in the world.”