Rebecca Pifer@RebeccaMPifer July 8, 2020 July 9 2020, 7:24 a.m. CDT
Dive Brief:
·
Walgreens on Wednesday announced plans to
open up to 700 primary care clinics across the country over the next five years
in partnership with medical services provider VillageMD, and "hundreds
more" after that.
·
As part of the agreement, Walgreens will invest $1 billion in
equity and convertible debt in Chicago-based VillageMD over the next three
years, including a $250 million equity investment Wednesday. VillageMD will use
80% of the funds to pay for opening the clinics, called Village Medical at
Walgreens, and integrate digitally with Walgreens. The partnership values VillageMD
at about $3.3 billion, according to SVB Leerink analysts.
·
Walgreens, which saw its stock rise slightly in early morning
trading on the news, anticipates owning 30% of VillageMD once the investment is
done. More details on the partnership will be released in the first quarter
next year.
Dive Insight:
Retail clinics, which can
generate additional script-writing and drive front-of-store sales for their
owners, have seen renewed interest in recent years from giants like pharmacy
rival CVS Health and retail behemoth Walmart. But Walgreens is the first
national pharmacy chain to work toward building out a primary care
infrastructure in stores across the U.S. using actual doctors, as opposed to
nurse practitioners.
The move represents a massive
investment in the healthcare delivery space for the Illinois-based company,
which began trialing the
full-service doctor's offices in its stores late last year with five clinics in
Houston, Texas. The pilot was successful, Walgreens said, driving high patient
satisfaction scores.
Additionally, the integrated
pharmacy model is correlated with increased medication adherence and better
patient outcomes, according to internal VillageMD data — important factors in
managing chronic conditions, which drive roughly 85% of all U.S. healthcare
spend.
As such, Walgreens plans to open
500 to 700 stores over the next five years, staffed by more than 3,600 primary
care physicians recruited by VillageMD, along with nurses, social workers and
therapists working alongside Walgreens' pharmacists in 30 U.S. markets.
The two companies are still
finalizing what those initial markets are going to be, but the very first will
be in Texas and Arizona, Walgreens' Director of Pharmacy and Healthcare
Services Communications Kelli Teno told Healthcare Dive. More than half of the
clinics will be located in government-designated medically underserved areas
such as Houston, which have a large share of low-income populations, migrant
workers and Medicaid beneficiaries.
The stores will accept a broad
array of insurance options, according to the release. Many plans VillageMD
works with have a zero dollar to $10 co-pay for primary care services, Teno
said.
The clinics use a sliding scale
payment model for patients who don't have insurance to try to make care more
affordable for the broad range of primary care services provided, like preventative
visits, acute infection or minor trauma care or chronic condition management.
Telehealth will be available
around the clock for consumers via Walgreens' healthcare marketplace app,
called Find Care, or via VillageMD's internal capabilities. VillageMD doctors
can also provide at-home doctor visits for vulnerable populations, such as
senior citizens or the immunocompromised.
The retail basic care market is
still in its formative stages, but competition to build market presence quickly
and inexpensively is stiff. Walmart's nurse-led clinics priced at a 35%
discount to CVS Health's network of health-focused stores, called HealthHUBs,
across 21 identical basic health services, SVB Leerink analysts said in a
Thursday note.
"As the first true
doctor-in-a-retail-box, VillageMD Medical at Walgreens will be raising the bar,
upping the ante on maintaining a robust patient panel to cover overhead,"
SVB Leerink analysts Stephen Tanal and Harrison Zhuo wrote.
Walgreens already has 14 in-store
primary care clinics operated by different partners like Partners in Primary
Care, Southwest Medical — part of Optum's physician group — and VillageMD. Late
last year, Walgreens announced it was closing 160 of its internally staffed
walk-in clinics, though it still has more than 400 clinics nationwide, most
staffed or run by local health systems or physician groups.
Its outsourcing model flies
against CVS, which built out its HealthHUBS through acquisitions and builds.
CVS plans to have a chain of 1,500 locations by the end of 2021 as part of its
enterprise growth strategy, adding to its almost 10,000 retail locations and
more than 1,100 walk-in medical clinics.
HealthHUBs designate at least a
fifth of floor space to health and wellness focused products.
For its part, Walgreens' clinics
will be between 3,300 and 9,000 square feet and use existing space within
Walgreens' locations. To make room, clinic-linked stores will offer fewer
unhealthy front-end products like snacks and sodas. Tobacco products will not
be sold in the first 200 Village Medical at Walgreens locations.
"Many of the stores that
we're initially looking at to build these clinics naturally sell more pharmacy
and health and wellness products," Teno said. "It will really depend
on the needs of that local community."
VillageMD, through its subsidiary
Village Medical, includes more than 2,800 doctors across nine markets. The
seven-year-old company, which competes with other primary care management
companies like UnitedHealth-owned Optum has raised $216 million in total funding
across three rounds from investors like Oak HC/FT and Town Hall Ventures, a
firm founded by Andy Slavitt, former CMS administrator under President Barack
Obama.
Editor's note: This story has
been updated to include insight from SVB Leerink.
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