Walgreens boosts stake in primary care company VillageMD with a $5.2 billion investment

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  • Walgreens Boots Alliance is becoming the majority owner of VillageMD, as it opens hundreds of doctor offices with the primary care company.
  • There are plans to establish at least 600 primary care clinics in more than 30 US markets by 2025 and 1,000 by 2027.
  • The deal is part of an effort to turn neighborhood drugstores into health care destinations with doctors who provide care, write prescriptions and draw traffic to retail locations.

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Walgreens Boots Alliance said Thursday that it has agreed to become a majority owner of VillageMD, as it opens hundreds of doctor offices with the primary care company.

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As part of the deal, the drugstore chain will invest $5.2 billion in VillageMD. This would increase Walgreens’ ownership stake from 30% to 63%. VillageMD will continue to be an independent company with its own management and board.

Walgreens said it expects the deal to close by the end of this year, pending regulatory approval.

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The investment is part of Walgreens’ broader effort to turn its stores into health care destinations that not only fill prescriptions, but also have doctors who can prescribe them and provide other types of care, such as annual checkups. The company is accelerating its plans to open Village Medical Clinics at existing Walgreens drugstores. The goal is to have at least 600 primary care clinics in more than 30 US markets by 2025 and 1,000 by 2027.

Walgreens CEO Roz Brewer said in an interview with CNBC’s Bertha Combs that the clinics will make patient care easier. She said Walgreens and VillageMD would have pharmacists and physicians who would work together. They will have access to the same technology platform that pulls together medical records. And they’ll be in a convenient location, a short walk or ride from.

“Your doctor’s recommendations are going to be shared directly with the pharmacist,” Brewer said. “I think it’s a game changer when you think about what we’re capable of.”

Most clinics will be about 3,300 square feet — about a quarter of the drugstore’s average size of 13,500 square feet.

Walgreens has approximately 9,000 stores in the US and more than 75% of Americans live within five miles of one of them. Brewer said he plans to use that footprint to reach people who have few — if any — doctors nearby. It said it plans to open more than half of its VillageMD clinics in urban areas and rural communities that are medically underserved.

Walgreens and VillageMD have said that doctor offices will accept a variety of health insurance and offer a sliding scale as well as an out-of-pocket option for those who do not have insurance.

With this move, Walgreens is following in the footsteps of competitors including CVS Health and Walmart. Many CVS stores already have a MinuteClinic, which administers vaccines and offers walk-in, urgent care appointments. CVS is turning more stores into HealthHub, which offers a wide range of medical services such as sleep apnea testing and diabetes management. Walmart is opening an increasing number of primary clinics with a lower-cost model, but so far, they are concentrated in Georgia, Florida, and the Chicago area.

Walgreens and VillageMD have already opened 52 primary care clinic locations and an additional 33 are on track to start by the end of the calendar year. The company first announced the partnership for 2019 and decided to expand the effort following a pilot of five clinics in the Houston area.

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