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Walgreens Invests $ 5.2 Billion in Village MD

Walgreens Boots Alliance Ltd

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As the pharmacy chain is trying to remodel itself as a healthcare provider, it will pay $ 5.2 billion to take control of its primary care network, Village MD.

VillageMD operates more than 200 clinics and employs or employs its own doctors and medical staff. Walgreens said the investment would allow it to open more than 600 clinics in drugstores by 2025 and another 400 by 2027.

Drugstores already own shares in Village MD after agreeing to pay $ 1 billion in shares and debt over three years last summer in exchange for a 30% stake in a Chicago-based startup increase. Under the deal announced Thursday, Walgreens will hold a 63% stake in Village MD.

The deal is the first major strategic move under Walgreens CEO Rosalind Brewer, who came to the company from Starbucks in January. Shortly before she joined the company, the company signed an agreement to sell its pharmacy wholesale division to AmerisourceBergen. Ltd

At $ 6.5 billion, it showed that its revenue could be used to push it deeper into health care.

“The main reason we first started this partnership is that they focus on all patient populations,” Brewer said Thursday, chaining insured by private and government plans. He said he would serve patients who were ill and those who were not insured. “To better care for them across pharmacies, the ability to provide care through owned and partner assets is important.”

Walgreens said Village MD plans to go public in 2022. It will continue to be an independent company with its own board of directors and management team.

Walgreens and Rivals CVS Health Ltd

There is competition to become a reliable treatment center, especially for patients with chronic illnesses 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 are also fighting Amazon.com Ltd,

We pulled shoppers away from physical stores and launched an online pharmacy.

Also on Thursday, Walgreens is Care Centrix Holdings Inc, a home health care benefits manager based in Hartford, Connecticut. Announced that it will acquire a majority stake in the company. Walgreens said it derives 85% of its revenue from about 35 million customers with chronic illnesses such as diabetes and heart disease.

Brewer said the increased investment in Care Centrix and Village MD will help the company manage cost increases for high-risk patients. “These are the same patients who visit our store frequently and meet our pharmacists,” she said.

The chain splits a business segment called Walgreens Health and invests to make prescribing cheaper and easier. The plan includes adopting a strategy called microfulfillment, which is becoming more and more popular in the retail industry, for the pharmacy business. This model aims to speed up the delivery of goods to consumers by complementing a vast, 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 another 9 stores and provide services to 3,900 stores. Another 22 locations 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 an increase in revenue from the administration of the Covid-19 vaccine and tests. According to the company, it has been vaccinated 13.5 million times in the three months to August 31, and has been vaccinated more than 40 million times since the pandemic began.

The company’s fourth-quarter sales were $ 34.26 billion, up from $ 30.37 billion in the year-ago quarter and above Wall Street’s estimates. Profit increased from $ 373 million last year to $ 627 million.

Write to Sharon Terlep (sharon.terlep@wsj.com)

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Walgreens Invests $ 5.2 Billion in Village MD

Source link Walgreens Invests $ 5.2 Billion in Village MD

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