VillageMD to Drive ‘Tremendous Long-Term Growth’ for Walgreens Health

Walgreens Boots Alliance Inc. (Nasdaq: WBA) is full-speed ahead on “Walgreens Health,” its recently unveiled health care strategy driven by investments in VillageMD, CareCentrix and Shields Health Solutions.

And to accelerate its health care push even more and refocus on long-term growth priorities, the holdings firm for pharmacy store giant Walgreens has initiated a strategic review of its Boots business. Walgreens Boots Alliance CEO Roz Brewer discussed those and other points Tuesday during the 40th Annual J.P. Morgan Healthcare Conference.

“This action is in line with our priorities around focusing our portfolio, optimizing our capital allocation and accelerating our transformation to health care,” Brewer explained.

The U.K.-based drugstore chain Boots has more than 2,200 stores and roughly 51,000 employees, according to the company’s website. Brewer did not specify whether the strategic review would yield a possible sale, spinoff or something else entirely.

“While the process is at an exploratory stage, we do expect to move quickly,” she added.

As for Walgreens Health, Brewer sees the new strategy as her company’s next major growth engine. The rapidly scaling segment is currently on track for annualized run-rate sales of about $4.3 billion by the end of 2022, with a “clear path” toward $9 billion to $10 billion in sales by 2025.

Walgreens Boots Alliance has additionally made substantial progress toward building out Walgreens Health’s leadership, with about 70% of the team in place, including CFO John Do and Chief Clinical Officer Dr. Sashi Moodley. Brewer said she expects to have the segment’s top executive in place in the not-too-distant future.

“We are making rapid progress toward building out Walgreens Health,” she said. “We will deliver improved health outcomes and lower costs for payers and providers by delivering care through owned and partnered assets.”

Walgreens Boot Alliance investor deck shared during the 2022 J.P. Morgan Healthcare Conference.

VillageMD and CareCentrix – two very home-centric businesses – are the key pillars of Walgreens Health. Walgreens Boots Alliance closed on its majority investment in the former in November; it’s on track to close on the latter by the end of the third quarter.

VillageMD CEO Tim Barry and CareCentrix CEO John Driscoll will each play important roles in the growth and direction of Walgreens Health, according to Brewer.

“Our majority investments are led by strong independent teams with huge experience across the health care spectrum,” she said. “Over time, we will tap into this extended network of talented executives with proven success in health care.”

As a result of a $5.2 billion follow-on investment in the Chicago-based VillageMD announced in October, Walgreens Boots Alliance officially owns a 63% stake in the primary care provider. Brewer spent a large portion of her time at the J.P. Morgan Healthcare Conference speaking about VillageMD, which reflects her overall bullishness on the business.

Currently, Walgreens and VillageMD have 81 co-located locations. The pair hope to grow that to at least 200 by the end of this year, to 600 by 2025 and to 1,000 by 2027.

An investor deck shown at the conference described VillageMD as a “unique asset poised to drive tremendous long-term growth.”

“The total addressable market for VillageMD is projected to grow 7% annually through 2025 to $1.4 trillion, with the potential to expand much further as the market continues to shift to full risk-based, value-based arrangements,” Brewer said. “This shift could result in an annual growth rate closer to 23%.”

VillageMD delivers services to around 1.6 million patients, with nearly 350,000 in value-based care arrangements. Its 2021 revenue was about $1.3 billion, according to the investor deck.

“The thing that is very noteworthy about VillageMD – and it’s a key reason we started this partnership – is that they are focused on all patient populations,” Brewer said. “Medicare and Medicare Advantage, Medicaid, commercial and the uninsured.”

It cares for many of its most vulnerable patients in the home setting as well through its in-home care arm, “Village Medical at Home.”

“When you look at those kinds of patients, and you look at the profile of those patients, you realize that oftentimes you might be better off seeing them digitally or in their homes,” VillageMD Chief Growth Officer Paul Martino recently told Home Health Care News during an HHCN+ TALKS conversation. “We decided that the home was where people really wanted to be cared for, especially those that are frail, elderly and do not have reliable support systems.”

Walgreens Boots Alliance aims to have 2 million lives under its scope of services by the end of 2022, with at least 100 “Walgreens Health Corners” opened. It’s targeting 10 million lives by the end of 2025, with at least 1 million at risk.

Its current payer partners include Clover Health (Nasdaq: CLOV) and Blue Shield of California.

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