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

Walgreens and VillageMD

Source: Walgreens

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

As part of the deal, the drugstore chain will invest $5.2 billion in VillageMD. That will increase Walgreens’ ownership stake from 30% to 63%. VillageMD will remain 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.

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 write them and provide other types of care, such as annual checkups. The company is speeding along 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 U.S. markets by 2025 and 1,000 by 2027.

Walgreens CEO Roz Brewer said in an interview with CNBC’s Bertha Coombs that the clinics will simplify care for patients. She said Walgreens and VillageMD will have pharmacists and physicians who work together. They will have access to the same tech platform that pulls together medical records. And they’ll be at a convenient location, a short walk or ride away.

“Your physician recommendations are being shared directly with the pharmacist,” Brewer said. “I think that’s a game changer when you think about what we’re able to do.”

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

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

Walgreens and VillageMD have said the doctor offices will accept different kinds of health insurance and offer an out-of-pocket option, along with a sliding scale for people who don’t have insurance.

With the 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 also turning more stores into a HealthHub, which has a wider range of medical services like testing for sleep apnea and management of diabetes. Walmart is opening a growing number of primary clinics with a low-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 have an additional 33 on track to start by the end of the calendar year. The company announced the partnership for the first time 2019 and decided to expand the effort after a pilot of five clinics in the Houston area.