Brewer hopes Walgreens’ varied companies will feed off one another, with docs sending prescriptions to Walgreens pharmacies and residential well being sufferers ordering sturdy medical tools like scooters and elevate chairs. Along with bolstering pharmacy and retail gross sales, the objective is to drive site visitors to Walgreens’ new Well being Corners, which embody in-person and digital choices like a caregiver app and help for these managing power situations.
“The pandemic positively gave WBA an opportunity to step up like by no means earlier than and we have delivered in so some ways, however we’re completely simply getting began by way of how we are able to mobilize to resolve huge advanced issues,” Brewer stated at an investor convention this month. “I imagine now we have some super underlying momentum inside this enterprise and the pandemic has additional confirmed the significance of pharmacies in native communities around the globe.”
However Deerfield-based Walgreens’ new companies are topic to the identical forces squeezing revenue margins at corporations all through the healthcare sector—together with Walgreens’ pharmacy, which accounts for greater than three-quarters of its U.S. gross sales.
Main care suppliers like VillageMD face worth pressures from authorities well being plans and personal insurers which might be gaining extra energy as they consolidate. VillageMD will want excessive affected person volumes to offset the margin squeeze.
“There are numerous sectors in healthcare which have low revenue margins however are very worthwhile as a result of they’ll reap the benefits of massive volumes,” says Dr. Joel Shalowitz, an adjunct professor at Northwestern College’s Feinberg Faculty of Medication.
Affected person volumes and hoped-for synergies will rely partially on well being insurers, which affect what docs their members see and the place they purchase their prescriptions. Insurers and trade middlemen referred to as pharmacy profit managers, or PBMs, usually steer sufferers to a most popular pharmacy chain over others, probably limiting Walgreens’ pool of potential prospects.
Walgreens’ archrival CVS Well being owns Aetna, one of many largest well being insurers, and CVS Caremark, one of many high PBMs. CVS is pursuing the identical healthcare-focused technique as Walgreens, with clinics in its shops and a slate of latest well being companies.
Whether or not Aetna will cowl visits to clinics owned by its high competitor is an open query. Equally, CVS Caremark could incentivize prospects to get their prescriptions from CVS.
Walgreens, for its half, has contracts with varied insurers, and CFO James Kehoe touts its lack of an insurance coverage firm as a bonus.
“We do not have an insurance coverage firm directing what we’ll do regionally,” Kehoe advised traders. “Our solely curiosity is client well being and that is why we imagine our method is exclusive and differentiated available in the market.”
Kehoe stated healthcare investments, together with extra acquisitions, will drive development, predicting “high-teens” annual income will increase within the Walgreens Well being phase after 2024. The corporate expects adjusted EPS development of 11% to 13% after 2024, he stated.
That will be a dramatic turnaround after three straight years of declining adjusted EPS, together with a 14.1% drop in fiscal 2021. Brewer is aiming for a development charge nearer to that of UnitedHealth Group, which owns the nation’s largest well being insurer and a community of greater than 50,000 docs. Even CVS Well being noticed earnings per share develop a mean of simply 10.6% over the past 10 years, together with an enormous enhance in 2018 following its merger with well being insurer Aetna.
“I doubt they’ll obtain that sort of development,” says professor Erik Gordon of the College of Michigan’s Ross Faculty of Enterprise. “Walgreens isn’t the one firm that does this.”
On the similar time she’s managing this transformation and stitching collectively health-focused investments, Brewer will probably be conducting a $1.3 billion cost-cutting marketing campaign.
Including strain is the truth that Walgreens isn’t the one retail pharmacy betting huge on healthcare. CVS Well being is launching HealthHubs to supply an expanded vary of healthcare companies. And Walmart is rolling out well being facilities, along with a partnership with Oak Road Well being, a Chicago-based community of main care facilities.
“All of those very massive gamers are taking a look at vertical integration another way,” Shalowitz says, “however finally could find yourself with the identical elements.”