Health

Walgreens CEO’s growth agenda calls for rapid acceleration


Brewer hopes Walgreens’ numerous 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 raise chairs. Along with bolstering pharmacy and retail gross sales, the objective is to drive visitors to Walgreens’ new Well being Corners, which embody in-person and digital choices like a caregiver app and assist for these managing persistent circumstances.

“The pandemic undoubtedly 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 will mobilize to resolve massive advanced issues,” Brewer mentioned at an investor convention this month. “I consider we’ve got some super underlying momentum inside this enterprise and the pandemic has additional confirmed the significance of pharmacies in native communities all over the world.” 

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 can be gaining extra energy as they consolidate. VillageMD will want excessive affected person volumes to offset the margin squeeze. 

“There are plenty of sectors in healthcare which have low revenue margins however are very worthwhile as a result of they’ll benefit from giant 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 business middlemen referred to as pharmacy profit managers, or PBMs, typically steer sufferers to a most well-liked pharmacy chain over others, doubtlessly limiting Walgreens’ pool of potential clients. 

Walgreens’ archrival CVS Well being owns Aetna, one of many largest well being insurers, and CVS Caremark, one of many prime 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 prime competitor is an open query. Equally, CVS Caremark might incentivize clients to get their prescriptions from CVS.

Walgreens, for its half, has contracts with numerous 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 will do regionally,” Kehoe informed buyers. “Our solely curiosity is client well being and that is why we consider our strategy is exclusive and differentiated out there.” 

Kehoe mentioned healthcare investments, together with further acquisitions, will drive development, predicting “high-teens” annual income will increase within the Walgreens Well being section after 2024. The corporate expects adjusted EPS development of 11% to 13% after 2024, he mentioned. 

That may 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 fee 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 median of simply 10.6% during the last 10 years, together with an enormous increase 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 shall be conducting a $1.3 billion cost-cutting marketing campaign. 

Including strain is the truth that Walgreens isn’t the one retail pharmacy betting massive 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 major care facilities. 

“All of those very giant gamers are vertical integration otherwise,” Shalowitz says, “however ultimately might find yourself with the identical elements.” 



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