Walgreens Leaders Tout Strong Growth In Health Care Delivery Segment

Walgreens Boots Alliance Inc. (Nasdaq: WBA) has been building out its health care delivery arm – which includes home-based care capabilities – for some time now, just like its retailer competitors.

There’s good reason for that. Pairing primary care and home-based care capabilities is a way to drive value-based care moving forward. But, in Walgreens’ case, its also a way to make up for profit dipping over time due to less COVID-specific business, such as vaccine delivery and test sales.

“The overall decline in adjusted [earnings per share] was against growth of 26.5% last year and again reflects the anticipated headwind from lower COVID demand and our investments in labor and the U.S. Healthcare segment,” Walgreens Boots Alliance CEO Rosalind Brewer said on the company’s fiscal Q2 earnings call Tuesday. “This is our final quarter of lapping last year’s peak COVID contributions, and we are looking forward to accelerated growth ahead.”

Under Walgreens’ U.S. Healthcare segment is the home-focused primary care provider VillageMD – which acquired Summit Health-CityMD for $8.9 billion in late 2022 – and the at-home care coordinator CareCentrix.

Walgreens agreed to fully acquire CareCentrix at an about $800 million valuation in October 2022. That deal is expected to close during Walgreens’ third quarter. John Driscoll – the former CEO of CareCentrix – became the president of the U.S. Healthcare segment at Walgreens after the deal was agreed to.

“I think we’ll continue to invest in sensible acquisitions,” Driscoll said on the call. “But actually, what we’re seeing is the opportunity to drive more cost and growth synergies off of a [multi-threat] set of assets that we think could be very impactful, particularly as we concentrate market power with more service offerings in specific markets.”

Quarterly profit declined more than 20% because of the aforementioned COVID-19 factors, but revenue beat Street expectations, up 3.3% year over year to $34.86 billion. Net profit was $703 million, or 81 cents per share.

U.S. Healthcare sales were $1.63 billion in the quarter, representing 30% year-over-year pro forma growth.

“Our second strategic priority [is that] we are accelerating the build-out of our health care growth engine,” Brewer said. “The addition of Summit Health is transformational. It creates one of the largest integrated provider platforms in the U.S., delivering quality affordable care for all patient populations regardless of insurance or payer type. This highly strategic transaction expands VillageMD’s addressable market with primary care, multi-specialty and urgent care and reinforces our approach across the entire care continuum. … We see meaningful synergy potential over time with integration activities already begun.”

What’s clear from recent comments by both Brewer and Driscoll is that Walgreens is committing considerable resources to the expansion of its health care delivery segment in the near-term future.

In turn, the company will continue to drive health care in the home, whether through home health care, personal home care, primary care or otherwise. 

“What’s exciting about the retail pharmacies investing in the last mile is that you have these massive new entrants – with a much closer relationship with consumers and patients – investing in expanding expanding care in the community,” Driscoll previously told HHCN. “The opportunity is huge to deliver better outcomes, at lower cost, by keeping people out of the hospitals and nursing homes who don’t need to be there. I just think it’s thrilling.”

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