Walgreens investing $1 billion in VillageMD partnership

WALGREENS BOOTS ALLIANCE is investing $1 billion in a Chicago-based primary-care startup as the pair plan to open at least 500 clinics at stores in more than 30 U.S. markets.

The deal expands on the Deerfield, Ill.-based drugstore chain’s partnership with VillageMD, which started with five in-store clinics in the Houston area.

From 500 to 700 Village Medical at Walgreens clinics are set to open in the next five years, with plans to build hundreds more, the companies said in a statement, and Walgreens pharmacists will be an integral part of the clinics’ care team. The clinics, staffed by VillageMD, will accept a range of health insurance plans, and more than half will be in areas with shortages of medical professionals. The model will also offer services around the clock virtually and in the home.

VillageMD, led by co-founder and CEO Tim Barry, aims to help doctors and patients better manage chronic conditions to improve clinical outcomes and control costs. It has grown rapidly in the past several years—snapping up physician groups and entering into partnerships such as this one.

Walgreens will invest $1 billion in equity and convertible debt in VillageMD over the next three years—including a $250 million equity investment last week—with the expectation that it will eventually hold about a 30% ownership interest in the startup, according to the statement. VillageMD will use 80% of the funds to execute the expanded partnership.

With more than 1,000 clinics in nine states, VillageMD and its subsidiary Village Medical manage $4 billion in total medical spending.

A day after the deal was announced, Walgreens reported a $1.7 billion loss in its third quarter. The company said that the rapidly spreading coronavirus took a bite of $700 million to $750 million from sales, with much of the damage coming from outside the U.S. Industry analysts expected a substantial hit to profits, but the size of the loss exceeded those projections.

The Walgreens-VillageMD partnership comes as rival CVS Health plans to expand its own primary-care presence, opening new HealthHubs in its stores through 2021. The HealthHub model offers an expanded range of health services aimed at helping patients better manage their health between doctor visits. ●