Targeting care growth

Walgreens plunged deeper into health care provision with a $3 billion-plus investment alongside clinic partner VillageMD, a move that will help the drugstore chain hedge against many challenges facing its core business.

Walgreens runs about 8,900 U.S. drugstores. Its majority-owned subsidiary VillageMD has helped it add clinics to some locations, setting up a health care business where doctors and pharmacists team up to provide care.

VillageMD this month said it’s buying care provider Summit Health-CityMD in a deal worth nearly $9 billion, with help from Walgreens.

Providing care gives Walgreens several advantages: It diversifies the company’s revenue sources, brings customers back to its locations more frequently and counters some financial pressures squeezing drugstores.

Non-pharmacy store sales have slumped, and reimbursements for prescriptions are tightening.

Other retailers including CVS Health and Walmart are also racing to add patients. Morningstar analyst Julie Utterback thinks there’s enough space for all competitors.

“The primary care market is very fragmented, and there’s lots of room to consolidate that,” she said.