The recent news that Walgreens-backed VillageMD is buying Summit Health-CityMD for $8.9 billion including debt is more than just another example of how the retail health market is consolidating. It’s a sign of how quickly the retail pharmacy giant believes its health care division will become profitable.
The nation’s No. 2 U.S. pharmacy chain, which owns a 63% stake in VillageMD, not only will greatly expand its health care market footprint in the acquisition, but the deal also should help Walgreens’ health care business turn a profit by year-end 2023, the company stated.
As a result of the transaction, Walgreens Boots Alliance (WBA) expects to raise its adjusted EBITDA from negative $50 million to positive earnings of $25 million by the end of the 2023 fiscal year. Previously, the WBA stated that its health care business would not turn a profit until 2024.
Here is what the transaction will mean to WBA and VillageMD:
- An added 680 provider locations in 26 markets.
- New or expanded capabilities in offering primary, specialty and urgent care.
- A multipayer platform that leverages VillageMD’s expertise in value-based care to support and accelerate the transition to more risk-based care.
The WBA health care operations will include:
- VillageMD, which had 276 clinics in the U.S. in July and plans to have 500 to 700 full-service doctors’ offices within the next five years.
- Specialty pharmacy company Shields Health Solutions.
- At-home care provider CareCentrix (the closing on this purchase is expected in March 2023), which manages care for 19 million members through 7,400-plus provider locations.