Dive Brief:
- Walgreens is planning to close its remaining VillageMD clinics in Florida as the beleaguered retail giant continues to cut costs.
- VillageMD operated 52 clinics in Florida, but 14 have closed to date. The remainder will shutter by March 15, according to multiple news reports citing Walgreens. The closures fully exit VillageMD from Florida, one of its largest markets and a key target for value-based primary care chains given the state’s large population of elderly patients with chronic health needs.
- Walgreens did not share details of what’s driving the closures. But analysts say Walgreens may have struggled getting enough doctors and patients into the smaller clinics, which are co-located within Walgreens stores.
Dive Insight:
Walgreens is currently pursuing a strategic pivot to providing healthcare services, expanding on its traditional retail pharmacy roots. This includes significant investment in its U.S. Healthcare division, which includes value-based primary care operator VillageMD. Walgreens bought a majority stake in VillageMD for $5.2 billion in 2021.
However, U.S. Healthcare has struggled to transform growing revenue into profits, reporting a sizeable operating loss in 2023. Executives cite VillageMD and its recently acquired medical groups as meaningful drivers of growth, but Walgreens is now shaving down the primary care network.
In October, Walgreens said it would close 60 VillageMD clinics as part of a larger goal to cut $1 billion in costs this year.
The exits, which Walgreens said would allow it to focus more heavily on regions where it has more market power, represent about 9% of VillageMD’s overall footprint.
“To continue to scale our care delivery services and value-based care model, we assess and evaluate our progress on an ongoing basis and refine our approach as we grow, similar to most growth-oriented companies,” a spokeperson for VillageMD told Healthcare Dive. “Strategically, we are focused on geographic density in markets and locations where we can serve patients to our standards of quality care.”
On a January earnings call, Walgreens’ new CEO Tim Wentworth said the company was almost halfway through the planned closures.
Walgreens has struggled to prove the value of its healthcare strategy to investors, causing the company’s stock to fall 41% since January 2023. Late last year, credit ratings agency Moody’s cut Walgreens’ senior unsecured credit rating to junk.
Walgreens’ stock has fallen during the company’s pivot to health services
Along with the VillageMD closures, Walgreens is also shuttering 450 retail locations and laying off hundreds of corporate employees.
Walgreens is also reportedly exploring a sale of its specialty pharmacy Shields Health Solutions. The update was panned by analysts, who argued divesting the high-margin business could slow Walgreens’ drive for healthcare profitability.
Shields is also part of the U.S. Healthcare division, along with VillageMd, at-home care provider CareCentrix, and a clinical trials division Walgreens launched in 2022.
Walgreens’ woes extend beyond its business strategy, as the company emerges from a flurry of leadership turnover.
Walgreens replaced chief executive Roz Brewer with insurance industry veteran Wentworth in October; and replaced U.S. Healthcare president John Driscoll with Mary Langowski, the former CEO of a chronic condition management company, this month.
Other recent departures include Walgreens’ CFO, CIO, chief medical officer and chief marketing officer.
Walgreens has also accrued billions in liabilities from settlements and claims related to its role in the opioid epidemic. And, pharmacy chains have struggled coming out of the coronavirus pandemic amid lower demand for COVID-19 tests and vaccines.
