Walgreens plans to open up to 700 primary care clinics as part of $1B investment in VillageMD

As part of Walgreens' strategy, primary care doctors and pharmacists will be co-located at stores in an integrated model to provide healthcare services to patients. (Walgreens)

Walgreens is expanding its reach into primary care with plans to open 500 to 700 clinics in the next five years.

It's part of the drugstore giant's partnership with VillageMD, a national provider of primary care based in Chicago.

In April 2019, Walgreens and VillageMD teamed up to open five new 2,500-square-foot primary care clinics next to Walgreens stores in the Houston area as a pilot project.

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It's part of a shift toward a changing healthcare delivery model the pharmacy retail company has previously announced.

Walgreens will be the first national pharmacy chain to offer full-service doctor's offices co-located at its stores at a large scale, following a highly successful trial begun last year, according to the company.

Walgreens will open 500 to 700 “Village Medical at Walgreens” physician-led primary care clinics in more than 30 U.S. markets in the next five years, with the intent to build hundreds more.

RELATED: Walgreens, VillageMD partner to open primary care clinics in Houston stores

Under the terms of the new agreement, Walgreens will invest $1 billion in equity and convertible debt in VillageMD over the next three years, including a $250 million equity investment to be completed today.

Of Walgreens' investment, 80% will be used by VillageMD to fund the opening of the clinics and build the partnership, including integration with Walgreens' digital assets.

It is anticipated, assuming full conversion of the debt, that Walgreens will hold an approximately 30% ownership interest in VillageMD at the completion of the investment, the companies said.

Walgreens has been aggressively working to establish itself as a force in the consumer health market, fighting back rivals like CVS Health and other competitors in the pharmacy retail space.

As part of Walgreens' strategy, primary care doctors and pharmacists will be co-located at stores in an integrated model to provide healthcare services to patients, the companies said.

The clinics, which will be staffed by more than 3,600 primary care providers recruited by VillageMD, will accept a wide range of health insurance options.

Along with primary care services, the clinics also will provide 24/7 care via telehealth and at-home visits.

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More than half of the clinics will be located in health professional shortage areas and medically underserved areas/populations as designated by the U.S. Department of Health and Human Services.

The rollout follows a trial with five in-store clinics in the Houston area.

Walgreens said the pilot produced "very strong results" including high patient satisfaction, with Net Promoter Scores over 90.

The primary care doctor-pharmacist integrated model will help address the growing population of patients living with chronic conditions.

Six in 10 Americans today live with at least one chronic condition requiring multiple daily medications. Data from current Village Medical clinics show an integrated pharmacy and primary care approach increases medication adherence and contributes to improved patient outcomes, the companies said.

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“This rollout is a major advancement of one of Walgreens Boots Alliance’s four key strategic priorities, Creating Neighborhood Health Destinations,” said Stefano Pessina, executive vice chairman and CEO, Walgreens Boots Alliance, in a statement.

“These clinics at our conveniently located stores are a significant step forward in creating the pharmacy of the future, meeting many essential health needs all under one roof as well as through other channels.”

The U.S. spends $4 trillion per year on healthcare, and more than 85% of that is tied to patients with chronic diseases, said Tim Barry, chairman and CEO of VillageMD, in a statement.

"To improve our healthcare system and reverse the trajectory of health spending, we must meet the needs of all patients. This partnership allows us to unleash the power of primary care doctors and pharmacists, enabling them to work in a coordinated way to enhance the patient experience," Barry said.

Most of the clinics will be approximately 3,300 square feet with some as large as 9,000 square feet.

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