On the heels of big-ticket acquisitions, Walgreens is ramping up its push into healthcare and is partnering with startup Pearl Health to expand its reach into value-based primary care.
New York City-based Pearl Health is a technology company that helps independent physician practices participate in value-based care models. Walgreens plans to leverage its capabilities, including prescription fulfillment, medication adherence, immunizations, care gap closure and diagnostic testing, to work with the startup to enable community-based primary care physicians to take advantage of new payment models, the two companies announced Tuesday morning.
Walgreens' partnership with Pearl Health builds on the assets that the retail pharmacy giant has recently made investments in as it "moves more aggressively into healthcare," Steve Wogen, chief growth officer, U.S. Healthcare at Walgreens, told Fierce Healthcare in an interview.
"We've been very public on our push into healthcare, through our majority acquisition of VillageMD and follow-on acquisitions of CareCentrix and Shields [Health Solutions] in the home care and specialty care businesses, respectively, demonstrated our commitment there," he said. "At Walgreens, we know that community-based care and the ability to build a community infrastructure to leverage trust from healthcare consumers and to really engage members that often aren't engaged in their healthcare where they are, which is in the local community, matters in managing care. We also know that the shift to value-based care is progressing at a rapid rate with projections showing that the value-based care market will move from $1.5 trillion to almost $3 trillion between now and 2027."
Walgreen's VillageMD bought the urgent and primary care chain, Summit Health-CityMD, in a deal worth close to $9 billion. The combined entity is one of the largest independent provider groups in the U.S. operating more than 680 provider locations in 26 markets. Walgreens also bought post-acute and home care provider CareCentrix this year, which currently manages care for more than 19 million members through over 7,400 provider locations. The company also closed its acquisition of specialty pharmacy Shields Health Solutions in December.
Wogen declined to disclose the commercial terms of the partnership. "At this point, we have no intent to acquire" [Pearl Health], he said.
It's Walgreens' first major healthcare move since Rosalind Brewer stepped down as CEO earlier this month. She was a key leader in the company's strategic push into healthcare, accelerating Walgreens' consumer health programs. Ginger Graham, the lead independent director of the company, stepped in as interim CEO while the company looks for a permanent leader.
Founded in 2020, Pearl Health developed technology that uses data science to help primary care providers focus their attention on the patients who are most likely to need it. The company has seen rapid growth as more physicians shift to value-based care arrangements and federal policies push alternative payment models. Pearl Health has seen 10x year-over-year growth and expanded from 10 to 29 states, co-founder and CEO Michael Kopko told Fierce Healthcare back in January. The startup works with more than 800 physicians from 120 practices caring for about 43,000 Medicare-covered lives, Kopko said.
The partnership will initially focus on providers participating in Medicare's ACO Reach model. "It will be nationwide, so we'll have sites across the country that we'll be testing as we go into next year," Wogen said.
The startup has raised $100 million to date from investors Andreessen Horowitz’s Growth Fund and Viking Global Investors.
Pearl Health brings to the table its expertise in risk contracting as well as technology and analytics to empower physicians to move to value-based care, Walgreens executives said. The two companies' capabilities complement each other, Wogen said. Pearl’s proprietary "urgency score" algorithm uses a variety of health and demographic data sources to proactively identify patients who could benefit from their programs. Walgreens offers services to help providers manage medications and drug spend and a portfolio of specialized wraparound healthcare and pharmacy services.
Walgreens operates 9,100 stores in the U.S., and 78% of the U.S. population lives within 5 miles of a Walgreens store, according to the company.
"Having fully aligned clinical partners at scale, and with frequent touchpoints with patients, are the key ingredients to succeed in value and Walgreens, in that sense, is a perfect partner," Kopko said in an interview with Fierce Healthcare. "They've got national recognition, national reach, they are eager for the rotation toward value, they bring some clinical assets that are critical in value-based care, such as Rx, acute care facilities, and the team has been incredibly productive, flexible and intelligent in structuring something to be successful in value-based Medicare models, and we hope beyond that as well."
The partnership with Pearl Health will provide Walgreens with a "digital care traffic control infrastructure," Wogen said. "Pearl brings technology analytics and insights that will now allow us to work with more primary care physicians and more communities to enable value-based care. We'll be able to integrate that with Walgreens' consumer experience, our community assets and our healthcare capabilities in order to provide a differentiated market offering."
Walgreens' investment in VillageMD and now Summit Health/CityMD gave it a foothold in primary, multispecialty and urgent care. A technology-enabling partnership with Pearl Health provides an additional, complementary value-based delivery channel that will allow Walgreens to reach more regions and patients and offer an even broader set of solutions to providers and health systems, Wogen said.
"We'll be able to leverage our capabilities in a couple of different ways. One is leveraging our pharmacists. We know that medication adherence, medication management and medication compliance are absolutely critical to successful healthcare overall," he noted.
With its CareCentrix business, Walgreens will also work with providers to help patients discharged from the hospital transition to home. The company can help support discharge management, manage care post-hospital discharge and support care in the home such as infusions or coordination of home nursing and personal care assistance, he noted.
"We have a number of services that we've built around the pharmacies, leveraging the convenience of retail. So, for example, the ability to do a blood pressure test in a store, the ability to coordinate testing for basic disease, whether it's HbA1c or colorectal cancer screening, the ability to do testing and diagnostics, the ability to do immunizations. We're able to manage those areas of care that seem so easy but are so often forgotten, and it really leads the consumer in a bad situation."
Pearl Health's technology-powered value-based care model "aligns seamlessly with the healthcare services Walgreens offers, particularly in the most vulnerable communities," said Kopko.
"With a focus on proactive, coordinated care, we’ll collaborate to deliver a better solution to providers and ultimately deliver high-quality services to patients, while managing their care efficiently. We’re very excited about the implications of this partnership for patients in Medicare and beyond," he said.
Walgreens' U.S. healthcare segment underperformed during the most recent quarter. The business unit took a loss of $113 million in the third quarter before interest, tax, depreciation and amortization, reflecting new clinic expansions at VillageMD and fewer patient visits at CityMD clinics, executives told investors during the company's third-quarter earnings call in June.
The drugstore chain slashed its profit outlook for the year to reflect consumer and category conditions, lower COVID-19 contribution and a more cautious macroeconomic forward view, executives said.
John Driscoll, executive vice president and president, of U.S. Healthcare, Walgreens Boots Alliance, said the partnership with Pearl Health allows Walgreens to "reach more communities faster and enable comprehensive, affordable care that improves long-term health outcomes and fosters healthier communities."
Walgreens' partnership with Pearl Health is markedly different than its investment in VillageMD, which is capital-intensive as the primary care player acquires physician practices.
"The Pearl Health model allows us to enable more physicians in more communities and more markets faster without actually acquiring the primary care physicians but instead providing them the tools and the capabilities to be able to partner successfully in managing financial risk and to better promote care for the members that are servicing today," Wogen said. "It's asset-light, tech-forward and allows us to get to more markets faster so we see it as highly complimentary of what we're doing with VillageMD. That also allows us to get into more markets that may be non-target markets for Village."
Moving forward, Walgreens plans to continue expanding services that are tied to retail and community-based care, Wogen said, as well as a "more aggressive movement" into testing and treating within the retail health centers and diagnostics within the retail pharmacies.