Health

Walgreens CEO Growth Program Needs Rapid Acceleration

Brewer hopes the various Walgreens businesses will feed each other, with doctors sending prescriptions to Walgreens pharmacies, and homeworkers ordering durable medical equipment such as scooters and lift chairs. In addition to supporting pharmacies and retail sales, the goal is to drive traffic to new Walgreens health corners that include personal and digital offerings such as a nursing app and support for those dealing with chronic conditions.

“The pandemic has definitely given the WBA a chance to step up like never before, and we’ve made so many successes, but we’re just starting out in terms of how we can mobilize to tackle big, complex challenges,” Brewer said at an Investors Conference this month. “I believe we have a huge core dynamic in this business and the pandemic has further proven the importance of pharmacies in local communities around the world.”

But Deerfield-based Walgreens’ new ventures are subject to the same forces that are cutting margins across the healthcare sector, including Walgreens, which accounts for more than three-quarters of its U.S. sales.

Primary care providers like VillageMD are facing price pressures from government health plans and private insurance companies, which are gaining momentum as they consolidate. VillageMD will need a large number of patients to compensate for the decline in margins.

“There are many sectors with low margins in healthcare, but they are very profitable because they can take advantage of high volumes,” says Dr. Joel Schalowitz, associate professor at Northwestern University’s Feinberg School of Medicine.

Patient numbers and expected synergies will depend, in part, on health insurance companies, which influence what doctors see to their members and where they buy their prescriptions. Insurers and industry intermediaries called Pharmacy Benefit Managers, or PBMs, often refer patients to their preferred pharmacy chain over others, potentially limiting Walgreens’ potential customer base.

Walgreens’ main competitor, CVS Health, owns Aetna, one of the largest insurance companies, and CVS Caremark, one of the leading PBMs. CVS is following the same healthcare-focused strategy as Walgreens, with clinics in its stores and a range of new healthcare services.

Whether Aetna will cover visits to clinics owned by its leading competitor is an open question. Likewise, CVS Caremark can incentivize clients to receive prescriptions from CVS.

Walgreens, for its part, has contracts with various insurers, and CFO James Kehoe calls the absence of an insurance company an advantage.

“We don’t have an insurance company to manage what we’re going to do locally,” Kehoe told investors. “Our only concern is consumer health, so we believe our approach is unique and different from others on the market.”

Kehoe said that investment in healthcare, including additional acquisitions, will drive growth, projecting growth in annual “adolescence” revenue for Walgreens Health beyond 2024. The company expects adjusted EPS growth of 11% to 13% after 2024, he said.

This will be a dramatic turnaround after three consecutive years of declines in adjusted earnings per share, including a 14.1% drop in fiscal 2021. Brewer is aiming for a growth rate similar to that of the UnitedHealth Group, which owns the nation’s largest health insurer and a network of other companies. more than 50,000 doctors. Even CVS Health has shown that earnings per share have grown by an average of only 10.6% over the past 10 years, including significant growth in 2018 following the merger with insurance company Aetna.

“I doubt they can achieve this kind of growth,” says Professor Eric Gordon of the University of Michigan’s Ross School of Business. “Walgreens isn’t the only company doing this.”

At the same time as she is driving this transformation and consolidating health-focused investments, Brewer will be campaigning to cut spending by $ 1.3 billion.

Additional pressure comes from the fact that Walgreens isn’t the only retail pharmacy with a big stake in healthcare. CVS Health launches HealthHubs to offer an expanded range of healthcare services. Walmart is also opening health centers in addition to partnerships with Oak Street Health, a Chicago-based network of primary health care centers.

“All of these very large players have different views of vertical integration,” Schalovitz says, “but might end up with the same components.”


Source link

Read More

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button