Walgreens Boots Alliance will invest $1 billion in VillageMD to open 500 to 700 clinics and doctors' offices at Walgreens drug stores across the country—a move that could make the company a "go-to treatment center" for consumers, the Wall Street Journal reports.

Walgreens' expansion into primary care mirrors the moves of several of its competitors, the Journal reports—such as CVS Health, which is  opening 1,500 HealthHub stores to complement its MinuteClinics, and Walmart's launch of "Walmart Health" centers. However, Walgreens said its new partnership with VillageMD would make it the first national pharmacy chain to add full-service primary care clinics at its stores on a large scale.

Walgreens previously worked with VillageMD in 2019 to open five VillageMD clinics next to Walgreens locations in Houston. According to Alexander Gourlay, co-COO of Walgreens, the companies decided to expand the project after patients' adherence to medications improved at the locations.

Partnership details

Through the partnership, Walgreens over the next five years will open between 500 and 700 "Village Medical at Walgreens" primary care clinics in more than 30 U.S. markets. As part of the arrangement, Walgreens will invest $1 billion in equity and convertible debt in VillageMD over the next three years. According to Walgreens, 80% of that investment "will be used by VillageMD to fund the opening of the clinics and build the partnership, including integration with Walgreens digital assets." Walgreens by the end of the multiyear contract will own 30% of the startup.

VillageMD—which already employs or contracts with 2,800 physicians—under its partnership with Walgreens will recruit an additional 3,600 doctors to staff the new clinics. VillageMD Chair and CEO Tim Barry said the company will prioritize "physicians who have existing long tenured relationships with patients" to fill those roles.

Under the partnership, VillageMD also will pay its employees' salaries, cover related operating expenses, and rent the physical space for the new clinics from Walgreens.

What the clinics will look like in practice

According to Forbes, the companies will convert part of existing Walgreens drugstores into the new clinics, which will range in size from 3,300 square feet to 9,000 square feet. Each of the clinics will have a waiting room, nine exam rooms, and a doctor-led team of four providers who will coordinate care with in-store pharmacists. Some locations will also include NPs, PAs, and social workers, the Washington Post reports.

Patients will be able to visit the clinics for services ranging from annual checkups to walk-in appointments, CNBC reports. According to Barry, the clinics could see between 100 and 120 patients per day. The clinics will also offer 24/7 care through telehealth and at-home visits.

While the companies did not disclose how much services would cost, they said the costs would vary depending on the service used and patients' insurance coverage. Half of the clinics will be located in medically underserved areas and will offer a sliding payment scale to uninsured patients, the Journal reports.

Partnership aims to 'unleash the power' of PCPs and pharmacists

According to the Journal, the move comes after Walgreens reported smaller revenue from prescription drugs, and, in April, reported that store sales had fallen following an initial surge in demand in March, amid America's coronavirus epidemic. Walgreens also faces competition from online retailers such as Amazon, the Journal reports.

Similarly, VillageMD experienced a 15% to 20% drop in primary care visits amid the epidemic, according to Barry.

Walgreens said its partnership with VillageMD will attract more patients to the stores, which will increase prescription sales and sales of related medical products. Walgreens said it will also gain profit off its 30% stake in VillageMD.

In addition, Walgreens said pairing its pharmacies with treatment centers could be particularly beneficial for patients with chronic conditions who struggle to adhere to medication regimens, the Journal reports.

"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. "The results of our initial pilot clinics highlight that these outcomes are infinitely achievable."

Separately, Gourlay said the clinics will "start to change the feel of Walgreens, particularly these locations, to be a health care company." He added, "We want to be everywhere in America where people need health care. … That's always been our position and always will be" (Terlep, Wall Street Journal, 7/8; Walgreens release,  7/8; Japsen, Forbes, 7/8; Repko, CNBC, 7/8; Shaban, Washington Post, 7/8).