Dive Brief:
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Walgreens Boots Alliance is shifting ownership and management of 56 of its Chicago area store-based retail clinics to the city’s largest hospital network, Advocate Health Care.
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The move represents a shift in strategy, although Walgreens says it’s committed to the store-based clinic model that is a major part of rival CVS Health’s plans.
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The move might also help with any regulatory challenge to the company’s proposed acquisition of rival Rite Aid, which would combine the number two and number three largest drugstore retail chains in the U.S., displacing the current largest, CVS.
Dive Insight:
Walgreens Boots Alliance’s move in Chicago affects some 14% of its more than 400 store-based clinics nationwide.
It appears to underscore Walgreens’ commitment to retail, rather than CVS Health’s all-out push to become a significant health care provider.
CVS, for example, in 2014 ended all tobacco sales, an important part of that pivot, according to the retailer’s chief medical offer, physician Troy Brennan MD, who also holds a degree in public health.
That’s also when the retailer rebranded itself from CVS Caremark Corp. to CVS Health, putting its healthcare delivery goals front and center. By November, the company was able to recoup much of its losses from its tobacco sales cessation with an uptick in pharmacy sales. And this year the company announced its acquisition of pharmaceutical sales company Omnicare, which would greatly expand CVS Health’s pharmacy services and could give it greater clout in its dealings with pharmaceutical companies.
Taking over the Walgreens clinics could help Advocate Health Care provide more services incentivized by the Affordable Care Act, which aims to give more people access to basic health services. The clinics could help patients seeking off-hours care for last-minute health issues and coordinated care for chronic conditions without the need for an emergency room visit, which can be costly and disruptive, or doctor office visits, which can be inconvenient and more expensive.
While the divestment may or may not help ease any antitrust concerns about the proposed merger with Rite Aid, it does push the retailer somewhat toward a more retail-oriented business.
That likely means that tobacco sales would continue, and beauty, a competitive but successful space, could become a more important aspect of Walgreens' business.