New owner plans to take the pharmacy company private as it continues to shutter retail locations
Last year, Walgreens announced plans to close a large number of its stores “due to financial difficulties and ongoing environmental pressures,” according to Becker’s Hospital Review. Dark Daily has covered the struggles facing all of the major pharmacy companies in many ebriefs over the past few years.
Now, in another sign of the financial woes facing retail pharmacy chains, Walgreens Boots Alliance (WBA) announced in March that it had agreed to be acquired by private equity firm Sycamore Partners. As part of the $10 billion deal, Sycamore will take WBA private, according to a company press release.
The sale is valued at up to $23.7 billion when debt is included. The company’s brands include Walgreens and Duane Reade in the US, and Boots in the UK.
The deal follows WBA’s plans to close approximately 1,200 US retail locations over the next 30 months. The pharmacy company announced the plan last October as it reported an $8.6 billion net loss for the 2024 fiscal year.
“You have a business that is shrinking, and then you layer on losses and cash burn, all of that was the perfect recipe for what we are seeing today,” Jefferies research analyst Brian Tanquilut told Reuters following the March announcement.
WBA said the deal is expected to close in Q4 of calendar year 2025, pending approval by regulators and its shareholders. The agreement includes a “go-shop” provision that allows the company to consider other proposals.
“Given the size and number of moving parts involved—a potential split of the US business, Boots, and Health—we don’t expect a competing bid to come over the top,” Leerink Partners analyst Michael Cherny told Reuters.
“Sycamore will provide us with the expertise and experience of a partner with a strong track record of successful retail turnarounds,” said Walgreens Boots Alliance CEO Tim Wentworth (above) in a press release. “We believe this agreement provides shareholders premium cash value, with the ability to benefit from additional value creation going forward from monetization of the VillageMD businesses.” (Photo copyright: Walgreens Boot Alliance.)
Long Way Down for Walgreens Boots Alliance
The purchase price of this sale demonstrates how far WBA has fallen since its formation in 2014, when Walgreen Co. completed a merger with Alliance Boots GmbH, a large retail group headquartered in Switzerland.
At its peak in April 2015, WBA had a market valuation of more than $100 billion, according to financial reports.
Analysts have pointed to industrywide challenges that have also affected rivals CVS and Rite Aid, according to reports in The New York Times and the Associated Press (AP). These include rising operating costs, declining reimbursement for prescription drugs, and stiff competition from discount retailers such as Amazon and Walmart.
“We are at a point where the current pharmacy model is not sustainable, and the challenges in our operating environment require we approach the market differently,” said WBA CEO Tim Wentworth during a June 2024 call with analysts, the AP reported.
News Outlets Report Questionable Moves Over the Years
Reuters, however, pointed to questionable moves by Stefano Pessina, the former executive chairman of Alliance Boots who became CEO of WBA following completion of the merger in 2014. Pessina is also WBA’s largest shareholder, Reuters noted.
In October 2015, WBA offered $9.5 billion to acquire US pharmacy chain Rite Aid. But the company eventually backed away from the deal as regulators raised antitrust concerns, CNBC reported. Instead, in 2017, WBA paid $4.375 billion to acquire nearly 2,000 of Rite Aid’s 4,600 US retail locations.
“But that store footprint proved too big and soon after the acquisition, Walgreens started to close locations,” Reuters reported.
Billions Spent on Retail Clinic Plans
In July 2020, WBA announced a $1 billion deal with VillageMD to open as many as 700 primary care clinics at Walgreens locations. That deal gave WBA a 30% ownership stake in the provider.
Nine months later, Pessina stepped down as CEO to become executive chairman of the board. Taking his place was former Starbucks chief operating officer Roz Brewer. Under her watch, WBA spent an additional $5.2 billion to take a majority stake in VillageMD, which provides primary care services.
That deal has become a “cash drain,” on WBA, Reuters reported. CNBC noted that other retailers have also faced headwinds in their efforts to provide primary care services. Walmart said it would close its in-store health clinics, and CVS also shuttered dozens of clinics in New England and Southern California.
In March 2024, Wentworth revealed a turnaround plan that included $1 billion in cost cuts and closure of 160 VillageMD clinics, according to Fierce Healthcare. At the time, the company had already closed hundreds of stores in the US and UK, AP reported.
Wentworth followed that plan with October’s announcement to shutter an additional 1,200 retail locations.
Mizuho Bank analyst Ann Hynes told Reuters that, as a private company, WBA will be better positioned to deal with its challenges because it won’t have to answer to shareholders.
One likely move is a divestment of the company’s stake in VillageMD, Reuters reported. And the Boots portion of WBA’s business is a likely spinoff candidate, analysts told the news outlet.
COVID-19 pandemic has elevated virtual care into the mainstream, creating opportunities to increase access to care, including clinical laboratory testing, and drive down healthcare costs
As the COVID-19 pandemic fuels demand for virtual healthcare, Cigna is acquiring telehealth provider MDLIVE in a move that may indicate the insurance giant anticipates virtual visits playing a major role in healthcare delivery going forward. And, with each acquisition within the telehealth space, the need for clinical laboratories and pathology groups to have a strategy to respond to this trend increases.
The acquisition of MDLIVE by Cigna’s health services subsidiary Evernorth is expected to be completed in the second quarter of 2021, pending regulatory approval, according to an Evernorth press release.
Evernorth, noted Becker’s Hospital Review, is a division of Cigna that “includes pharmacy benefit manager Express Scripts, specialty pharmacy Accredo, and the rest of Cigna’s health service product lines.” And that Evernorth focuses on, “… benefit management, behavioral and clinical care, pharmacy, and intelligence.”
Tim Wentworth, Evernorth’s CEO, anticipates consumers’ desire for telehealth options will not disappear as SARS-CoV-2 infections decrease and the country returns to a new normal.
“Customers expect more convenient care interactions and COVID-19 has rapidly accelerated this need. We see an immediate opportunity to build a new model of care delivery, one that delivers a connected experience with greater affordability, predictability, and simplicity,” Wentworth said in the press release.
“With the opportunity to serve millions more people, and with more personalized ways to deliver care, we will have an even greater impact on our customers, clients, and partners,” Evernorth CEO Tim Wentworth (above) said in a company press release. “Combining MDLIVE’s platform and strong network for virtual providers with our comprehensive care solutions, we will be better positioned to optimize the care journey to improve affordability and accessibility and to deliver superior support to health plans as they advance their own care delivery models for the future.” Clinical laboratories that support telehealth providers will want to devise strategies to address this trend. (Photo copyright: Evernorth.)
The MDLIVE website states the telehealth company’s provider network includes physicians who are board certified in:
Internal medicine,
Family practice,
Emergency medicine, and
Pediatrics.
The company also provides counseling and behavioral health services by licensed mental health professionals.
Virtual Care Expanded Rapidly Due to COVID-19 Pandemic
Cigna was an early investor in MDLIVE. According to the company’s investors page, other investors include:
Health Care Service Corporation (HCSC), a Chicago-based mutual legal reserve company and independent licensee of the Blue Cross and Blue Shield Association.
Sentara Healthcare, a not-for-profit that operates more than 100 sites of care across Virginia and North Carolina.
Sutter Health, a not-for-profit integrated health delivery system headquartered in Sacramento, Calif., that operates 24 acute care hospitals and more than 200 clinics in Northern California.
And various venture capital and private equity firms.
Cigna began investing in virtual care years before the COVID-19 pandemic arrived in America. In 2018, members of Cigna’s employee-sponsored health plans were given access to virtual urgent care services. In 2019, the partnership was expanded to include online appointments with psychiatrists and behavior health counselors, while some primary care services were added last year.
Then, according to Cigna’s Virtual Investment Day Excerpt Video, virtual care expanded rapidly during the COVID-19 pandemic, with the use of telehealth jumping 46% in 2020 compared to an 11% increase in 2019.
That trend was highlighted last month in a report published in the American Journal of Preventive Medicine (AJPM), titled, “Who Is (and Is Not) Receiving Telemedicine Care During the COVID-19 Pandemic.” The study’s authors found a twentyfold increase in telehealth visits starting in March 2020 among six million people with employer-based health insurance, while office-based encounters fell by almost 50%.
Telehealth Drives New Model of Virtual Healthcare
In the Cigna video, Cigna President and CEO David Cordani says telehealth will be an important driver behind a new model of healthcare delivery.
“The emergence of virtual care is an important example of this,” he states. “We have seen consistent growth in virtual care over the past decade and it has rapidly accelerated further during the COVID pandemic. At Cigna, we see this trend continuing and accelerating further, moving well beyond urgent care to primary, coordinated chronic and behavioral care.”
Cordani added that the MDLIVE acquisition will not only increase patient access to care, but also help Cigna drive down healthcare costs to “below CPI (Consumer Price Index) and ultimately to zero or less.”
Evernorth, however, does not appear to be signaling that its expanded network of virtual providers will serve as gatekeepers for patients scheduling in-office visits with their providers. The Evernorth press release states MDLIVE’s 24/7 virtual care platform will “complement—not replace—the way customers and patients interact with their existing providers.” The goal, Evernorth says, is to achieve:
Earlier identification and diagnosis of critical care needs;
Faster and more seamless referrals to high-performing providers, including specialists and behavioral health; and
More convenient access to appropriate, affordable sites of service, and pharmaceutical fulfillment.
“From cost to complexity to quality, there is tremendous potential for progress in healthcare,” Evernorth President and Chief Operating Officer Eric Palmer said in the company press release. “As one, Evernorth and MDLIVE can accelerate meaningful change. MDLIVE will be part of the new, differentiated, and future-state care solutions that improve the patient experience, close the patient-provider accessibility gap, and bring providers opportunities to augment the services they currently offer. We’ll also have the opportunity to expand the reach of MDLIVE’s capabilities to Evernorth’s clients, as well as Cigna’s US Medical customers and clients.”
Opportunities for Clinical Laboratories That Can Support Virtual Care
Evernorth’s acquisition of MDLIVE expands Cigna’s health services portfolio of healthcare services and may provide opportunities for clinical laboratories that are prepared to support telehealth providers.
As virtual healthcare networks become a signature part of employee-sponsored health plans, clinical laboratories and pathology groups will need to keep pace with a changing healthcare landscape that puts a premium on remote and virtual visits. Outreach to health plans may be necessary to ensure clinical laboratories are included in an ever-growing virtual network.
