VillageMD, a primary care company majority-owned by Walgreens Boots Alliance, is looking at a possible merger with physician practice group and urgent care provider Summit Health.
The merger would create an entity valued between $5 billion and $10 billion, raising questions about Walgreens' entrance into the primary care world and increasing its direct relationship with patients.
In 2021, Walgreens purchased a majority stake in VillageMD for $5.2 billion. At the time of the transaction, CNBC reported that Walgreens was aiming to open 1,000 VillageMD clinics by 2027.
Walgreens is one of many large healthcare disruptors working to build a more significant primary care presence. Walgreens competitor CVS Health plans to acquire home health company Signify for $8 billion, and tech giant Amazon entered into an agreement in July to purchase primary care company One Medical.
Summit Health was created in 2019 through a merger between Summit Medical Group and urgent care provider CityMD. The combined entity now has over 370 urgent care locations spread across the Northeast and Oregon.
Walgreens' recent fourth-quarter earnings report showed digital sales growing by 14 percent. However, compared to last year, the company's fourth-quarter sales were down 5.3 percent.
"Fiscal 2023 will be a year of accelerating core growth and rapidly scaling our U.S. healthcare business," Walgreens CEO Rosalind Brewer said in a company press release. "Our execution to date provides us visibility and confidence to increase the long-term outlook for our next growth engine and reconfirm our path to low-teens adjusted [earnings per share] growth."
The company reported that they have opened 342 total VillageMD clinics and 82 clinics in the last year. Walgreens aims to have 200 co-located clinics open by the end of the year; it currently has 152 open.
As Walgreens weighs the merger, it is shaking up its workforce policies as it moves toward pharmacist evaluations based on patient care and outcomes rather than "task-based metrics."
Additionally, HHS is set to investigate the pharmacy giant to determine whether it has complied with federal law since the Supreme Court overturned Roe v. Wade.
If the merger comes to reality, it will serve as another reminder of the escalating arms race between major healthcare disruptors entering the primary care and urgent care sectors.