People involved in the industry commonly refer to the companies at its center as chain pharmacies. The trajectory of the business over the past 15 or 20 years has, however, arguably made the term something of a misnomer. During that period, CVS Health, among others, entered pharmacy benefits management; Walgreens Boots Alliance carved out a major stake in pharmaceutical distribution; and several companies took different paths to adding health clinics to their stores.
The transformation of the major chain pharmacy operators into diversified health care companies continues apace. CVS is a case in point. The company, which first transcended the definition of a pharmacy chain in spectacular fashion with its acquisition the Caremark PBM in 2007, and did so again in 2018 by buying health insurer Aetna, persists in its quest to extend its reach in an effort to make health care more accessible, affordable and effective.
The company late last month announced the formation of CVS Health Ventures, a corporate venture capital fund, with $100 million earmarked for investments in early-stage enterprises dedicated to innovation in digital health care. Headed by Josh Flum, the fund formalizes a practice at the CVS and Aetna businesses, which together already have made more than 20 direct investments.
“We have deep experience investing in innovative companies,” says Flum, who is executive vice president of enterprise strategy and business development at CVS Health. “We will build on this experience by providing capital to our start-up and venture partners and helping them scale more rapidly through commercial relationships with our business units. This is an exciting opportunity to accelerate innovation and effectively bring new solutions to the consumer health space.”
As Flum indicates, CVS Health’s expertise and connections may prove as valuable to its partners as financial support. To cite two examples, CVS’ increasing focus on social determinants of health and commitment to expanding the scope of services it offers are clearly a plus for existing partners Unite Us, a technology platform that links health care and social service providers, and LumiraDx, a point-of-care diagnostic system.
WBA is another company that is diversifying its business by making significant investments in health care technology. In addition to revamping the systems that power its pharmacy and front-store operations, WBA is in the process of developing a tech-enabled health care start-up. Slated to be officially launched later this year, the new stand-alone company’s assignment will be to create a patient-centered ecosystem offering solutions via an integrated omnichannel platform. WBA executive chairman Stefano Pessina has said that in time he expects the new entity “will become as big, if not bigger, than the company we have today,” adding that Roz Brewer’s experience with digital and technology transitions is one of the reasons she was chosen to succeed him as WBA’s chief executive officer.
Other recent WBA investments in iA and VillageMD promise to enhance its core drug store operations and more. By taking a majority stake in the former company, a supplier of software-driven pharmacy automation, WBA intends to accelerate the shift of many tasks related to the dispensing of medications from stores to central fill facilities. The expansion of WBA’s partnership with the latter, bringing its total investment to $1 billion, will greatly accelerate the addition of primary care facilities to its pharmacy locations. As a result of the deal, 600 to 700 Village Medical at Walgreens clinics in some 30 markets will open within the next four years.
The departures from standard practice are not limited to chain drug stores. The world’s largest retailer is testing the waters with the ambitious Walmart Health format. Still restricted to a small percentage of Supercenters, the outlets offer a comprehensive suite of services, including primary and urgent care; X-rays; diagnostic testing; lab work; and dental, optical and hearing care; as well as counseling services. Customers can also obtain help sorting through insurance and other payment options and take advantage of classes on such subjects as diabetes education, nutrition, prenatal care and various types of exercise. As this issue was about to go to press, Walmart Health announced that it has entered into an agreement to acquire MeMD, a provider of comprehensive services for on-demand care for common illnesses, injuries and behavioral health issues.
Kroger is another company that is working to take on a higher profile in health care. The supermarket chain is not only working to leverage the link between its health care and food offerings, it is expanding into areas like home diagnostics. For instance, earlier this year Kroger Health started offering home collection COVID-19 test kits under its own brand name.
Clearly, a lot more is going on at what are commonly referred to as chain pharmacies than filling scripts and counseling patients. The trend is sure to gain momentum as well-financed industry leaders invest in turning their stores into community health care centers. The industry has performed impressively during the COVID pandemic — first providing easily accessible destinations for testing and now as a source for immunizations. The time has never been more propitious for it to secure a much bigger role in health care delivery.