Pessina, as usual, is several moves ahead

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Stefano Pessina

Stefano Pessina’s decision to step down as Walgreens Boots Alliance’s chief executive officer has triggered speculation in the retail pharmacy and drug wholesaling sectors about the change, its timing and what it might portend for the company. Those who have followed WBA since its formation and, prior to that, Alliance Boots, which Pessina merged with Walgreen Co. in late 2014, will recognize that he is doing what he has always done — look several moves ahead in order to lay the groundwork for the future.

In recent years, Pessina, who will become WBA’s executive chairman once a new CEO is chosen, indicated that he was considering giving up the chief executive’s role, signaling the time was right for the company’s board to think about a succession plan. By putting a new CEO in place and giving that person an opportunity to work directly with Pessina, the company will equip that individual to carry out and build upon the many initiatives that Pessina started to sharpen WBA’s competitive edge, in both health care and retailing, in coming years.

During five and a half years as CEO, Pessina has put programs in place, often in partnership with other companies that possess capabilities outside WBA’s areas of expertise, designed to help the company achieve its top four strategic priorities — turning its stores into neighborhood health care destinations, restructuring the retail offerings, accelerating digitization, and stepping up cost management efforts to free capital for reinvestment in the business. Deals announced in recent weeks — one with VillageMD, a provider of value-based primary care service, another with Microsoft and Adobe — illustrate important aspects of the company’s long-term strategy.

In the wake of a successful pilot program launched last November at five Walgreens drug stores in greater Houston, WBA and VillageMD will open between 500 and 700 Village Medical at Walgreens clinics staffed by physicians in more than 30 markets over the next five years. The initial rollout, financed in part by a $1 billion investment in VillageMD (which promises to give WBA a 30% stake in the company), is projected to be followed by hundreds of additional locations.

“These clinics at our conveniently located stores are a significant step forward in creating the pharmacy of the future,” Pessina said when the agreement was announced in early July, “meeting many essential health needs all under one roof as well as through other ­channels.”

In addition to integrating the pharmacist more closely in the patient care team — something that VillageMD data shows raises adherence with medication regimens and enhances outcomes — the partnership will give patients access to round-the-clock care through telehealth technology. In-home visits, as appropriate, are also envisioned.

The deal with Microsoft and Adobe, announced at the end of June, marks the start of the second phase of WBA’s digital transformation. Together, the partners will develop technology and a customer insights platform to facilitate personalized interactions with shoppers, seamless in-store and online experiences, and comprehensive customer service.

When WBA first teamed up with Microsoft in January 2019 to develop new technology, delivery models and retail innovations to improve health care, and migrate the former’s global systems to the latter’s Azure Cloud, Pessina noted that in the future digital tools, not the stores, would be the first point of contact with WBA for most consumers. The latest agreement accelerates that transition, with the goal of making personalization on a mass scale a reality. In addition to making products and services available to Walgreens and Boots shoppers whenever, wherever and however they want to receive them, the platform will deliver appropriate offers and other content to customers.

The agreements with VillageMD, Microsoft and Adobe are just the tip of the iceberg in terms of the steps WBA has taken during Pessina’s tenure as CEO to better serve patients and customers, the communities across the country where it operates, and its shareholders and business partners. To cite just a few additional examples, the company since 2015 has acquired 1,942 Rite Aid stores to augment its position as the biggest drug chain in the U.S.; added LabCorp diagnostic clinics to more than 500 locations; formed a group purchasing organization with supermarket operator Kroger, with which it is also testing the Kroger Express format in selected drug stores; and purchased a 40% stake in GuoDa, the top pharmacy chain in China. The list goes on.

Whoever succeeds Pessina as WBA’s chief executive — the company has at least two compelling candidates within its ranks, co-chief operating officers Ornella Barra and Alex Gourlay — will clearly benefit from the investments made since the merger of Walgreens and Alliance Boots. In addition, he or she will have the advantage of interacting with Pessina, who as executive chairman can be counted on to remain the guiding force at WBA.


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