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Vision of leaders at CVS, WBA goes beyond the store

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Sci-fi thrillers in the 1950s first introduced the phrase “Take me to your leader.” If extraterrestrials were to land in today’s U.S. drug chain universe, they would meet two leaders who only recently arrived on the scene and move fast. It might be hard to find them.

Perhaps unimaginable a decade ago, the two major U.S. drug chains are led by women who didn’t “grow up” in the retail drug store industry. Chief executive officers Roz Brewer of Walgreens Boots Alliance (WBA) and Karen Lynch of CVS Health are leading reimagined drug chains further into services and technology. The days of the two companies racing to buy stores or wholesale distribution seem long ago.

Both leaders have been in place for about two years, and their visions are starting to impact their respective companies, although COVID undoubtedly delayed some of their transformative efforts. To be sure, there has been a general shift to services within the retail world. Dollar General is moving into the health clinic business. Kroger is in the clinical study business. But it is central to drug chain success, as health care broadly defined is their core. No one is counting store openings and/or store ­acquisitions.

Prior to joining WBA, Brewer’s experience points to change from the legacy drug store model. This was not the first time she migrated to a new industry, having joined Starbucks without coffee experience (she actually preferred tea) and Sam’s Club without prior retail experience. At Sam’s Club she helped usher in advance online grocery ordering. Also relevant, she has sat on Amazon’s board since 2019. Brewer’s early career included some HBA experience at Kimberly-Clark.

Lynch has a long track record in the health care industry outside of the drug chain world. Her prior experience at Aetna, Cigna and Magellan Health Services point towards services and technology. Lynch has a strong financial knowledge base, having begun her career with Ernst & Young as a certified public accountant. If there was a doubt about Lynch’s focus, CVS has withdrawn from the National Association of Chain Drug Stores.

Brewer’s M&A activity has been head-spinning and seemingly nonstop. The fall of 2022 was one-a-month explosions. In September, WBA optioned to acquire the remaining stake in Shields Health for $1.37 billion, which closed in December. In October, WBA completed the acquisition of CareCentrix, whose business is post-acute and home care and outsourced benefit management. In November, through WBA’s VillageMD subsidiary, Brewer, for $3.5 billion, acquired Summit Health, a primary, specialty and urgent care provider.

In-store health services also grew. The 2022 WBA annual report announced the successful co-location of 200 VillageMD clinics, bringing the system total to 393. Targeting 100 new Walgreens Health Corners, the chain actually hit the 112 mark. On the technical side, nine automated ­micro-fulfillment centers support approximately 3,000 stores. On the store operations front, all pharmacist task-based metrics are gone. Pharmacists can be pharmacists.

Significant legacy WBA businesses were jettisoned, in no small part, to pay for the transition. At year-end 2022, $1 billion in shares of AmerisourceBergen were shed, and the stake in Guangzhou Pharmaceuticals was sold for $150 million.

CVS moved along a similar path. September of 2022 CVS revealed plans to acquire Signify Health, a national network of 10,000 offering value-based care and health risk assessment. This acquisition was a “two-for” as Signify had acquired home health value-based care Caravan Health earlier in 2022.

Of greater importance, the company made its initial foray into primary care (with a focus on Medicare) by its huge $10.6 billion acquisition of Oak Street health in February of this year. CVS also focused on its existing stores. Lynch intends to transition a large number of the chains (almost) 10,000 stores into clinics.

In all, the leaders of the U.S.’s two largest drug chains are moving their respective companies to a new core driven by services and technology. If asked “take me to your leader” you might not find them in a store.

Ed Rowland is the principal of Rowland Global LLC (rowland-global.com).


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