Yahoo Finance Walgreens CEO: 'We don't need to own a health plan in order to create value'
Walgreens (WBA) is not pivoting away from its stores to focus on healthcare services, as many predicted with the transition to new CEO Tim Wentworth. In fact, it's the opposite.
Wentworth, a health industry veteran who most recently served as the CEO of Express Scripts, which was acquired by Cigna (CI) in 2018, told Yahoo Finance he doesn't think the retail giant needs to grow in new directions — aside from participating in clinical trials.
In fact, he is bullish on his focus on stores, though that doesn't mean Walgreens isn't considering closing more outlets in the future. Wentworth said the company is deciding what the right footprint size is for its stores — and the number of products it sells. This also includes growing the number of house-branded products, Wentworth said during the JPMorgan healthcare conference in San Francisco on Monday.
He also pointed out that vertical integration — the way CVS (CVS) and UnitedHealthcare (UNH) have grown with insurance services, pharmacy benefits, and care provision all under one roof — is not where Walgreens is headed.
"We don't need to own a health plan in order to create value for that health plan and be paid fairly for it," Wentworth added.
Walgreens' past few years have been tumultuous. Pre-pandemic, the company was struggling with its front-of-store sales and had made significant investments in digital upgrades to its retail systems.
Front-of-store sales, which is everything that isn't a prescription, have been weaker across pharmacies for years as they compete with e-commerce sites — leaving them little choice but to shutter low-volume stores despite the gap it leaves for patient access to pharmacy services. (During the pandemic, the role of pharmacies in providing COVID-19 treatments, tests, and vaccines helped boost the bottom line.)
In 2019, Walgreens reported revenues of about $120 billion, compared to $139 billion in 2022.
Since the end of the pandemic, Walgreens has executed a strategy that focused more on healthcare services, with speculation that it would chase vertical integration in a big way.
Under previous leadership, the company chose to diversify with the acquisition of VillageMD, but Wentworth hasn't been enthusiastic about the benefit of the asset. He told Yahoo Finance recently he believes it will add to the bottom line but not the top line.
On Monday, he added that VillageMD is a well-performing asset, but it may not be an area of growth for the company, which includes the hiring of additional doctors and growing the physical footprint. When asked if it was possible that VillageMD could end up on the chopping block, Wentworth replied with a standard "Everything is on the table."
The company's stock is down more than 31% in the past year, trading at the same levels it was in the early 2000s.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
