For now, it appears CVS Health and Walgreens Boots Alliance are going down different paths and at different paces to providing healthcare services inside their stores.
But neither pharmacy chain rival is turning away from retail healthcare as a critical growth strategy.
News this week that CVS Health is expanding its new “HealthHub” concept to 1,500 stores across the U.S. within three years provides clarity to the drugstore chain’s plan to fill unused and underperforming retail space with more healthcare services, medical supplies and equipment.
CVS earlier this year began to pilot three “HealthHUB” locations in Houston that dedicate more than 20% of the store to health services, adding thousands of new “wellness items” as well as additional services at its MinuteClinics in the health hub stores. New CVS employees in the HealthHUB stores will include a “health concierge” and a dietician, executives said this week.
“We opened our first three stores in the Houston area earlier this year, and we’re very encouraged by the patient engagement and satisfaction scores, as well as the utilization of our health care services,” CVS chairman and CEO Larry Merlo told attendees Tuesday at the company’s annual investor day.
The rapid expansion this year of HealthHUBs in Houston, Atlanta, Tampa and the market that includes Philadelphia and southern New Jersey this year is a sign to investors that money is to be made. By the end of 2021, CVS will have the HealthHUB concept in 1,500 stores across the country.
“The HealthHUB program is expected to be a long-term driver of growth across all CVS businesses,” analyst Ann Hynes of Mizuho Securities USA wrote in a research note Wednesday. “Early results back indicate HealthHUB stores outperform traditional CVS stores.”
Though CVS has partnerships with various medical care providers in different markets across the country, its HealthHub strategy appears to be taking on a national brand unlike Walgreens healthcare push.
Walgreens has signed partnerships with health insurance companies and medical care providers to collaborate on in-store health services as well as medical care adjacent to the drugstore.
Walgreens in April announced a deal with the primary care provider VillageMD, which is developing clinics next to Walgreens in Houston as a precursor to a potential national rollout. And in the Kansas City market, Walgreens has a joint venture with the health insurer Humana to develop senior health clinics inside the drugstores.
For the last two years, such partnerships have been testing concepts and piloting healthcare services and technology to develop what executives have called the “drugstore of the future.”
But Walgreens executives continue to stress many of these partnerships like the Humana senior clinics are in the “very early stage” though they are going. That has been frustrating to some analysts and investors who follow the company.
In April, Walgreens executives weren’t projecting profits from partnerships in the near term.
“Beyond 2022, we expect a rising contribution from partnerships,” Walgreens global chief financial officer James Kehoe told analysts in April on Walgreens fiscal second quarter earnings call. “However, until then, our EPS growth model is not dependent on a material ramp-up of any of the existing partnerships.”
But Walgreens may be under more pressure to reveal more details of its retail healthcare strategy when the company reports quarterly earnings later this month.
Date: June 11, 2019