The proposed acquisition of Rite Aid by Walgreens has the potential to expand Walgreens’ portfolio of retail clinics and build on its efforts to play a more integral role in the provision of primary-care services.
The $17.2 billion cash deal, which is the latest in the healthcare industry’s recent tide of consolidation, would make Walgreens the largest pharmacy chain in the nation and would calcify its strength as a leading provider of health products, medical devices, prescription drugs, and retail clinics.
Recently, CVS/minuteclinic opened its 1,000th retail clinic, while Walgreens lags well behind with 400 locations nationwide. Walgreens is preparing to open 25 new clinics in Washington and Oregon as part of a collaboration with Providence Health Services, and if all goes well, it may pursue similar arrangements with other health systems.
Now, with the proposed acquisition of Rite Aid, Walgreens has another potential avenue to grow its retail clinic business. Although Rite Aid’s subsidiary RediClinic has fewer than 85 clinics, Rite Aid has about 4,600 stores and announced earlier this year the addition of at least 50 clinics by 2016. Even if Walgreens has to close some of its 8,200 stores to win regulatory approval of the deal, Walgreens’ total footprint will be greater than CVS, which should have more than 9,000 stores after it adds Target’s 1,660 pharmacies to its current 7,800.
Aside from creating a larger footprint for Walgreens, the acquisition would also integrate Rite Aid’s health and wellness strategy into Walgreens’. Rite Aid has nearly 1,900 wellness stores specifically modeled to appeal to a health conscious consumer base. The wellness stores offer organic and gluten-free products, natural beauty and health products, and consultation rooms with pharmacists. By championing the ethos of the empowered consumer, Rite Aid has positioned itself for long-term growth, a characteristic that should benefit Walgreens as it looks to become a leader in innovative, more personalized healthcare. In-store clinics with disease management programs or preventive health services may be a natural extension of conscious consumers’ desires to be accountable for their health.
Overall, the acquisition of Rite Aid more directly impacts pharmacy business than retail clinics. Even so, as retail clinics become more entwined with drug stores’ strategies, the synergies realized by a combined Rite Aid and Walgreens could usher in additional retail clinics and expanded health services in an effort to better compete with CVS and increase earnings.