Retailers made a bolder move into healthcare in 2022, making several big acquisitions at high prices. Interestingly, a theme emerged that cut across all deals: access.
The key players were Amazon, CVS Health and Walgreens. Amazon announced in July that it plans acquire primary care provider One Medical for about $3.9 billion. Shortly thereafter, CVS Health made headlines when it said it would purchase home health company Signify Health for nearly $8 billion. Meanwhile, Walgreens Boots Alliance has made strides in both home health and primary care. He announced in October that he would acquire its remaining 45% stake in home care company CareCentrix for $392 million and that its VillageMD business will buy Summit Health-CityMD for $8.9 billion. In September, so did Walgreens announced that it is acquiring the remaining 30% of specialty pharmacy company Shields Health Solutions for $1.37 billion.
Regardless of the game or the playmaker, it’s clear that retailers are trying to reach more consumers in more convenient places, one expert said.
“Whether it’s CVS’s acquisition of Signify Health, Amazon’s acquisition of One Medical or Walgreens subsidiary VillageMD’s move to acquire Summit Health, the theme is clear,” Tunde Akinniranye, an analyst at 7wireVentures, wrote in an email. “There is a growing unmet need to meet consumers where they are, and this is increasingly moving away from the four walls of the hospital. Retail giants see this as an opportunity to own the front door and increase access to care at home, in-store or virtually.”
“While not an M&A, the agreement represents a substantial commitment and certainly demonstrates the retailer’s intent to increase its share of the traditional healthcare world,” Moore wrote in an email.
While increasing access to people in a convenient way is a top priority for retailers, another goal that underlines these deals is the shift to preventative care, said Simon Gisby, director of Deloitte.
“It’s an extension of a move to say, ‘How can we start thinking about [preventive] care? How can we start to think about the fact that if a person has one particular condition, what is the likelihood that they will have another condition, and can we preempt that?” Gisby said in an interview. “I think ultimately it’s about saying, ‘How do we look at the population or the individual holistically?’ How can we help them manage their own care?’
However, these acquisitions weren’t just about expanding access to healthcare and catching problems upstream. They were also partly related to competition, said Ellen Herlacher, director of LRVHealth. The deals were both offensive and defensive for retailers as they try to emerge as leaders in the field.
But retailers aren’t the only ones competing, Herlacher said, noting that acquisition targets are also struggling to complete deals.
“We’ve seen tremendous activity in the digital health space, in the primary care space, in the home care space,” she said in an interview. “So for people on the acquisition side, there’s probably going to be a rush to make those connections … At some point, if you’re a home health company or a primary care innovator that doesn’t fall under one of these consolidation umbrellas, what do you remains? I think there will probably be a rush from both sides to find their matches.”
After a very active M&A atmosphere this year, what can we expect in 2023? This is just the beginning, Akinniranye said.
“[I think] 2022 was a harbinger of what was to come in 2023 — a continuation of the healthcare retail wars,” he stated. “The market is ripe for consolidation and these companies have strong balance sheets. It’s not a question of if, but when – and next year is shaping up to be the perfect backdrop for a flurry of M&A activity.”
The priorities are likely to remain the same: primary care, home health and digital health, several experts said. CVS Health has already stated that wants to move into primary care and is rumored to be looking at Chen Med and other companies. However, behavioral health may also be of interest to retailers, predicts Ash Shehata, partner and industry leader for health plan consulting at KPMG.
“Behavioral health has become an area of great awareness for our society and our communities,” he said. “Healthcare organizations are putting more and more resources into this.”
Other retailers may join Amazon, CVS Health and Walgreens in the M&A frenzy, Herlacher predicted. One company she expects to step in more visibly is Best Buy, which has already made inroads into health care. For example in 2021 announced acquisition plans Current health, a technology platform for home care. Another retailer she expects to make moves is Costco, which is a trusted brand among consumers, she said. The company already offers health services such as vaccinations, eye exams and a pharmacy.
Herlacher added that he could see dollar stores like Dollar General and Dollar Tree moving into healthcare. These stores have a large footprint across the country and have the opportunity to expand access to medical services. Dollar General even hired Albert Wu as its first chief medical officer in 2021, representing her interest in healthcare.
“They are located in places where we know there is a disproportionate medical need,” she said. “How do they think about taking that presence and redirecting it for potential healthcare?”
Regardless of the retailer, healthcare deals aren’t slowing down anytime soon.
“I think we’re in the first inning of what retailers are doing right now,” Herlacher said.
Photo: Kritchanut, Getty Images