Walgreens expands primary care presence with $8.9 billion purchase of Summit Health from VillageMD - MedCity News

VillageMD, supported by Walgreens Boots Alliance, announced On Monday, it will acquire Summit Health-CityMD for $8.9 billion, expanding Walgreens’ reach into primary care. The move was a bold and smart one for the retail giant, an industry expert said.

Summit Health-CityMD provides primary, specialized and emergency care. Together with a primary care provider VillageMDthe combined organization will have more than 680 supplier locations in 26 markets, according to a news release.

“Summit is viewed as one of the highest quality assets in the market,” Michael Greeley, co-founder and general partner at Flare Capital Partners, said in an interview. “It has a very substantial physician footprint and there are only very few large-scale primary care assets.”

The announcement comes amid a flurry of merger and acquisition news, particularly in the primary care and home health space. Amazon recently announced its plan to acquire primary care provider One Medical for $3.9 billion, while CVS Health is purchase home health provider Signify Health for nearly $8 billion. Walgreens also recently announced that it would acquire its remaining 45% stake in CareCentrix for $392 million.

And with CVS Health and Amazon making big moves in health care, the Summit Health deal was both offensive and defensive for Walgreens, Greeley said.

“I think it was a great offensive move from one standpoint,” Greeley said. “You could also say it was somewhat of a defensive move because their direct competitor CVS made a very bold acquisition. Amazon with PillPack is entering pharmacies and has made some pretty interesting moves in healthcare. I think at some level Walgreens had to do something because they were at risk of being painted into this low-growth retail space and now they’re in a much larger, addressable or profitable part of the market.”

Another industry expert said the deal would allow Walgreens to reach even more consumers.

“For Walgreens, this transaction expands the primary care presence and allows the company to deepen its connection with communities and consumers,” Ellen Herlacher, director of LRVHealth, wrote in an email.

She added that the deal is a natural next step for Summit Health, which is backed by private equity firm Warburg Pincus.

“In the first chapter, VC-backed medical groups created affordable, personalized primary care,” Herlacher said. “In the second chapter, they scaled up and entered the best urban areas. And now we’re in the third chapter where they’re consolidating and cementing their presence by becoming suppliers to trusted retailers like Walgreens.”

The $8.9 billion purchase of VillageMD includes investments from Walgreens Boots Alliance and Evernorth, a subsidiary of Cigna, which will become a minority owner of VillageMD. Walgreens will invest $3.5 million through an equal mix of debt and equity for the acquisition.

The purchase will combine VillageMD’s expertise in value-based care with Summit Health’s expertise in providing multispecialty care, the news release stated.

“Adding our expertise and geographic coverage to VillageMD’s proven, value-based approach to primary care will improve the lives of so many patients and physicians across the country, helping to reduce healthcare costs and improve the health of our communities” , Jeff, CEO of Summit Health-CityMD Alter said in a statement.

Roz Brewer, CEO of Walgreens Boots Alliance, said the deal will significantly improve access to healthcare in the US

“The addition of Summit Health-CityMD to VillageMD is transformational for our US healthcare segment and reinforces our intent to create greater access to quality healthcare across the continuum of care,” Brewer said in the news release. “This transaction accelerates growth opportunities through a strong market footprint and broad network of providers and patients in primary, specialty and urgent care.”

The deal is subject to approval and is expected to close in the first quarter of 2023.

Photo: designer491, Getty Images

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