Walgreen’s plan to achieve global drugstore dominance

January 17

SAN FRANCISCO -- Walgreen's would like to be your go-to drugstore. Yes, you -- assuming you're a person who lives on Earth.


"We have a global footprint of 11,000 drug stores, 370 distribution centers operating in 25 countries with a pharmacy supply chain unmatched in the world," Walgreen's chief executive Gregory Wasson told investors earlier this week at the JP Morgan Healthcare Conference.

Here is where things stand right now. Over the past five years, Walgreen's has acquired four local drugstore chains, most notably Duane Reade's massive network in New York City. The drugstore has also struck up a partnerships with international pharmacy chains, buying a 45 percent share in British-based pharmacy chain Alliance Boots, with the option to buy the rest of the company in 2016. Walgreen's flat-out bought drugstore.com in 2011 and has contracted with a major drug supplier for their thousands of locations.


So, what exactly does a globally dominant drugstore look like? Wasson outlined a bit of that vision. First off, their stores are changing -- not rapidly growing in number, but growing in the types of services and products they offer.

"Our goal was to step out of the drugstore format and create something completely new and unique," he said. "These flagship stores: They allow us to push the needle in retail health-care innovations, and they elevate our brand in every market we have opened in."

To that end, Walgreen's has opened up 13 "flagship" stores that sell everything from fresh food, to flu shots in their on-site clinics (Matt Yglesias has done a very, very thorough post on what, exactly, a flagship Walgeen's store looks like). Approximately 600 of Walgreen's 8,200 stores in the United States have been converted into "Well Experience" pharmacies, which puts pharmacists outside the counter to encourage more interaction with patients.

There's also a focus on delivering more health care, particularly at a time when there is a shortage of primary-care doctors. Some of that means opening more primary-care clinics that offer visits during the weekend and in the evening. But there's also a play to adapt to how the health-care system is changing. Walgreen's announced last January that it would participate in three of the health law's Accountable Care Organizations, new partnerships where health-care providers' reimbursements get tethered to the health of their patients.

"I see this as a natural evolution," Walgreen's Senior Vice President Jeffrey Kang, who leads the pharmacy chain's work on health and wellness, said at that time. "Over the last five years we have been moving more aggressively into health services. Historically our pharmacists were just filling prescriptions. We've moved them out behind the counter in a more consultative role."

But that's just here in the United States -- and there's a global angle here, too. With its new international partnerships, Wasson argues, Walgreen's increased scale will make it cheaper to distribute pharmaceuticals and essentially give drug manufacturers one, larger corporation to interact with. More drugstores, the thinking goes, will lead to more efficiencies both in the United States and abroad.

"The greater scale and global reach...give us new opportunities to streamline the world's pharmaceutical supply and distrubtion, reduce costs and increase patient access to pharmaceuticals," Wasson said. The corner drugstore, in other words, hopes that being on lots and lots of corners will give it a big advantage -- one where they can essentially corner a very big chunk of the entire drugstore market.

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