Walgreens is closing all VillageMD primary-care clinics in Florida as the pharmacy giant slashes costs

The closures are part of Walgreens’ strategy to slash spending by $1 billion or more as the pharmacy giant’s healthcare business struggles with losses. Walgreens has a majority stake in VillageMD.

VillageMD and Walgreens representatives did not respond to questions about how many employees and patients would be affected. But a VillageMD spokesperson said in an email that the company is supporting patients by giving them resources about where they can receive care, helping them access their medical records, and answering their questions.   

Walgreens first said in October that it planned to close 60 VillageMD locations in “nonstrategic” markets as part of its cost-cutting efforts, but it didn’t name the locations. In a January earnings call, Walgreens’ new CEO Tim Wentworth said the company had completed nearly half of those closures.

Jefferies analysts had theorized that Walgreens was having trouble with the VillageMD centers co-located at its pharmacies, in particular, rather than the standalone clinics. All of the VillageMD clinics in Florida are attached to Walgreens stores, according to Jefferies’ January report.

Those co-located clinics are small and likely had a hard time recruiting enough doctors and building up enough patients to make a profit, Jefferies analysts Brian Tanquilut and Jack Slevin said.

“If you’re co-locating with a retail pharmacy it’s probably too small of a clinic to get the scale needed to make it work, to get the center-level economics to click,” Tanquilut said.

Walgreens’ push into primary care

Walgreens has been pushing further into healthcare over the past few years to compete with rival pharmacy chain CVS Health and deliver medical care directly to patients alongside its retail pharmacies.

It bought a majority stake in VillageMD in 2021 for $5.2 billion. At the time of the acquisition, Walgreens had planned to open 1,000 VillageMD clinics located adjacent to its pharmacies by 2027. In 2022, Walgreens spent another $3.5 billion to help VillageMD buy another clinic and urgent-care company, Summit Health-CityMD.

Combined with Summit, VillageMD had more than 680 locations last year, including 200 attached to Walgreens’ stores.

But Walgreens has struggled to get these businesses to turn a profit. The company’s healthcare segment that houses VillageMD reported an operating loss of $1.7 billion in fiscal 2023.

The VillageMD closures follow an overhaul of Walgreens’ executive team. Walgreens hired Wentworth in October after former CEO Roz Brewer stepped down. And earlier this month, the company said it was replacing its head of the healthcare business, John Driscoll, with Mary Langowski, a former CVS health exec and the CEO of Solera Health.

In an interview in January ahead of the news of his exit, Driscoll told Business Insider that Walgreens was still committed to its healthcare bets. He said that even though VillageMD was shrinking its locations, its revenue and membership continued to grow. Walgreens’ plan was to focus on growing VillageMD in large markets like Houston, Atlanta, and Phoenix.

“We are focusing our resources on a smaller set of markets where there’s plenty of growth upside, and it’s in that concentration at a local market level that we can really deliver the best results for our doc and patient partners,” he said in January.

In addition to its investment in VillageMD, Walgreens’s healthcare bets include home-health company CareCentrix and the specialty-pharmacy company Shields Health Solutions. Walgreens also struck a partnership with Pearl Health, a startup that uses technology to help doctors succeed in new payment models that reward them for keeping patients healthy.

Want to tell us about your experience with VillageMD? Contact Shelby Livingston at [email protected] and Rebecca Torrence at [email protected].