Retailers marched more boldly into healthcare in 2022, making several major acquisitions with big price tags. Interestingly, a theme that cuts across all the deals emerged: access.
The key players were Amazon, CVS Health and Walgreens. Amazon announced in July that it plans to acquire primary care provider One Medical for about $3.9 billion. Shortly after, CVS Health made headlines when it said it will purchase home health company Signify Health for nearly $8 billion. Walgreens Boots Alliance, meanwhile, made moves in both home health and primary care. It announced in October that it will 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, Walgreens also announced that it is acquiring the remaining 30% stake of specialty pharmacy company Shields Health Solutions for $1.37 billion.
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Regardless of the play or the playmaker, it’s obvious that retailers are trying to reach more consumers in more convenient places, one expert said.
“Whether it’s CVS’ acquisition of Signify Health, Amazon’s acquisition of One Medical, or Walgreens subsidiary VillageMD’s move to acquire Summit Health, the theme is clear,” wrote Tunde Akinniranye, an analyst at 7wireVentures, in an email. “There is a growing unmet need to meet consumers where they are and that is increasingly moving away from being within the four walls of the hospital. Retail giants are seeing this as an opportunity to own the front door and increase access to care either at home, in-store, or virtually.”
Another move worth mentioning is Walmart’s 10-year value-based partnership with UnitedHealthcare, said Marissa Moore, health tech investor at OMERS Ventures.
“Though not M&A, the agreement represents a material commitment and is certainly demonstrative of the retailer’s intent to grow its stake in the traditional healthcare world,” Moore wrote in an email.
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A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
While increasing access to people in a convenient manner is a major priority for retailers, another goal that underscores these deals is the move to preventive care, said Simon Gisby, a principal at Deloitte.
“It’s a continuation of a move to say, ‘How can we start thinking about [preventive] care? How can we start thinking about the fact that if an individual has one particular condition, what is the likelihood that they may have another condition and can we get ahead of managing that?’” Gisby said in an interview. “I think at the end of the day, it’s about saying, ‘How do we look at the population or the individual holistically? How can we help them manage their own care?’”
These acquisitions weren’t only about expanding access to healthcare and catching problems upstream, though. They were also partially about competition, said Ellen Herlacher, principal at LRVHealth. The deals were both offensive and defensive for retailers as they try to emerge as leaders in the field.
But the retailers aren’t the only ones competing, Herlacher said, noting that acquisition targets are also jostling to complete deals.
“We’ve seen a tremendous amount of activity in the digital health space, in the primary care space, in the home care space,” she said in an interview. “So for the folks on the acquiree side, there’s probably going to be a rush to make those connections … At some point, if you’re the home health company, or the primary care innovator that hasn’t fallen under one of these consolidation umbrellas, what does that leave you with? I think there will probably be a rush on both sides to find their matches.”
After a very active M&A atmosphere this year, what can we expect in 2023? This is only the beginning, Akinniranye said.
“[I think] 2022 was a harbinger for what’s to come in 2023 — a continuation of healthcare’s retail wars,” he declared. “The market is ripe for consolidation and these companies have strong balance sheets. It’s not a matter of if, but when — and next year is gearing up to be an ideal backdrop for a flurry of M&A activity.”
The priorities will likely remain the same: primary care, home health and digital health, several experts said. CVS Health has already stated that it wants to move into primary care and is rumored to be looking at Chen Med and other companies. However, behavioral health may be of interest for retailers as well, predicted Ash Shehata, partner and advisory industry leader of health plans 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 in it.”
Other retailers may join Amazon, CVS Health and Walgreens in the M&A mania, Herlacher predicted. One company she expects to step in more visibly is Best Buy, which has already forayed into healthcare. For instance, in 2021, it announced plans to acquire Current Health, a care-at-home technology platform. Another retailer she anticipates making moves is Costco, which is a trusted brand among consumers, she said. The company already offers healthcare services like vaccines, eye exams and a pharmacy.
Herlacher added that she 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 its interest in healthcare.
“They’re situated in places where we know there’s a disproportionate medical need,” she said. “How do they think about taking that presence and repurposing it for potential healthcare?”
Regardless of the retailer, healthcare deals won’t be slowing down anytime soon.
“I think we’re in the first inning of whatever retailers are doing right now,” Herlacher said.
Photo: Kritchanut, Getty Images
