When it comes to health care, people’s needs have grown far more sophisticated but also more challenging, pressured by shifting insurance requirements, increasing rates of chronic illnesses, and the serious health risks associated with the global coronavirus pandemic. As a key actor in the health care market, drug stores and their business models have had to make some substantial adjustments to meet consumers’ demands for more personalized, effective health care options. Such claims prompt little argument. But the way in which drug store chains are revising their approaches vary widely, reflecting the retailers’ unique views about the best way to support consumers’ search for easily accessible, affordable, convenient, and safe medical services.

At Walgreens for example, up to 700 clinics, staffed by physicians, will soon be installed in existing drug stores. The retailer is partnering with, and purchasing a 30 percent stake in, a primary health care provider called VillageMD, which maintains a network of approximately 2800 medical professionals. Walgreens anticipates that these doctors and nurses will work together with its pharmacists to provide integrated health care services. The clinics-within-stores will range in size from 3300 to 9000 square feet and plan to accept various insurance plans.

In contrast, in CVS HealthHub locations, doctors will not be available on site, but other health care tools will be, including kiosks to review information and take blood pressure readings. A Care Concierge also can advise consumers on what sorts of services are available to them through CVS, such as linking them to a nurse practitioner on duty at a nearby MinuteClinic, developing plans to manage chronic conditions, and facilitating their access to necessary medications, both prescription and over the counter. The Hubs thus will function in parallel with the MinuteClinics and Caremark pharmacy services that CVS already operates.

Although it is not primarily a drug store, Walmart also has a prominent role in this market, and it is starting to experiment with providing health care services. Offering flat-rate pricing, its on-site clinics (some in stores, some in close proximity) provide medical, vision, dental, and mental health services (e.g., $25 for dental x-rays, $27.96 for a flu shot). The retail giant previously had introduced a few urgent care clinics, but the most recent initiative instead signals that Walmart hopes to reach its existing market of price-sensitive shoppers, around 140 million of whom visit its stores every week, who also might prefer to pay a low, flat rate to address their general medical concerns.

Despite their differences, all these expansions reflect the similar trends affecting retailers more generally, including shrinking profits from product sales and a growing recognition of their need to integrate service offerings to keep their customers satisfied. For drugs store retailers specifically though, this trend features some critical contingencies and concerns, and it is intensified by the widely recognized crisis in health care. For people who struggle with rising health care costs, want to avoid crowded doctors’ offices, and need convenient access to tests and real-world solutions, the local drug store offers great promise. The form that this service provision ultimately will take remains an open question, but the trend toward greater services is clear.

Discussion Questions:

1. What factors are driving this transition toward service provision among drug store retailers?
2. Which plan seems most likely to succeed, across the three versions presented herein? Why?

Source: Sharon Terlep, “Walgreens to Open Doctors’ Offices at Its U.S. Stores,” The Wall Street Journal, July 8, 2020; George Anderson, “Will Doctors Provide a Cure-All for Walgreens’ Competitive Ills?” Retail Wire, July 9, 2020; George Anderson, “Will CVS’s HealthHUB Concept Change What Consumers Expect of Drugstores?” Retail Wire, February 14, 2019; Tom Ryan, “Would You Go to Walmart to See a Doctor?” Retail Wire, September 6, 2019.