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Walgreens Goes Private: Why Its Healthcare Bet Failed
Jared Dashevsky, MD
March 09, 2025 • Estimated Reading Time: 13 minutes
GRAND ROUNDS
Walgreens Goes Private: Why Its Healthcare Bet Failed
Walgreens is closing the chapter on its century-long run as a publicly traded company, opting to go private in a high-stakes private equity deal. Over the years, I’ve covered the company’s ambitious—yet often troubled—efforts to expand beyond retail pharmacy, from its push into clinical trials to its costly VillageMD investment.
Now, with Walgreens handing the reins to private equity, it’s the perfect time to reflect: How did we get here?
In this article, I’ll break down Walgreens’ exit plan, examine its missteps in vertical integration, and explore what this shift means for patients, physicians, and the broader healthcare system.
The Deets: Walgreens Goes Private
Walgreens Boots Alliance is set to go private in a $23.7 billion transaction led by Sycamore Partners, a private equity firm specializing in retail and consumer investments. The deal includes:
A cash payout of $11.45 per share, meaning shareholders will receive this amount for each share they own, which is 29% more than what Walgreens stock was worth before news of the sale.
An additional potential payout of up to $3.00 per share, depending on how much Walgreens can sell off its investments in VillageMD, Summit Health, and CityMD in the future.
Sycamore Partners has a track record of turning around struggling retail brands such as Staples, Belt, and Hot Topic. While it’s known for reviving retail chains, healthcare is an entirely different beast (as we know).
This go-private deal is probably one of the most significant shakeups in retail healthcare, raising questions about whether Sycamore can succeed where Walgreens itself struggled.
Walgreens’ (Flopped) Vertical Integration Strategy
For decades, Walgreens thrived as a pharmacy-first business—filling prescriptions, selling over-the-counter medications, and offering basic health services like vaccinations. But to evolve into a full-fledged healthcare provider, Walgreens bet big on healthcare (the “caring” part).
Vertical Integration Strategy
Walgreens’ expansion into healthcare aimed at controlling more aspects of patient care. The company built a presence across multiple healthcare segments:
Primary & Urgent Care: Walgreens acquired a majority stake in VillageMD, which in turn purchased Summit Health for $9 billion in 2022. This deal expanded its footprint to 2,000 primary care doctors across 700 locations, managing 7 million patients and 125,000 Medicare Advantage beneficiaries.
Home Health: In October 2022, Walgreens acquired CareCentrix, a post-acute and home healthcare provider, aiming to extend care beyond clinics and into patients’ homes.
Value-Based Care: Walgreens partnered with Pearl Health in September 2023 to focus on managing patients under fixed-rate payments, particularly within Medicare Advantage. This reflected Walgreens’ commitment to value-based primary care.
Clinical Trials: Like CVS Health and Walmart, Walgreens launched a clinical trials division, aiming to leverage its retail footprint for decentralized trials. They even partnered with Boehringer Ingelheim to improve trial diversity.
Vertical Integration Struggles
Walgreen’s investment in VillageMD was supposed to make it a major player in value-based primary care by embedding clinics into its retail stores. But instead of driving growth, the effort became a financial loss.
By the second quarter of 2024, Walgreens reported a $6 billion loss, largely due to the declining valuation of VillageMD. This was a staggering turn of events for a company that had planned to open 600 VillageMD clinics by 2025. While 680 clinics were eventually launched across 26 markets, they failed to achieve sustainability. Many clinics were simply too expensive to run, struggling with low patient volume and shrinking Medicare reimbursements.
Several key factors doomed Walgreens’ vertical integration strategy:
Retail and Healthcare Don’t Always Mix: Running a pharmacy or any other type of transactional business in healthcare requires patients to come in, pick up a prescription (or toilet paper), and leave. Primary care, on the other hand, requires long-term relationships, chronic disease management, and a deep understanding of insurance reimbursement models. Walgreens vastly underestimated the operational complexity of integrating these two models.
Primary Care Takes Time to Turn a Profit: Unlike retail, where revenue is immediate, primary care clinics take years to reach profitability. Walgreens poured billions into VillageMD but saw nothing in return except mounting losses.
Physician Staffing and Utilization Challenges: Unlike urgent care or telehealth, primary care clinics need a steady patient panel to survive. Many VillageMD locations struggled to fill their patient slots, especially in areas where Walgreens didn’t have a strong reputation as a healthcare provider.
Walgreens’ downfall was inevitable. In October 2023, Walgreens announced plans to shut down 60 underperforming VillageMD clinics and exit five markets to cut costs. But after its rough Q2 2024 earnings report, the company increased that number to 160 closures. Walgreens has been looking to sell off VillageMD—a clear admission that this model wasn’t working.
Dashevsky’s Dissection
Why has CVS Health managed to thrive in retail healthcare while Walgreens and Walmart have struggled?
The answer: better strategy and execution.
CVS Health bought Aetna, securing an insurer-driven advantage, and later acquired Oak Street Health, a well-run primary care group focused on Medicare Advantage. Walgreens, in contrast, lacked an insurer partner, and VillageMD never had the scale or efficiency of Oak Street. Add in CVS Health’s PBM-insurer synergy, and the gap in execution becomes clear.
With Sycamore Partners now in control, expect aggressive cost-cutting—anything unprofitable will be shut down or sold off. Here’s what that could mean:
For Patients: If Sycamore shuts down VillageMD clinics or sells off its primary care assets, this could mean fewer options for primary care access, especially in areas where VillageMD played a key role. Pharmacy closures could also disrupt access to essential medications, particularly for underserved communities.
For Physicians: If VillageMD is sold, physician employers could face instability, with job uncertainty looming for those tied to Walgreens’ healthcare ventures. Physicians who built patient panels under the VillageMD model may now be left wondering where they’ll practice next.
For the Healthcare System: Retail healthcare’s transactional nature has always clashed with the continuity needed for patient care. Walgreens’ retreat only reinforces this reality. I’ve explored this issue in more depth here.
A primary care physician shared on LinkedIn how their clinic closure left patients without a trusted provider. As a reminder: business decisions affect real people.
One thing is certain—Sycamore will make moves fast. Don’t be surprised if Shields, CareCentrix, or VillageMD are next on the chopping block. Walgreens wanted to become a healthcare powerhouse but may end up back where it started—just a pharmacy.
In summary, Walgreens’ private equity exit marks the fallout of its failed healthcare expansion. Costly bets on VillageMD, home health, and clinical trials backfired, leading to billions in losses and mass clinic closures. Unlike CVS Health, which leveraged its insurer-PBM model, Walgreens lacked a cohesive strategy. With Sycamore Partners in control, expect aggressive cost-cutting and a likely return to pharmacy-first operations, leaving the future of retail-driven healthcare in question.
COMMUNITY POLL
Is retail health fundamentally flawed, or was Walgreens simply the wrong company to pull it off?
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