WBA - Walgreens Boots Alliance

[Cigarbutt]

I believe the future of healthcare is a more integrated system, similar to single payer healthcare in Europe or Kaiser in the US.

I see the value of integrated myself, but I am not sure if all customers will value integrated experience over autonomy.  My company offers choice between (1) Kaiser's fully integrated plan for free and (2) autonomy plans where employees have to pay a co-pay and deductible but have lot more choice over providers.  To my surprise, almost all employees pick #2 because they like to be able to go to the best providers and not be locked inside the Kaiser network.

..

So, I think we can't say with a reasonable probability that integrated system will work over customer autonomy.

NPS scores can be a leading indicator of market share...

...

Seeing NPS of Amazon Pillpack and Alto compared to Walgreens and CVS reminds me of how Netflix and Redbox killed Blockbuster.  What do folks think is the probability that Walgreens will end up being like Blockbuster vs. Walmart given Amazon Pillpack, Alto, NowRx and other online providers have higher NPS and growing exponentially, starting to steal market share?

That said, regarding Village MD, what do folks think about NPS of 90 and market share of 50% for Walgreens after everything is settled that was claimed in the latest quarterly call (excerpt below)l?  Do you think Alex meant 50% market share among patients who go to VillageMedical or do you think he really meant that they expect Walgreens market share will go from 20% to 50% when VillageMedical is all rolled out?

...

Well, what I can describe is that, you know Walgreens gets 20% of an average market share, you can expect us to be well above 50% when these with -- of market share when these settle down.

So what about drug prescription market share and the future of drug stores?

 

-Disruptors have been coming to the market using the efficient delivery option as a comparative advantage but this implies squeezing in between the prescriber and the 'client'. CVS, Walmart and Walgreens are all reacting in relatively unique ways to this threat. The strategy for Walgreens has been to bring the prescriber and the 'client' together and closer to the drug delivery point.

 

-Overall, Walgreens has about a 20% market share of the US drug prescription market but there are regional differences. In the Houston market for example, even before the Village medical venture, they had about a 40% market share. The goal of the deployment of the medical clinics is to try to reach under-served areas with the potential (my interpretation of the 50% comment) to reach 50% market penetration in areas where the new format is completed. The retail pharmacy market remains extremely competitive.

[Spekulatius]

I believe the future of healthcare is a more integrated system, similar to single payer healthcare in Europe or Kaiser in the US.

 

I see the value of integrated myself, but I am not sure if all customers will value integrated experience over autonomy.  My company offers choice between (1) Kaiser's fully integrated plan for free and (2) autonomy plans where employees have to pay a co-pay and deductible but have lot more choice over providers.  To my surprise, almost all employees pick #2 because they like to be able to go to the best providers and not be locked inside the Kaiser network.

 

Also, Canada has a single payer healthcare, but patients can pick any doctor and any pharmacy they like.

 

So, I think we can't say with a reasonable probability that integrated system will work over customer autonomy.

 

NPS scores can be a leading indicator of market share as they tell you how much actual customers who have used the product/service are recommending the product/service to their friends and family.  Here are the current NPS scores to consider that I was able to find:

• Aetna: 16
  
• CVS: -5
  
• Amazon Pillpack: 80
  
• Alto: 80+
  
• NowRx: 59
  
• Walgreens: 25
  
• Village Medical at Walgreens: 90
  

 

Seeing NPS of Amazon Pillpack and Alto compared to Walgreens and CVS reminds me of how Netflix and Redbox killed Blockbuster.  What do folks think is the probability that Walgreens will end up being like Blockbuster vs. Walmart given Amazon Pillpack, Alto, NowRx and other online providers have higher NPS and growing exponentially, starting to steal market share?

 

That said, regarding Village MD, what do folks think about NPS of 90 and market share of 50% for Walgreens after everything is settled that was claimed in the latest quarterly call (excerpt below)l?  Do you think Alex meant 50% market share among patients who go to VillageMedical or do you think he really meant that they expect Walgreens market share will go from 20% to 50% when VillageMedical is all rolled out?

 

 

 

---------------------------------------------------------------------------------------------------------------------------

Alex Gourlay -- Co-Chief Operating Officer for Walgreens Boots Alliance, Inc., and President, Walgreens

 

...

The other thing that's important to understand in the short term has been the NPS score. The NPS scores are over 90%. So this is a really fantastic feedback, and the way that these particular VillageMDs[VillageMedicals] are designed is really strong from the point of view of your local surgery, quite different, and I hope you've seen the pictures to what many local surgeries look like today. And last, but not least, of course they are very good as a practice, and as a Company with the software they have.

...

Well, what I can describe is that, you know Walgreens gets 20% of an average market share, you can expect us to be well above 50% when these with -- of market share when these settle down.

 

Interesting info on NPS, we should probably look at those soft numbers more as investors. value investors tend to overlook those soft stats, but they are important imo.

 

CVS looks bad on they end, but I also found through googling, they the NPS for Minute clinics actually was high. 80+, so maybe that’s a relevant number for CVS’s integerster strategy.

 

As I mentioned before, I believe that the old idea to run a pharmacy with a front store front end (in the case of WBA, it’s more a personal care front end) is dated and probably dead.

CVS want to replace this with service offering (Minute clinics) and I see green shoots they this is working in my area.

 

Anecdotally, I just went to get my annual flu shot today at Minute clinic today. I usually get these at work , but due to COVID-19, my employer has cancelled them and now recommend to get them at the doctors office or CVS.

 

The CVS experience could have been better (not very streamlined workflow), but the store was busy with people using Minute clinic services (mostly vaccinations ), so maybe that part is working.

 

As for Kaiser, I have used them a few years back. I used to be with PPO/HMO (Aetna,  Blur Cross, United - I had them all) and then decided to give it a try and me and myself absolutely loved it, as everything become much more simple and transparent.

 

The problem is that you have to change your doctors and most people like their doctors (since they chose them), but hate their insurers , so inertia to do so is high. Unfortunately, since I moved to the East coast, Kaiser isn’t an option any more. Of course CVS isn’t Kaiser by a long shot, but it is the direction things are moving, imo.

 

United in a way is an integrated player too, but they started on the insurance side. They have their own PBM and run Market places and health care providers which synergistically Feed into each other. That’s what CVS is trying to do combing from the drug store side.

[dwy000]

In my experience NPS is an interesting data point but not an overly telling or a driver of customer behavior.  Cable companies are legendary for having horrible NPS but have been great investments.  For pharmacy, customer behavior is determined by proximity (closest to home) and payor driven behavior (discounts and PPO acceptance).  People seem to also like the option of choosing mail or in pharmacy. 

 

The rumor was that Amazon wanted Pillpack (now Amazon Pharmacy) because the average customer generated over $5000/yr in revenues and was perfect for Prime expansion.  They also got a licensed pharmacy in all 50 states which may be what they were really after.  Who knows because they no longer break out details, have buried the name behind Amazon Pharmacy (unlike say Zappo's) and aren't advertising it anywhere near like they were in the first year post close.

 

For a NowRx there's really not much competitive advantage.  They don't have the volume for price discounts and to drive contract value with PBO's.  They don't have the "other products" of a CVS or Amazon.  It's really just customer service they can lean on and that gets expensive to provide long term without huge volume. 

 

I'm long CVS so quite biased in my view but in the complex world of US healthcare where the payors and customers are two different groups I'd rather get behind the payors because they are ultimately the decision makers. 

[LearningMachine]

The problem is that you have to change your doctors and most people like their doctors (since they chose them), but hate their insurers , so inertia to do so is high. Unfortunately, since I moved to the East coast, Kaiser isn’t an option any more. Of course CVS isn’t Kaiser by a long shot, but it is the direction things are moving, imo.

 

United in a way is an integrated player too, but they started on the insurance side. They have their own PBM and run Market places and health care providers which synergistically Feed into each other. That’s what CVS is trying to do combing from the drug store side.

 

At my company, almost everyone is a transplant.  So, folks don't have an existing doctor.  Folks talk to each other a lot in determining the best plan. I knew several folks closely who worked for Kaiser at the time also, and I tried to convince several folks to choose the Kaiser plan.  Folks would sometimes try it, but after sometime, they would go to full-autonomy option, even if they started with Kaiser, taking the pain of switching doctors.  There would also be lengthy discussions among employees at my company on which plan is better.  In the end, the consensus was that if you wanted to go for simple mundane checkups, Kaiser could work, but if you needed something serious done, and needed best providers, Kaiser isn't the best because you are forced to see providers within Kaiser.  Maybe it is just my company where folks want the absolute best in care, e.g. if someone thinks they might need a heart surgeon, they want to be able to get the best heart surgeon, not just the one that is included in Kaiser's integrated system.

 

I would also like to get folks' opinions on something else.  What are the options for other insurers to provide convenient pharmacy now, and convenient care in the future?  Because CVS will have its own insurance plan and integrated system advertised in its stores, if insurers could pick, would they pick CVS?  Probably no, right?  I have seen this play out in other industries too, where non-integrated competitors are reluctant to send their customers to an integrated competitor for services they don't offer, and instead, send them to a non-integrated partner because they are worried about losing customers if they send them to the integrated competitor.  If that is the case, is Walgreens the only major option available for other insurers?  Does it mean Walgreens will have somewhat of a monopoly position with other insurers?  Is this why Humana and United are willing to partner with Walgreens?  Could Walgreens use this to its advantage?  Would Humana, United, Anthem, Centene, Cigna, etc. lose customers if they said customers couldn't get their emergency medication from Walgreens? Would the insurer who let their customers pickup 90-day prescriptions (including when there are changes to prescription) from a convenient pharmacy, including Walgreens, and also let them see a convenient provider, including doctors at convenient Walgreens clinics, be able to attract more or higher-paying customers?