Walmart Health and big swings
The retailer's health strategy has struggled. Is this next iteration going to be bolder?
Like many others, I’ve been watching legacy retail businesses attempt to enter healthcare. Best Buy, Dollar General, CVS, Walgreens, and Walmart have all taken active steps forward. Unsurprisingly (especially after what happened to Haven), these companies have struggled to take on the enormous and complicated healthcare system.
I’ve followed Walmart’s path particularly closely, mostly because they seemed to enter healthcare with so much hubris, and also because I think they have the most interesting value prop (although, in my opinion, they have yet to leverage it). I originally wrote about Walmart in October 2020, as part of an article about cash-pay models.
A year later, upon hearing that Walmart was foundering, I wrote another article. I complained that they hadn’t tested a more differentiated strategy while still aligning with their core business prop. In other words—why not do a food pharmacy? (Also…I acknowledge the irony of complaining about Walmart’s hubris and then complaining that the largest employer in the U.S. hasn’t taken my great idea.)
All of that said—and setting aside my GREAT IDEA FOR A FOOD PHARMACY (are you reading this, Walmart?)—I’ve heard some tidbits from Walmart recently that makes me think they might not be just a clinic yet.
Walmart Health’s origins
Per their public material, Walmart originally envisioned a series of clinics based out of Walmart Supercenters, which would offer basic primary care and other services for transparent, cash-pay prices. The idea was that Walmart would take its everyday low prices and apply the concept to healthcare.
Taking their cash-pay clinics a step further, the company also launched Walmart Insurance Services, a licensed brokerage partnering with UnitedHealthcare, Amerigroup, Anthem, Centene, Clover, and a few other brand-name insurers.
The idea was that, with 90% of Americans living within 10 miles of a Walmart, Walmart could be a new hub for primary care and more, while also directing under- or uninsured Americans towards plans that would help them pay.
Foundering—and maybe a new strategy
Of course, building a sustainable healthcare business is more complicated than that. In late 2021, Business Insider reported that Walmart was struggling with its EHR, with integrating patient insurer coverage, and with other basic healthcare business challenges.
Over the last few months, it appears Walmart is shifting towards a more traditional FFS model. Rather than aiming to offer the lowest possible prices, as HTN noted, Walmart has begun “aiming to be competitively priced in market.”
At the same time, Walmart has struggled to open clinics at the same rate as other retailers.
A round-up by Becker’s Hospital Review in October 2021 lays out the disparity. At the time of the article, Walmart had opened 20 clinics in 3 states and was planning for 7 more. Meanwhile, Walgreens, in partnership with VillageMD, had opened 18 clinics, with 43 more scheduled to open in 2021. Walgreens and VillageMD also said they were planning to open 600 additional clinics within four years.
CVS, the undisputed winner in terms of number (and for whom this has been a strategy for a long time), had MinuteClinics in 35 states and DC, and planned to operate 1,500 HealthHUB locations by the end of 2021. (MinuteClinics provide low-acuity, primary care services, while HealthHUBs are intended to do more chronic condition management.)
Leveraging scale for cheaper pharmaceuticals?
In July 2021, Walmart hired a new CMO, Dr. John Wigneswaran, previously of DaVita and Express Scripts, filling a role that had been vacant for months. Whether and how Dr. Wigneswaran alters Walmart’s health strategy is yet to be seen (right now, it seems like they don’t have any strategy), but there are some hints he’s interested in using pharmaceutical prices as a lever.
In a November 2021 podcast episode from the show Healthcare is Hard, Dr. Wigneswaran talked in-depth about how drug costs are a priority. In the past, Walmart has leveraged its scale to offer $4 generic medications and to launch its own branded, cheaper insulin. On the podcast, Dr. Wigneswaran sounded interested in extending Walmart’s leverage to pharmaceutical formularies.
Although it remains unclear how that would work, this sounds like the beginnings of a strategy that could get Walmart Health back in the race (although still in direct competition with CVS/Aetna, which arguably has more control over formularies given that the combined company *has* a formulary).
Underlying all of this: I don’t doubt that these retailers can help people get more appointments. But I’m not convinced these appointments are driving towards better health.
A RAND report from several years ago suggested that 58% of retail clinic visits are net new visits; in other words, the majority of these visits aren’t replacing a visit to the ER or another physician. The majority of these visits are additional care, which may or may not be helpful on an individual or societal level (I’m not trying to make this a leading statement—I genuinely don’t know if this additional care is a good thing.)
In short: If the path to better healthcare lies through big retailers, I’m convinced it will be through big swings that only huge companies can afford to take. Which is why I still have some hope for Walmart, if it can get a strategy together.
This information shouldn’t be taken as investment advice (obviously), and the opinions expressed are entirely my own, not representative of my employer or anyone else.